(Delwyn Verasamy/M&G)
Black and small-scale sugarcane growers have been given a lifeline of R176 million as they try to weather the storm during a milling crisis caused by miller Tongaat Hulett, entering into business rescue.
Tongaat Hulett entered into voluntary business rescue in October 2022 when the sugar producer could no longer pay its creditors because it had a debt burden of R6.3 billion. Worst affected were small-scale sugar producers who could not farm without payment from Tongaat, which would often be delayed.
Months later, Gledhow Sugar Company, also in the KwaZulu-Natal North Coast area, entered into business rescue, creating another problem for small-scale cane growers because it was costly to transport produce to other sugar mills in the south of KwaZulu-Natal.
The R176 million lifeline from the South African Sugar Association flowed from the sugar industry’s commitment to transformation interventions, as well as commitments under the Sugar Cane Value Chain Masterplan.
The SASA represents the interests of all sugar millers and refiners in South Africa and its purpose is to promote the sustainability of the sugar industry.
“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,” Andrew Russell, the chairperson of SA Canegrowers, said in a statement.
The disbursement from the fund will be done in two ways. First, the industry has budgeted R125 million for black and small-scale growers delivering less than 1 800 tonnes of sugarcane in the 2023-24 season.
From the R125 million, R60 million will be paid out at the end of July this year, together with the payments for cane delivered in June 2023. A further R50 million will be paid out in November 2023, with the balance of R15 million to be paid out in January 2024.
Second, R51 million has also been set aside for black growers and joint ventures delivering more than 1 800 tonnes of sugarcane. These are predominantly land reform growers.
“This funding is critical as the industry continues to face the crisis in the milling sector and growers try to recover from the financial shocks of the last season,” Russell said.
Showing the vulnerability of the industry, the last disbursement to the sugar industry by the SASA was a year ago, when more than R225 million was paid to small-scale growers at the end of January last year.
At the time, the SA Canegrowers said: “The payments come at a good time for small-scale growers, a number of whom were affected by the unrest in July 2021. Over the past two years, growers have survived not only the widespread cane arson that characterised the July unrest, but also costs incurred to combat the Covid-19 pandemic; the continued implementation of the health promotion levy; declining milling capacity, which means significant quantities of cane being carried over; and an exponential increase in input costs like fertiliser.”
More than a year later, the industry experienced a different point of pain — small-scale growers were particularly hard hit by Tongaat Hulett and Gledhow sugar mills when they defaulted on financial obligations to the industry, totalling R1.5 billion.
“In light of these challenges, the funding disbursed this month is 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,” Russell said.