In May, the Kilombero Sugar Company, a joint venture between Illovo Sugar Africa and the Tanzanian government, announced the approval of a $238.5m project that will expand the company’s local sugar-processing operations and put the east African country on track for sugar self-sufficiency by 2025.
Representing the largest investment in African to date by Illovo Sugar — a subsidiary of UK-based Associated British Foods holding a 75% share in the company — the project will more than double Kilombero’s sugar production in an effort to serve growing regional demand for its leading Bwana Sukari sugar brand.
“The approval of this project on 14 May, 2021, demonstrates our continued confidence in the growth of Illovo Sugar Africa in the African sugar market,” Gavin Dagleish, group managing director at Illovo Sugar Africa, tells fDi.
As part of Tanzania’s National Development Agenda, which aims to create self-sufficiency in the sugar industry by 2025, the project will lessen Tanzania’s reliance upon imports by boosting Kilombero’s sugar production from 127,000 tonnes of sugar per year to 271,000 tonnes.
According to TanzaniaInvest, the country’s annual demand for sugar in 2019 was 710,000 tonnes, while local production in the same year was 439,100 tonnes. To meet this demand, the country had to rely on imports.
Mr Dagleish tells fDi that aiding the Tanzanian government in this pursuit has been a driving motivation of the project: “The 144,000-tonne sugar expansion will effectively reduce the amount of sugar that is imported every year to meet consumption demand, equating to a $71m saving in foreign exchange.”
Other key features of the project include the construction of new storage facilities, which will enhance the company’s branded pre-packaged capacity, and the cogeneration of electricity for the manufacturing properties, which will be exported to the Tanzanian grid.
Moreover, in response to increasing demand for potable alcohol in both the Tanzanian and east African beverage industries, the project will expand ethanol production at the company’s distillery, which already supplies 12 million litres of alcohol to the local beverage sector.
“The increased production at Kilombero’s adjacent ethanol distillery will enable us to respond to this growth by increasing our production by 4000 kilolitres, which will bring total annual production up to 16,000 kilolitres per annum,” says Mr Dagleish.
This increased annual output will have a profound impact on employment in the region, creating 2000 direct jobs within the company and the extended sugarcane grower supply chain.
“As a ‘ground-up’ expansion, the project also directly relies on an almost three-fold increase in cane supply from Kilombero’s small-scale growers, from 600,000 tonnes currently to 1.7 million tonnes,” says Mr Dagleish.
To fulfil the project’s elevated targets, the number of local small-scale farmers will increase from 7500 to between 14,000 and 16,000, and revenues paid to regional growers are estimated to triple by 2028. These improvements, he says, underline the drive to prioritise new developments through inclusive growth models and shared value in the supply chain.
This article first appeared in the August/September print edition of fDi Intelligence. View a digital edition of the magazine here.