Embattled sugar giant backs industry transformation
06 November 2019 | Web Article Number: ME201917021
DESPITE headline hogging financial woes, Tongaat Hulett says it is pressing ahead with its backing for the establishment of a “transformative milling, refining and sugar marketing business”.
According to a statement from the company, this new entity aims to offer small-scale growers, commercial growers and equity partners an opportunity to partner in a “well-structured, sustainable and competitive sugar business spanning the North Coast of KwaZulu-Natal”.
Strategic assets owned by Tongaat Hulett’s South African sugar operations will form the initial assets in this business which include the four Tongaat Hulett owned mills, Tongaat Hulett’s stand-alone refinery as well as its animal feeds business, Voermol. The entity will also become the producer of sugar-related products, including its speciality sugars, syrups and liquids.
The shareholding will specifically be aimed at inclusively integrating all the company’s current sugar value chain participants, including supplying growers. The shareholder mix will accordingly target black ownership of greater than 50%, towards which Tongaat Hulett will contribute via its current B-BBEE ownership at a group level.
The worlds’ demand for sugarcane is increasingly shifting from sugar consumption to the growing relevance of the high-margin green economy. The company has identified opportunities in bioplastics, ethanol and additional co-generation. The key benefits of these opportunities include margin expansion, lower carbon footprint and high and growing demand for renewable products globally.
The initiative was launched recently by the Tongaat Hulett CEO, Gavin Hudson, supported by the Transaction Advisors, Capricorn Capital and BSM, and a significant number of growers attended the two launch events.
“The milling, refining and sugar marketing business will be implemented on a scale that has never been achieved in the sugar industry,” said Hudson.
“For many years, growers have called for equity participation in the milling and refining business which would allow for their increased participation in the sugar industry value chain. The initiative is providing this opportunity, which is revolutionary for the industry.”
It is envisaged that the transaction will be completed by December 2019 and Hudson concluded that this transaction will allow the company to further embed its objectives of transformation, empowerment, inclusivity and partnership.
Grower representatives welcomed the initiative, particularly its inclusivity and they have requested that Tongaat Hulett assist them in identifying potential funders and ensure that women and youth were prioritised in the process.
“This is a great initiative that promotes empowerment and transformation in the milling sector. It will afford growers the opportunity to participate in the full sugarcane agriculture value chain. Growers will engage further with Tongaat Hulett to explore the detail of the concept,” said Dave Littley, Amatikulu Local Grower Council Chairman.
Lee Hlubi, Deputy Chairperson of SAFDA said a key focus area for the organisation was to ensure full value chain participation of black farmers.
“We believe any opportunity that aligns with this must unlock value creation for our farmers and contribute to the sustainability of the industry at large – particularly at this time when the industry is facing a number of challenges,” Hlubi said.