Sugar giants eye companies operating in Mozambique

27 March 2006

Maputo, Mozambique, 27 March – The positive performance of the Mozambican sugar sector is attracting multinational companies to companies set up in the country with a view to having free access to the European market in 2009.

France’s Tereos – Union de Cooperatives Agricoles, Europe’s second-largest sugar company recently acquired 50 percent of Mozambique’s Sena Holdings, and Associated British Food is interested in acquiring South African giant Illovo, located in Maragra, on the outskirts of Maputo, Macauhub was informed by a company official.

Illovo is the largest sugar sector company in Africa and is present in several countries that are to benefit from free access to the European market from 2009, such as Mozambique, Malawi, Zambia and Tanzania.

At Maragra, the South African company produced 74,500 tons of sugar, well above the projected 63,000 tons.

These amounts transformed Maragra into Mozambique’s principal sugar producer, surpassing its rival Savannah Sugar Estates, of Mauritius, and France’s Tereos, located at Marromeu, in the center of the country, which reached production of 73,300 tons against a projected 80,000 tons for 2005.

Last week, Illovo said it had received a proposal from the UK’s Associated British Food, which controls British Sugar, for the acquisition of 51 percent of its capital.

Tereos, which this year went into processing sugar at Marromeu by buying 50 percent of the 78 percent of the company that has been privatized and until then entirely in the hands of Savannah Sugar Estates, said it was willing to let go of this investment and another it wons in Brazil in exchange for 75 percent of Illovo.

“The sector is clearly recovering and it is natural that investors are looking to Mozambique as an opportunity and run this way,” Líria Nhaquila, of the Mozambique National Sugar Institute (INA), told Macauhub.

“As well as this, Mozambqiue has the attraction of being an LDC 9low development country) which makes it one of the great beneficiaries of the opening up of teh European market,” Nhaquila added.

“The attraction of Illovo is that the company has low-cost operations in Malawi, Zambia, Tanzania and Mozambique, which will shorten the distance for Europeans and provide them with sugar at a very low cost and, in the future, entry without obstacles into Europe,” explained Eugene Gosseon, a South African market analyst quoted by his country’s press.

The Mozambican sugar sector has recently finished a rehabilitation project costing US$140 million which has enabled the industry to increase production to over 250,000 tons per year.

In 2005, the sector’s production beat all previous records, having reached 2.2 million tons of cane, more than 265,000 tons of sugar and 81,000 tons of molasses, from a total of jsut over 31,000 hectares of plantations.

These production levels represent increases of 20 percent, 29 percent and 23 percent for cane, sugar and molasses respectively, as compared with 2004.

As well as Maragra and Marromeu, two other sugar companies operate in Mozambique, in which South Africa’s Tongaat-Hulett has a stake, with 49 percent of Açucareira de Xinavane, in Maputo province, and 75 percent in Mafambisse, in central Mozambique.

The increase in production was accompanied by greater exports, especially to the preferential markets of the European Union – through the protocols “Everything But Arms” (EBA) and ACP countries – to the United States and the community of Southern African Development Countries (SADC).

Altogether these three markets absorb more than 60 percent of the sugar made in Mozambique.

Of the production from 2005 more than 56,000 tons have already been exported and, by the end of March, a further 13,000 tons will have been sold to the UE, as part of the EBA initiative, and 5,000 tons to the US.

The current preferential sugar quota of 8,000 tons that Mozambique exports to Europe under the terms of the EBA initiative is due to be increased by 15 percent, according to estimates made by Tongaat-Hulett.

As well as exports to the EU, Mozambique sells 12,000 tons of sugar per year to the United States and 10,000 tons to the southern Africa region as part of a sugar deal signed by SADC countries.

The Mozambican sugar sector employs around 26,000 workers directly and a further 4,000 in support services such as cane cutting, transport and independent cane production. (macauhub)