The European Union (EU) is said to be the third largest sugar producing region and the second largest consumer in the world. This makes the region and its Sugar companies among the top global players in the food market. Other big Sugar producing countries in Europe are France, Germany and Poland.
In 2013, the EU amended its Sugar Common Market Organisation (Sugar CMO) policy. The economically powerful regional block set timelines and guidelines to let Sugar producers respond to market signals. This effectively set the premise to abolish production quota’s by September, 2017 and that export subsidies are to be set at zero.
It is this reform that has been said to have set in motion the global market consolidation we are seeing today that has resulted in one of Zambia’s largest Agribusiness, Zambia Sugar’s parent company official take over. Associated British Foods (ABF) has recently acquired 100 per cent shareholding in Illovo Sugar Limited in which it previously held 51 per cent stake. Illovo Sugar Pty owns about 76.4% stake in Zambia Sugar Plc, effectively bringing Mazabuka headquartered Zambia Sugar under direct control of ABF.
ABF Chief Executive Officer, Mr George Weston, and his Financial Director, Mr John Bason, were in Zambia on October 20 and met the Zambian President, Edgar Lungu and his Finance Minister Felix Mutati at State House (Zambia’s official presidential palace) accompanied by both Illovo Sugar Group and the local Zambia Sugar management teams.
Zambia Sugar will now be more directly connected to the global Sugar industry and directly face the impact of Sugar market movements. With this take over, the local management of Zambia Sugar will have to tune in to global Sugar events as their key decision makers will be based at the centre of global Sugar market activities.
Zambia Sugar will now need to justify to the local Zambian market if their prices surge above the global market prices. They enjoy the local protection from imports by both tariff and non tariff measures (e.g the vitamin A fortification requirement) by the Zambian state but this will now need more justification, the traditional justification of saving local jobs will have to be followed up with lower local prices and weighed against the overall economic impact on the country.
The EU as a economically integrated regional block has suffered a major set back following Britain, the second largest economy by GDP to Germany in the European region, voting to exit the economic block via a referendum (Brexit). However, the EU backed by Germany and France has resolved to press on with its economic agenda despite some skeptics who have labelled the whole EU as a failed project, expecting more countries to go the Brexit way.
Associated British Foods (ABF) is a diversified international food, ingredients and retail group with sales of £12.8bn, has over 124,000 employees and operations in 48 countries across Europe, southern Africa, the Americas, Asia and Australia.