2 August 2023
By: Lloyd Phillips
There are hopes that financial interventions will assist South Africa’s sugarcane growers, most of whom are small-scale and black, to survive the challenges they are facing.
South Africa’s close to 24,000 sugarcane growers, who have taken a bitter knock from industry challenges, have received a short-term financial lifeline to help keep them afloat.
Under the administration of the South African Sugar Association, R176 million gathered from the national sugarcane value chain via levies and other contributions is to be incrementally disbursed to these growers, most of whom are small-scale and black.
The payments will be made between now and January, according to a statement issued by Andrew Russell, chairperson of the industry association SA Canegrowers.
Russell says his association welcomes the news that R60 million in transformation intervention funding is already being paid to small-scale growers.
“This funding is critical as our industry continues to face a crisis in the milling sector and growers are still trying to recover from the financial shocks of the last season,” he says.
“Small-scale growers were particularly hard hit by the decisions of the business rescue practitioners at Tongaat Hulett and Gledhow Sugar to default on financial obligations to the industry totalling R1.5 billion.
“This reduced the final recoverable value price [paid to sugarcane growers] for the season by more than R400 per ton.”
Russell says R125 million of the R176 million will be disbursed to sugarcane growers who each deliver fewer than 1,800 tons of sugarcane for milling during the 2023/24 season.
The remaining R51 million will be paid to black growers and transformation joint ventures which deliver more than 1,800 tons. Most of these growers are land reform beneficiaries.
“In light of [their financial] challenges, the funding disbursed this month is vital to sustain growers in the interim,” says Russell.
“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 adds that the sugarcane value chain’s legal challenge against decisions by Tongaat Hulett and Gledhow to allegedly unilaterally withhold levies and other disbursements while they are under business rescue, is ongoing.
Russell is cautiously relieved and optimistic after recent news that the business rescue processes at both companies appear 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,” he says.
“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 sugarcane operations that are so vital to local economies on the North Coast of KwaZulu-Natal.”
