More than R400 million in payments to Kwazulu-Natal cane growers is at risk as Tongaat Hulett, the mainstay of the province's economy goes belly up.
The South African Cane Growers Association said on Friday that it was deeply concerned about Tongaat going into business rescue, which could have catastrophic consequences for South African sugar cane growers and the entire sugar cane value chain.
“This move means that Tongaat Hulett has lost access to its bank accounts, which in the immediate term means that over R401 million that was due to be paid to growers at the end of October 2022 will likely not be transferred on time,” said Andrew Russell, SA Cane Growers chairperson.
Russell said the unbundling of Tongaat would have dire financial consequences for growers as well as the farm workers they supported.
This situation could plunge thousands of growers and workers into destitution and raised the risk of unrest in KwaZulu-Natal’s rural cane-growing communities, he said.
“The payments due at the end of this month are for sugar cane delivered in September 2022. For a number of small-scale growers, September marked their first deliveries of the season, and any default on these payments will have devastating impacts on their livelihoods, as well as the communities they support,” Russell said.
Questions also remain about how payments will be made for deliveries in October, November and December 2022, which means the impact on growers is likely to worsen if the mills do not remain operational.
“Although the sugar industry has been aware of Tongaat Hulett’s financial woes, the decision to enter into business rescue at this time has come without warning. As the surrounding mills in the province lack the ability to take on Tongaat Hulett’s deliveries, the decision also has serious short- and long-term implications for the supply of sugar to the local market,” he said.
Locust outbreak fears
Meanwhile, Andrea Campher, risk and disaster manager at Agri SA, said the Department of Agriculture, Land Reform and Rural Development needed to address the outbreak of locusts as farmers had concerns that the 2022/2023 summer season would lead to an even greater locust outbreak if no proactive measures were taken now. South Africa would probably experience further locust infiltration of agriculture areas, which would affect yields and the capacity to control the magnitude of the outbreak.
Camphor said in the 2021/2022 season, more than 23 million hectares of land was affected by locust outbreaks; it was the worst outbreak in 25 years.
As much as 90% of the 23 million hectares of the infiltrated land was agricultural land. Unless urgent action was taken, 2023 could see even greater losses, he said.
“Outbreaks are already in full swing in parts of the Northern Cape, Eastern Cape and Western Cape. With the above-normal rains expected this summer according to the South African Weather Service, we can expect devastating swarms in the 2022/2023 summer season as locust eggs on the infiltrated land hatch. Despite the magnitude of the threat facing the sector, timeous renewal of contracts of locust officers in the affected provinces did not take place, which poses a risk to locust control operations,” Camphpor said.
He said chief concerns were the urgent issuing of locust officers’ contracts, which had not been finalised; securing pesticide supplies and spraying equipment; the distribution of protective equipment for officers; training of new officers; the capacity of the Department of Agriculture, Land Reform and Rural Development to finalise payment claims; and to resume an open line of communication with the department to implement workable solutions.
“A number of challenges were encountered in 2021 and 2022, and these also needed to be addressed ahead of time for 2023. Previously, many of these issues were only addressed with the assistance of private-sector funding to mitigate the impact of public-sector shortcomings. On a positive note, the department revised the fuel tariffs since 2013 for this coming locust season which will ensure sustainable controlling operations for officers,” Camphor said.
He said the SA Cane growers Association would engage with the business rescue process to ensure that payments due to growers were prioritised.
In the meantime, urgent action was required to prevent the catastrophic social consequences that would arise if the immediate threat of non-payment materialised in the next few days.
“We, therefore, urge all involved, including the business rescue practitioners, the Tongaat Hulett board and executive management, and financial institutions to do everything possible in the circumstances to ensure that payments are made with as little disruption as possible.”
BUSINESS REPORT