The South African Sugar Association (Sasa) disbursement of R60 million in transformation intervention funding to black and small-scale growers was critical as the industry continued to face the crisis in the milling sector and growers try to recover from the financial shocks of the last season, SA Canegrowers (Sasa) chairperson Andrew Russell said yesterday.
He said small-scale growers were particularly hard hit by the decisions of the Business Rescue Practitioners at the Tongaat Hulett and Gledhow sugar mills to default on financial obligations to the industry totalling R1.5 billion. This reduced the final recoverable value price of sugar for the season by more than R400 per ton.
The legal action brought in this regard was continuing, Russell said.
Notwithstanding the unresolved matter of the 2022/2023 financial obligations, the business rescue processes at both mills appeared to be progressing.
"Last week, the business rescue practitioners at Tongaat Hulett announced the selection of a strategic equity partner to help save the milling giant’s South African operations.
“While SA Canegrowers has welcomed this announcement, it remains to be seen what the final arrangements for Tongaat Hulett will be and whether these can save the sugar cane operations that are so vital to local economies on the North Coast of KwaZulu-Natal," he said.
Tongaat Hulett said recently shareholders would vote on bringing a “strategic equity partner” into the group, Kagera Sugar.
The potential deal also comprised the acquisition of Tongaat’s sugar division in South Africa, in Zimbabwe, Mozambique and Botswana.
Kagera Sugar is a sugar manufacturing company situated in Kagera, in the north-west of Tanzania. It is part of a group of companies that are the largest producers of sugar in the country and owns sugar assets in Tanzania, the Democratic Republic of Congo and sugar refineries in the Middle East.
Russel said in light of these challenges, the funding disbursed recently was vital to sustain growers in the interim.
"It will provide critical support in an environment marked by rising debt servicing costs and high input costs. This is especially important for small-scale growers, who face the greatest challenge in accessing operating and capital finance," he said.
The industry had budgeted R125m for black and small-scale growers delivering less than 1 800 tons of cane in the 2023/2024 season.
Some R60m would be paid out at the end of last month, together with the payments for cane delivered in June. A further R50m would be paid out in November, with the balance to be paid out in January next year.
A further R51m had also been budgeted for black growers and joint ventures delivering more than 1 800 tons of cane. These were predominantly land reform growers.
SA Canegrowers said it was committed to the survival of the industry and to supporting the industry’s most vulnerable small-scale and black growers.
"We will continue to work with our industry partners through the South African Sugar Association to protect the one million livelihoods the industry supports," it said.
Dr Siyabonga Madlala, the executive chairman of South African Farmers Development Association (Safda) , said that over the years, since 2017, the South African sugar industry had made significant strides in formulating and implementing targeted interventions to provide support to struggling black farmers who would always need help because of their historical and structural characteristics.
He said Safda was the one that had been championing the introduction of these interventions, which today were bearing fruits for our growers.
"One such intervention is the R1-billion Transformation Fund, which expires in the current season that ends on March, 31, 2024. The fund ends on a tense note as some of the resistant elements within the industry stall the allocation of the remaining funds, estimated at around R220 million, which is the last annual tranche of the original billion-rand fund.
“Safsa welcomes and appreciates what has been agreed upon for disbursement during this challenging time when farmers are facing escalating farming costs and anxieties about the future direction of the industry.
“More concerning is whether there will be a second and perhaps permanent transformation facility set aside by the sugar industry. This is important if sustainability and responsibility are important to this industry. The Sugar Master Plan has already recognized the vital role of Small-Scale farmers in the sugar industry, emphasizing their centrality in shaping its future. Therefore, continuing efforts to support and empower these farmers will be essential for the long-term success of the sugar sector in South Africa," Madlala said.
BUSINESS REPORT