Hippo Valley Estates Group Finance Director Tapera Masarakufa (left) and CEO Tendai Masawi (second from left) pose with colleagues at the company’s 70th annual general meeting. Photo: Tinashe Floyd Bizeki/Equity Axis

• Hippo Valley Estates Finance Director Tapera Masarakufa has proposed recapitalisation tax rebates, VAT relief on cane milling services and Export Processing Zone status for the Lowveld sugar industry
• Zimbabwe's sugar exports more than doubled to 92,518 tonnes in the year ended March 2026, although production increased by only 1% to 443,501 tonnes
• The industry's export ambitions face renewed pressure after first-quarter sugar exports fell 59%, exposing the need for competitive production costs and more dependable regional market access

Harare – Zimbabwe's sugar industry is seeking a significant overhaul of its tax and investment framework, with Hippo Valley Estates Finance Director Tapera Masarakufa proposing recapitalisation incentives, relief from value-added tax on cane milling services and Export Processing Zone status for the Lowveld. The proposals come as the country's established sugar producers confront ageing infrastructure, rising production costs and the need to expand exports beyond a domestic market already largely supplied by local production.

Speaking to Equity Axis journalist Blessing Kanyemba, Masarakufa argued that the industry's long operating history had created a disadvantage in accessing investment incentives generally associated with new projects. With Hippo Valley marking 70 years of operations, he called for a fiscal framework that recognises the capital required to modernise existing factories and agricultural infrastructure.

"Maybe there could be tax issues, rebate systems that people can look at when you recapitalize such a business, just like government does for someone who is coming in new," Masarakufa said.

His argument exposes a broader industrial-policy question. Zimbabwe offers incentives intended to attract new investment, but economic growth also depends on maintaining and modernising businesses that already employ workers, purchase agricultural output and operate substantial productive assets. For mature industries, replacing machinery, rehabilitating irrigation infrastructure and improving manufacturing efficiency can generate economic returns comparable to greenfield investment, often without requiring an entirely new industrial ecosystem.

The sugar industry's recent performance strengthens the case for examining those incentives, although it also establishes the need for financial discipline. During the year ended 31 March 2026, Zimbabwe produced 443,501 tonnes of sugar, an increase of only 1%, while total industry sales rose 24% to 471,837 tonnes. The gap was largely explained by the release of accumulated inventories rather than a corresponding expansion in productive capacity.

Hippo Valley reported revenue growth of 15% to US$220.8 million, while operating profit increased from US$7.7 million to US$33.6 million. Profit after tax rose 79% to US$24.1 million, supported by stronger sales and improved operating efficiency. The company also moved from net debt of US$8.9 million to net cash of approximately US$13.4 million.

These results demonstrate a stronger financial position from which management can invest. However, the inventory contribution means the scale of earnings growth cannot be assumed to recur indefinitely. Sustained expansion requires higher cane yields, improved milling throughput and investment that lowers the cost of producing each tonne of sugar.

Masarakufa's second proposal addresses the tax treatment of the sugar value chain. He argued that VAT on cane milling services creates an inconsistency between agricultural production and processing, as different tax treatments apply to successive stages of the same commercial activity.

"We have VAT on milling services. If farmers are given cane on a cane milling agreement, there's an assumption we are doing this on behalf of farmers, so there's VAT attached. Sugarcane is zero-rated, sugar is exempt. But the process of converting the two is standard-rated," he said.

The distinction between zero-rated and exempt supplies is economically important. Zero-rated sales generally allow registered businesses to recover eligible input VAT, while exempt sales restrict the recovery of tax paid on associated inputs. Consequently, tax treatment can affect production costs even when consumers are not charged VAT on the final product.

Hippo's historical disclosures show that the issue has deeper roots. The company previously contested ZIMRA assessments concerning the treatment of milling services, securing favourable court rulings. Its 2024 annual report recorded that the dispute concerning those assessments was considered closed, while separately identifying additional costs arising from the exemption of sugar and sugarcane from VAT from January 2024.

The current policy discussion must therefore distinguish the historical legal dispute from Masarakufa's proposal for future tax reform. Removing VAT from a service, changing the status of finished sugar and restoring input-tax recoverability can produce different outcomes. Relief that simply exempts milling services may not eliminate the wider cost of unrecoverable input VAT.

For Treasury, the appropriate assessment would examine the effective tax burden across farmers, millers and refiners, including which entities ultimately bear the cost and how proposed relief would affect fiscal revenue. A targeted reform could improve investment economics, but its benefits should be measurable through lower processing costs, increased capital expenditure and stronger agricultural returns.

The third proposal concerns exports, which Masarakufa considers the main destination for future industry expansion.

"We think that export process should be given EPZ status. Because all the land growth we are talking about is all destined for exports, because what we are currently producing is enough for the local market," he said.

His proposal would extend investment incentives to export-oriented sugar production in areas including Chiredzi and Triangle, potentially improving the commercial attractiveness of expanding cane cultivation and milling capacity.

The strategy has a clear economic rationale. Zimbabwe's existing sugar industry serves a domestic market estimated at around 320,000 tonnes annually, while national production exceeded 440,000 tonnes in FY2026. Additional production could therefore strengthen foreign currency earnings if producers secure profitable and reliable export markets.

Industry export volumes rose 114% to 92,518 tonnes during the financial year ended March 2026, compared with 43,303 tonnes previously. Exports represented approximately one-fifth of total sales, demonstrating the importance of external demand to the industry's expansion potential.

However, the subsequent quarter exposed the risks of treating export capacity as equivalent to guaranteed export sales. Sugar exports fell 59% to 6,519 tonnes during the quarter ended June 2026, largely reflecting restrictions affecting shipments to Kenya and a slower start to export deliveries. Domestic sales increased 8% to 91,395 tonnes, leaving the local market responsible for approximately 93% of industry sales volumes during the period.

The reversal is significant because Zimbabwean sugar producers have historically relied on regional arrangements and preferential market access to place surplus production. Kenya's import restrictions demonstrate how policy decisions in destination markets can weaken export opportunities even where Zimbabwe has sufficient production capacity.

Export Processing Zone incentives could help lower operating and investment costs, but they cannot independently resolve foreign import restrictions, international sugar price volatility or transport disadvantages. Any preferential framework would therefore need to be accompanied by market diversification, competitive logistics and commercially viable export contracts.

The policy discussion also intersects with the Government's Sugarcane Industry Development Plan for 2026 to 2035, approved in June. The strategy targets annual sugar production of 500,000 tonnes, increased ethanol output and expanded electricity generation, linking agricultural production to broader industrial and energy objectives.

Reaching 500,000 tonnes would require roughly 56,500 tonnes of additional annual sugar production above the FY2026 level, equivalent to an increase of approximately 12.7%. The target is achievable only through sustained investment in agricultural yields, irrigation systems and efficient processing, rather than relying on the sale of accumulated stocks.

For private growers, these investments could increase demand for cane and strengthen the economic activity supported by sugar production in the Lowveld. However, their benefits would depend on transparent cane pricing, fair milling arrangements and reliable payments. Tax relief provided to processors would not automatically translate into improved farmer returns unless the commercial relationships across the value chain support that outcome.

The industry's wider contribution also extends into employment, ethanol production and electricity generation from bagasse, the fibrous residue left after cane processing. More efficient mills could generate additional economic value from these activities, although investment decisions require careful assessment of costs and market demand.

Masarakufa's proposals consequently present Government with three related but distinct decisions. Recapitalisation incentives concern the renewal of established productive assets. VAT reform concerns the effective cost of moving cane through the processing chain. Export-zone treatment concerns the ability to compete for external markets once additional sugar is produced.

The strongest policy response would link any concessions to measurable investment, productivity and export outcomes. Incentives that lower costs without increasing capacity or improving competitiveness could weaken fiscal revenue without delivering the intended industrial benefits.

Zimbabwe's sugar industry has demonstrated its ability to recover profitability and expand sales, but production growth remains modest and export access increasingly uncertain. The next phase depends on converting stronger corporate balance sheets into higher agricultural output, more efficient factories and dependable markets.

For Treasury, the challenge is designing incentives that reward productive investment while protecting the public revenue base. For Hippo Valley and the wider Lowveld industry, the decisive test is converting those incentives into higher sustainable production and export earnings rather than relying on tax relief as a substitute for operational competitiveness.

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