Project detail - ZANZIBAR SUGAR FACTORY LIMITED

ZANZIBAR SUGAR FACTORY LIMITED

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Who is our client

Zanzibar Sugar Factory Limited (ZSFL) is an existing sugarcane production and processing company in Mahonda, Zanzibar, with a nucleus farm of 3,900 acres.

Funding objective

FMO will provide a USD 11.5 million loan to ZSFL for the rehabilitation and expansion of a sugarcane estate (plantation) and processing facility. The funds will be used for capex investments, with a tenor of 10 years (2 years grace). The new management is in the process of restarting the business and expanding processing plant from existing 500 MT/day to 800MT/day. ZSFL already invested close to USD 10 million over the last 2 years in order to refurbish the factory and plantation. The company will produce 19,000MT of sugar and 1.9 mln liter of ethanol. The bagasse (residue product of sugar processing) will be used to heat the boilers. The generation of this ‘green’ energy makes a small part of this financing green. Sugar will be sold straight to Zanzibar retail (both in 1kg and 50kg bags). The high import cost (import duties) in combination with the ability to directly serve the retail market, give ZSFL a competitive edge to produce sugar on a relatively small-scale. The company is in discussion with the United Nations Industrial Development Organization (UNIDO) to sell the ethanol, which wil be used for special cooking stoves for low-income households. Ethanol fueled stoves are a healthier alternative to the wood-fired stoves, which have a bad effect on the peoples lungs as they are contaminating the air in small huts.

Why we fund this project

The transaction is expected to generate substantial development impact. The farm and factory are currently neglected. ZSFL will become one of the few commercial activities on Zanzibar next to tourism. The farm and factory will create approximately 200 direct and 400 indirect jobs. In the medium-run ZSFL expects to buy cane from around 1000 smallholder farmers (out growers). Currently already >100 out growers have started growing cane, a number which is expected to increase substantially once the factory is up-and-running and the first farmers receive payments. FMO plays an important role in ensuring adequate environmental and social practices, with the help of an external consultant.

More investments

Date Total FMO financing
12/2/2016 EUR 0.13 MLN
Region
Africa
Country
Tanzania, United Republic of
Sector
Agribusiness, Food & Water
Signing date
12/16/2015
Total FMO financing
USD 11.50 MLN
Fund
Infrastructure Development Fund
Risk categorization on environmental and social impacts, A = high risk, B+ = medium high risk, B = medium risk, C = low risk Environmental & Social Category
(A, B+, B or C)
B+