Star Africa in quandary over raw sugar price increases

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By Alois Vinga

STAR Africa Corporation is in a fix after the sole supplier of raw sugar recently hiked price significantly in a development that has driven the company’s products out of market competitiveness.

Earlier this week, its unit, Goldstar Sugar’s commercial executive, Revesai Gwenhamo said the increase in prices of raw sugar have made it difficult for the company to continue operations.

He said a decision to close the Harare Refinery was taken with effect from Monday, 13 February 2023 until further notice after the recent spate of price increases made it difficult for the company to produce and sell refined sugar at a competitive and viable price, as well as onerous trading terms which have constrained raw sugar supplies to the refinery.

The following day, the entity’s company secretary, Aldo Musemburi issued a cautionary statement to its shareholders informing them of ongoing discussions with the sole supplier of raw sugar.

“While the negotiations are in progress, the company has had to shut down its sugar refining plant at Goldstar Sugars. The outcome of the deliberations and impact of the action taken by the company may have a material impact on the value of the company’s shares,” he said.

In a trading update issued Thursday, Musembiri said the company was operating in dire straits due to the price increases.

“The business was already operating under untenable trading conditions that this supplier had imposed. The company has engaged the supplier and the Ministry of Industry and Commerce, with a view to agreeing to a price, as well as trading conditions that are viable and sustainable,” he said.

During the 2022/23 financial year, Goldstar Sugars’ production volumes of granulated white sugar were 0.4% lower than those attained during the prior year comparative period. Power and steam supply constraints were the main causes of the marginally reduced throughput, as they negatively impacted plant uptime.

Consequently, the reduced production led to a 0.2% decrease in sales volumes, compared to prior year.

Notably, the unit completed an overhaul programme of two of its five boilers. In addition, the business installed an 11kVA dedicated electricity line, procured a 1,000kVA generator (for controlled plant stoppages, following power cuts) and electrical cables to mitigate power supply challenges.