South African sugar producer Tongaat-Hulett Sugar on Monday announced that it is looking to cut costs by half as a result of the strong rand, chief executive of the Tongaat-Hulett group Peter Staude said in a statement.
These cuts will require the downsizing of its head office at La Lucia in KwaZulu-Natal, which has 190 employees, and management will also be centralised and downsized across the group.
All services operating out of La Lucia will be reviewed, including finance and accounting, information technology, purchasing and procurement as well as technical services.
The sugar industry in South Africa is facing one of its most extreme challenges in recent history brought about by a number of factors converging at the same time, Tongaat said.
The most important factors are:
The rapid strengthening of the rand against the United States dollar to levels last seen in early 2000;
Cost push pressures since 2000 that have rendered the industry less competitive in US dollar terms;
The recently announced reduction in the domestic market sugar price; and
The world market price being at its lowest level in recent years largely attributable to the rapidly growing Brazilian sugar industry that is expanding even though there is little movement in world sugar trade liberalisation.
Tongaat-Hulett Sugar’s position has also been exacerbated by poor rainfall in many parts of the local sugarcane belt, with production in some of the worst affected areas reaching full-blown drought status.
In mid-November 2003, Tongaat-Hulett Sugar MD Bruce Dunlop announced that the company had initiated consultations with Entumeni mill employees, their representative unions and cane growers regarding the company’s proposal to close the Entumeni sugar mill.
“Consultations with stakeholders are ongoing,” Tongaat-Hulett Sugar said.
In other developments, the Tongaat-Hulett group is looking at the feasibility of relocating from the La Lucia offices in Umhlanga Rocks Drive near Durban to smaller premises and the need for an office in Maputo in Mozambique. — I-Net Bridge