Gledhow Sugar Mill has become the latest sugar mill to enter into voluntary business rescue, piling pressure on the industry after a similar move by Tongaat Hulett in October.
(Delwyn Verasamy/M&G)
Gledhow Sugar Mill has become the latest sugar mill to enter into voluntary business rescue, piling pressure on the industry after a similar move by Tongaat Hulett in October.
The Gledhow decision was made at a meeting held on 10 March, the SA Canegrowers said on Wednesday. Gledhow and Tongaat control all four sugar mills still operational in northern KwaZulu-Natal, these being the Gledhow, Maidstone, Felixton and Amatikulu.
“This (Gledhow) announcement is a further signal of the sugar industry’s growing distress and the need for urgent intervention to prevent the crisis from deepening,” SA Canegrowers chairperson Andrew Russell said in a statement.
He said Tongaat’s business rescue last year had “caused an acute crisis in the industry, delays in grower payments and uncertainty as to the future of sugar milling operations on the north coast of KwaZulu-Natal”.
SA Canegrowers said with the new season commencing on 1 April, Gledhow’s supplying growers faced uncertainty whether the mill would operate normally and be able to make payment for sugarcane delivered as well as meet its financial obligations to the industry.
The Gledhow mill in Stanger buys from more than 245 growers who produce more than 1.1 million tonnes of sugarcane per year — 6% of the industry’s total output.
Gledhow has been facing significant challenges in recent years, including the forced closure of its factory due to social unrest in KwaZulu-Natal in July 2021 and catastrophic flood damage to its machinery and infrastructure in April last year.
“In addition, the Russia-Ukraine War has resulted in significant increases in essential supply costs, such as coal and other operational inputs, which have further affected the company’s operating margin and cash flow constraints,” Gledhow said in a statement.
It said these challenges have resulted in the company becoming “financially distressed” as defined in section 128 of the Companies Act.
According to the Act, a company is deemed financially distressed if it appears reasonably unlikely that it will be able to pay all of its debts as and when they become due, or if its liabilities will exceed its assets within the ensuing six months.
The growers that supply sugarcane to Gledhow employ more than 3 400 workers from surrounding communities, according to SA Canegrowers.
“The milling operations at Gledhow are critical for the mill’s survival and for the growers in the region. SA Canegrowers is engaging extensively with the mill management, the South African Sugar Association and with its grower members. We will make every effort to support Gledhow supplying growers, and to protect the livelihoods the industry supports,” the association said.
The loss of jobs at Gledhow would be a blow for KwaZulu-Natal province, where the unemployment rate increased by 0.8 percentage points to 31.4% of the labour force in the last quarter of 2022, according to Statistics South Africa.
The KwaZulu-Natal agricultural industry employed 130 000 people during the last quarter of 2022, a 3% decrease from the 132 000 people employed in the sector during the same period a year prior.
As a whole, the agriculture sector contracted by 3.3% and contributed -0.1 of a percentage point to GDP growth for the fourth quarter of 2022, according to Stats SA. This was primarily due to decreased economic activities reported for field crops and horticulture products.
Gledhow said that under business rescue, the operation will continue to crush cane and produce sugar as efficiently as possible.
It said the board of directors had assured all affected people, including the staff, that paying salaries and allowing the business to keep producing sugar as efficiently as possible was a top priority. Cane payments, production and maintenance costs were also top priorities to be covered.
Meanwhile, Tongaat Hulett is due to release its long awaited business rescue plan on 31 March.
Gledhow has not communicated when it aims to release its business rescue plan.