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18 February 2015

Zambia Sugar Plc Invests in Major Sugar Project

Zambia Sugar Plc Invests in Major Sugar Project

Zambia Sugar today announced details of a major investment project at its Nakambala sugar operations at Mazabuka which will give further impetus to the development of Zambian smallholder cane farmers and provide employment opportunities for local people during the construction phase scheduled for completion in 2016.

The project scope includes the construction of a modern, high-specification refinery to more than double current annual refined sugar production capacity to around 100 000 tons and increase annual sugar production capacity from 420 000 to 450 000 tons through a range of smaller factory improvements. This project consolidates Zambia Sugar’s position as Africa's single-biggest cane sugar producer and underlines the broader Illovo group strategy of focusing on growth within its domestic and regional markets and downstream opportunities to diversify its product mix. 

The increased cane supply for the improved Nakambala factory will come primarily from area expansions of which the smallholder development at Manyonyo, involving some 145 individual growers, is a major part. This development will benefit the local community in terms of both revenues derived from the supply of cane to the factory and, as part of a broader multiplier effect, employment opportunities for seasonal agricultural workers and other job creation opportunities.

It is estimated that upwards of 400 people will be employed during the construction phase of the project. Aligned with Zambia Sugar’s existing employment policy, priority in the recruitment process will be given to local people with the necessary skills.

The key driver for the investment in Zambia is the strong historical and forecast domestic refined sugar sales growth which has been primarily driven by demand from domestic and regional industrial manufacturers. The project also brings with it a unique opportunity to align Zambia Sugar’s manufacturing assets behind a new post-EU export sales mix and higher food safety standards. This strategy will ensure that both direct consumers and industrial customers of the range of Whitespoon branded products will continue to receive the sugar and syrup products which they like best at the exacting quality standards they demand (Annex 1 – Group Investor Presentation December 2014 – African Growth Rationale).

The project cost amounts to more than ZMW522 million (US$: 82 million), funded by debt finance largely sourced from within Zambia itself and from Zambia Sugar’s own available cash resources. As such, the investment underlines the company's commitment to the economic growth and prosperity of Zambia, and aligns it strongly with the Government's clearly stated desire for greater levels of direct investment. It is also important to note that the Nakambala factory is situated in a predominantly rural area and that this investment continues to support the company’s efforts towards rural development.  

The project will utilise standard Zambian tax allowances as legislated, and which are in place to encourage capital investment in the country. 

Commenting on the expansion investment, the newly appointed Zambia Sugar Managing Director Rebecca Katowa said: "The company's strategic plan focuses on diversification through value addition to its core sugar products as key to achieving sustainable growth. This project, together with our previous significant expansion of the agricultural and factory operations serves as growing evidence of this strategy and of our support of government initiatives to promote rural development. We are especially pleased that this investment touches on the continuing development of our successful small-holder sector whose increasing cane supplies to the factory are fully supported in the project plan and on further job opportunities for local Zambian people."

During the most recent reporting period ending March 2014, Zambia Sugar’s outgrower partners supplied a total of 1.29 million tons of cane for processing at the factory, generating revenue of ZMW 332 million. Of this revenue, approximately ZMW 66 million was paid directly to small-holder farmer schemes, directly and positively impacting economic growth, enterprise development and job creation directly and through multiple support services such as cane haulage and land preparation. The continuing emergence of new small-holder schemes, with which the company is directly involved, reflects Zambia Sugar’s commitment to support the development of sustainable, commercially-directed farming business models and governance systems in the company’s growing community (Annex 2: Sustainability Report, 2014 Zambia Sugar Annual Report).

In the six months to 30 September 2014, the company reported that revenue attributable to the half year increased by 5% to ZMW966 million and profit from operations increased by 3% to ZMW149 million, on the back of a solid performance in both agricultural and manufacturing operations (Annex 3: Zambia Sugar Interim Results, November 2014).

Zambia Sugar wishes to place on record its appreciation for the significant support it has received through the various incentives that the Zambian government offers to investors. Says Rebecca Katowa: “It is our sincere wish that we can continue contributing to national government imperatives which include the enhancement of economic activity in the country, increased foreign direct investment, rural development and increased socio-economic contributions from the private sector which benefit all Zambians.”

Following the recent approval of the project by the Zambia Sugar Board, the various civil and specialist equipment contracts will be awarded and full construction of the refinery and ancillary operations, which will be integrated into the existing factory environments, will commence in the first half of this year. It is envisaged that after the start-up of the Nakambala factory in April 2016, the refinery will come on stream in May 2016. 

Zambia Sugar is listed on the Lusaka Stock Exchange and is majority-owned by the Illovo Sugar group, listed on the JSE Limited in South Africa, which employs more than 30 000 people across six southern African countries and is Africa’s biggest sugar producer.

For the full press release and to visit Illovo's website, please click here >

Notes to editors:

Zambia Sugar is the largest sugar producer in the country and the second largest single sugar mill in Africa. Outside of the Illovo Group’s majority stake in the company, the balance of shares are held by local institutional investors and over 3 000 members of the public, including employees. The company employs over 6 000 people at peak and has an estate population exceeding 16 000. It also has an active social investment programme targeting health, education, sports and culture. Zambia Sugar offers a wide range of education, health and social amenities to its staff and the surrounding communities which include but, are not limited to, medical services, schools, sports and recreation at the Nakambala Estate. Corporate Social Responsibility to smallholder outgrowers, among other corporate social investments, is extended in a commercially sustainable way.

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