Zebb Chakawa 
By Kudzanai Gerede
Companies and Markets Editor
SUGAR producer Hippo Valley Estate (Hippo Valley) plans to spend US$15 million in the short-term to grow its business and return capital to shareholders, the company said at its 68th annual general meeting this week.
The company has been battling unscheduled mill stoppages, a notable decline in yields, high input costs due to price volatility and global inflation from geopolitical events in eastern Europe, among others.
Last year about 652 hectares of cane could not be crushed and was carried over to this season owing to abrupt stoppages at its antiquated mills.
Hippo Valley’s chief executive, Tendai Masawi, said in an interview with The Financial Gazette on the sidelines of the annual general meeting that the plan ― dubbed project Zambuko ― will focus on improving efficiencies both at plant and field.
“We needed to maximise our sales in the domestic market. We need to look the cost of production. Remember I said that the unit cost of production is very, very important because we have to compete and be best in class like any other mill that is running.
“Yes, capital expenditure has to be used. I’m looking at close to about US$15 million that we need to spend for us to be able to retool the whole plant completely…It’s not only retooling the plant. We also have to introduce new varieties in our fields in terms of agronomy, of what we want to do. With new varieties being introduced, we’re going to be getting better yield,” said Masawi.
Masawi, however, did not disclose how the company planned to raise the funds to finance the recapitalisation programme.
“There are various ways of funding…You’ve got to tread carefully these days because, you know, we’re also going through a phase of currency changes. So, I’m not at liberty to say I’m going to be borrowing 100 percent of it in US dollars from the banks because of all you know what has been happening in Zimbabwe.
“We can go back to the drawing board and say how do we fund all the capital expenditure that we want to do,” said Masawi.
Project Zambuko will also focus on the reconfiguration of the route to market and implementation of innovative work streams to contain the cost of goods and services.
Hippo Valley has seen a significant cost in cane purchases from private farmers to US$71 per tonne from US$68 per tonne previous year, which could narrow its margins.
Already, the group says it has seen a steady increase of nine percent in cane production since the start of the year, thanks to successful off-crop maintenance.
In addition, its two main water sources, Tugwi Mukosi and Lake Mutirikwi, have sufficient water levels to sustain irrigation activities until the rains.
Masawi also said the group will not be affected by ownership changes under the business rescue plan at its parent company, Tongaat Hulett (Tongaat) in South Africa.“I want to highlight that the business rescue is not affecting the operations in Zimbabwe. We are not part of that. That is affecting the business in South Africa,” said Masawi.
In August. Tongaat shareholders voted against a debt-to-equity swap leaving investors, the Vision Investments with the option to trigger a debt-for-asset swap, likely to see existing shareholders remaining with nothing.
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