FIFI PETERS: Let’s get into what is going on within the sugar trade. You’ll recall that final week we had the choice popping out of a giant sugar producer within the sector, Tongaat Hulett, that it was going into enterprise rescue. It mentioned it needed to. It has an entire lot of debt and it was struggling to seek out new lenders. Even its current lenders had been struggling to justify how they might give it more cash, and the place the flexibility of Tongaat to repay the cash would come from. This resulted within the getting into of enterprise rescue of the corporate.
This has left a bitter style within the mouths of some gamers, significantly the small-scale cane growers who additionally provide Tongaat with sugar. They had been on account of obtain payment for offering these providers in September, however Tongaat missed that R400 million in payment that was on account of round 4 300 cane growers. It missed it yesterday, I believe as a results of the actions of enterprise rescue which have type of given it a little bit of wiggle room by way of assembly its monetary duties whereas the enterprise rescue practitioners within the background attempt to get Tongaat on a extra stable footing in order that it could possibly finally pay whom it owes.
At this stage it’s additionally not so clear whether or not these cane growers who’re owed by Tongaat, actually for the month of September, will even get the payment on account of them for the month of October.
We have the CEO of the South African Cane Growers (*14*), Dr Thomas Funke, on the Market Update for extra. I’m enjoying with puns right here by way of ‘bitter sweet’, however it is a fairly bitter style that Tongaat has left within the mouths of the cane growers who provide it with sugar. Can you give us a way of what has occurred to them thus far, and what Tongaat going into enterprise rescue will imply for them?
DR THOMAS FUNKE: Yes. Good night. You’ve summed it up very effectively. There’s actually a bitter style within the mouths of the sugar-cane growers. As of this [past] weekend, the growers really stopped delivering sugar cane to Tongaat, and that has pressured the mill to a grinding halt, just because they don’t seem to be positive that they’re even going to receives a commission for something they ship. So at the second the farmers are sitting on their cane and hoping that this enterprise rescue state of affairs opens the mills once more comparatively quickly, and that the collectors receives a commission in order that enterprise can resume as regular as potential.
FIFI PETERS: How a lot are the cane growers owed at this stage by Tongaat?
DR THOMAS FUNKE: We had been working via the figures, and at the top of September they had been paid what was on account of them.
How the payment works is you receives a commission for the entire sugar cane that you simply ship, all the time at the most recent value. So at the top of September they had been paid round R2 billion, and that was for all of the cane that they delivered up to now. And then at the top of October there’s a payment due which might be an extra R400 million on what that they had been paid in September. So that’s the quantity that hasn’t been paid.
As a consequence, the growers will not be delivering sugar cane. At the second they’re owed R400 million that is because of them for sugar cane that has already been transformed into sugar, and that’s principally sugar sitting on the cabinets, and what’s bought to clients.
FIFI PETERS: You as an affiliation are on account of meet with the enterprise rescue companions of Tongaat tomorrow [Wednesday]. Help us perceive how that assembly goes to go. What’s on the agenda, prime of thoughts?
DR THOMAS FUNKE: I believe at the beginning it’s in all probability a meet-and-greet to see who they’re and what their plan is. But what we actually wish to do is simply elaborate on the affect that the closure of the mills can have on far-reaching rural areas of KZN, particularly on the North Coast.
Tongaat is lively by way of sugar cane being harvested in 18 little cities unfold all through the North Coast and Zululand. Our figures present that the farmers in these areas make use of round 15 000 folks; that’s along with the 4 300 growers that personal these companies.
So if Tongaat doesn’t pay the farmers for the sugar cane they’ve delivered, and in the event that they don’t open their doorways once more to crush the rest of the crop for the season, growers should shut their farms.
They’ll go in all probability into their very own enterprise rescue state of affairs, and that can imply large job losses. That’s actually what we’re involved about – the far-reaching affect that this example may have.
FIFI PETERS: I think about that you simply don’t count on this enterprise rescue course of to be completed in a single day. It takes time, if we glance at what we’ve seen concerning different corporations which have entered enterprise rescue. In this time, how lengthy can a few of the cane growers maintain out for?
DR THOMAS FUNKE: That’s an excellent query. When you’re working across the clock with funds, additionally on the agriculture facet, to clarify the state of affairs to them and the way dire it’s, and that they need to be trying at their purchasers and seeing what choices there are, I absolutely perceive that this doesn’t occur in a single day.
There are timelines, and we’ve simply acquired a Section 129 discover from these practitioners to try to clarify what the rights are and what the timelines are they’re working towards.
Hopefully we will persist with these timelines after which there’s a bit extra certainty as to when hopefully operations can resume or the corporate is bought, or regardless of the consequence is of this course of.
So I believe what’s actually key for us is certainty on the method and on timelines, and sticking to these, in order that we will plan accordingly.
FIFI PETERS: And then what in regards to the different sugar producers within the trade, the likes of Illovo and I believe [but] I stand to be corrected, Crookes Brothers, additionally RCL Foods with their Selati model. Are they not in a position to present sufficient work for the cane growers within the meantime whereas Tongaat’s out?
DR THOMAS FUNKE: No. They’ve obtained their very own growers in their very own mill areas supplying them. So they’re working across the clock. Sugar cane is being delivered as we converse. Sugar is being made, it’s being packaged, it’s being bought.
So we don’t foresee a direct subject with the availability facet. There’s nonetheless fairly a little bit of cane to be crushed this season. The mills are on account of shut their doorways solely in December, simply earlier than Christmas, in order that’s going full steam forward, and that can preserve the market provided.
Unfortunately sugar cane is a commodity you could’t transport over lengthy distances. It’s a high-bulk, low-value product. So your radius, the financial transport distance, is round 60km, 40-60km.
That’s how shut you need to be to a mill as a way to ship your crop viably. Illovo mills, for instance, are additional away. RCL Mills are in Mpumalanga and northern KZN, to allow them to’t actually assist out. And they’re full, as it’s. So the difficulty actually is within the North Coast and Zululand, and that needs to be sorted out.
FIFI PETERS: So if the availability within the rapid time period just isn’t actually anticipated to be impacted meaningfully, does the identical go for the value? Should we be involved as shoppers of sugar as to what Tongaat’s enterprise rescue means for the value that we pay for our sugar?
DR THOMAS FUNKE: At this stage I don’t assume we must be involved. The sugar trade has fairly a regulated system, and one of many strategic pillars of the sugar-cane worth chain was to maintain sugar pricing at CPI – and that’s what the trade has accomplished.
So costs on the cabinets gained’t actually improve dramatically now, as a result of the switch value between growers and millers has been set and it gained’t change once more.
So even when provide dries up, I believe the risk is extra that sugar from elsewhere may enter the nation – and with the weak rand and the excessive world costs that sugar could be much more costly. So as soon as that sugar would hit the cabinets, clearly you’ll see a rise within the value. But if it’s not South African sugar, I don’t assume there’s a lot to be involved about at this stage.
FIFI PETERS: All proper. Dr Thomas, we are going to depart it there. We’ll actually look out for any assertion that you could be subject, or not, concerning your engagement with the enterprise rescue practitioners at Tongaat tomorrow, simply to maintain tabs on that story. Dr Thomas Funke is the COO of the South African Cane Growers (*14*).
