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Zimbabwe Stock Exchange listed sugar producer Hippo Valley today announced it will start retrenching its workers in February due to harsh operational costs, unprecedented economic challenges and inflationary pressures.
The leading sugar producer said the retrenchment will be in 3 phases, with the first group of workers’ contracts expiring at the end of February, the second phase in May, and the last batch in August this year.
In a statement, Hippo Valley said the government’s sugar tax, cost of duty free imported sugar, and currency losses were other unbearable factors that forced them to retrench as they lost the grip to sustain their operations.
“The current economic environment in Zimbabwe has presented unprecedented challenges for Hippo over the past three years. Escalating operational costs, particularly in areas such as fertilizer, fuel, maintenance, costs and imported goods, combined with inflationary pressures, currency losses, the inability to claim VAT on inputs after sugar was exempted from VAT, and competition from low cost duty free imported sugar, have severely impacted our ability to sustain current levels of operations,” said Hippo Valley.
“Since 2022, we have seen profit margins decline significantly by 32%, manpower costs increasing by 117% as a proportion of revenue and debt levels rising to unsustainable levels.
“The company has been unable to generate positive cash flows from its operating activities for the past three years, and has faced a very constrained working capital position since the implementation of the revised cane supply arrangements, which has necessitated constant trade off between what the business needs and what it can afford. These financial realities underscore the urgent need for corrective action, so that the business can generate sufficient cash flows to reduce debt and reinvest in its future,” added the sugar producer.
Hippo Valley has over 15 000 employees, and it farms sugarcane on 24 986 hectares at Triangle Mwenezana and Hippo Valley Estates. It has the capacity to produce 4.8 million tonnes of sugarcane annually.