Farmers who supply sugarcane to the Gledhow Sugar Company (GSC) mill in KwaDukuza (Stanger) north of Durban, face an uncertain future, with livelihoods on the line after the company went into business rescue earlier this month.
Business rescue is a legal process aimed at facilitating the rehabilitation of a financially distressed company.
GSC has 374 employees whose jobs are potentially on the line depending on the outcome of the rescue process.
This is another blow to the financially troubled sugar sector and the sugarcane growers after troubled Tongaat Hulett, the sugar and property group, entered business rescue in October 2022 due to its snowballing debt burden, and in the absence of additional funding.
Last week, Abigail Moyo, spokesperson of the trade union Uasa said the financial challenges at GSC, meant the company may not be able to pay all its debts which become due and payable in the following six months.
This after GSC’s management voluntarily entered into business rescue in a bid to save the company and prevent job losses.
Uasa said unemployment remained a significant threat to South Africa’s economic growth, and the country could not afford the extra pressure of liquidations or business closures.
Uasa was pleased that GSC’s management had taken steps to ameliorate the financial challenges and save the company from further distress.
“Uasa encourages its members and all workers at Gledhow to keep the trust in their management. With the assistance of the business-rescue practitioner, the company will proceed with a business turn-around plan and secure funding to restore proper operations.”
The board of GSC last week announced that it had passed a resolution to voluntarily commence business rescue proceedings. The decision was made at a meeting held on March 10.
The shareholders of the company comprise a consortium of Ushukela Milling(34.9%), Illovo Sugar (South Africa) (30%), the Gledhow Growers Share Trust (25.1%) and Sappi Southern Africa (10%).
Glendale Mill has been facing significant challenges in recent years, including the forced closure of its factory due to the unrest in KwaZulu-Natal in July 2021 and catastrophic flood damage to its machinery and infrastructure in April last year.
It said the Russia-Ukraine War had resulted in significant increases in essential supply costs such as coal and other operational inputs, which had further affected the company's operating margin and cash flow constraints.
South African Farmers Development Association (Safda)’s, chief operations officer Thandokwakhe Sibiya, told Business Report that the organisation was concerned about the possible deterioration of socio-economic conditions in the area if the company failed to recover.
Sibiya said the potential failure of this business would be a double blow for small-scale farmers who lost out when the Glendale Mill, which is now a distillery, closed down years back and was moved far away from them to its current location outside KwaDukuza.
“Farmers in the district will have nowhere to take their sugarcane given the fact that another sugar mill close by, the Darnall Mill that was owned by Tongaat Hulett, closed down two seasons ago, creating a sugar milling capacity shortage in the KwaZulu-Natal north coast,” Sibiya said.
Safda, which advocates for the development and support of small rural farmers in sugar-cane industry, said small-scale farming, was regarded as self-employment for individual farmers. He said these farmers also provided jobs to community members, and economic opportunities for other small businesses linked to the sugarcane value chain, like contractors, input suppliers, security companies, micro lenders and other types of businesses.
Safda said the failure of GSC would spell disaster for KwaDukuza’s economy as sugarcane farming and milling was a major local economic development activity in the area.
It added that experience had shown that when an anchor economic activity collapsed, ghost towns were created and this was now a likely possibility for the historical town.
Deane Rossler, the CEO of the South African Sugar Millers’ Association, said the GSC had been impacted by a number of “black swan” events against the background of challenging economic conditions in the sugar industry.
It was encouraging to note that the company continued to operate despite being in business rescue as all milling companies played an important role in the industry, “as well as at a local mill area level where they were often the mainstay of the economy of deep rural areas, he said.
“Growers require a mill to which they can send their cane for processing into sugar, without which their sugarcane has limited economic value. The closure of a mill will have significant negative economic consequences particularly at a local mill area level.
“GSC contributes to meeting the needs of the sugar market and given that they continue to operate no disruption is expected. We as the South African Sugar Millers’ Association wish GSC a quick successful resolution to their current financial challenges,” Rossler said.
Sibiya said it was for this reason that Safda has begun conceptualising its own sugar milling model where regional sugar milling hubs would be set up across the sugarcane farming belt, in strategic locations close to where farmers were.
“Our plan becomes even more urgent as we get a second sugar mill going the route of business rescue in less than six months after Tongaat Hulett announced its business rescue on 27 October 2022,” he said.
Sibiya said he believed that Safda milling was the future of a transformed, competitive and innovative sugar industry.
“We have established international technology partnerships that will bring modern sugar milling technologies and products into our country thus ensuring the security of supply of sugar to the local market, preservation of current jobs and creation of new ones, as well as new revenue streams from new value-added products.”
Safda said that it looked forward to working with the KwaZulu-Natal Department of Agriculture and Rural Development, KwaZulu-Natal Department of Economic Development, Tourism and Environmental Affairs as well as the national Department of Agriculture, Land Reform and Rural Development (Dalrrd), to bring about a fresh and new sugarcane farming and milling dispensation in South Africa.
“We call for the government and its agencies to make funding available for this initiative. We avail ourselves to support industry partners going through business rescue, and hope for an effective turnaround solution that will ensure a secure future for our farmers whose livelihoods are deeply rooted in this industry, historically and going forward,” Sibiya said.
BUSINESS REPORT