Wed, 29 Nov 2023
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R176m lifeline extended to growers as sugar industry battles milling sector crisis

Home Business Management Finance & Investment R176m lifeline extended to growers as sugar industry battles milling sector crisis

SA Canegrowers welcomed the disbursement of R60 million in transformation intervention funding to black and small-scale canegrowers through the South African Sugar Association, said chairman of SA Canegrowers, Andrew Russell.

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, he continued.

The industry has budgeted R125 million for black and small-scale growers delivering less than 1,800 tons of cane in the 2023/2024 season. R60 million will be paid out at the end of July 2023, together with the payments for cane delivered in June 2023.  A further R50 million will be paid out in November 2023, with the balance to be paid out in January 2024.

R51 million has also been budgeted for black growers and joint ventures delivering more than 1,800 tons of cane. These are predominantly land reform growers.

“SA Canegrowers is committed to the survival of the industry and to supporting the industry’s most vulnerable small-scale and black growers. We will continue to work with our industry partners through the South African Sugar Association to protect the one million livelihoods the industry supports,” said Russell.

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. This reduced the final RV price of sugar for the season by more than R400 per ton. The legal action brought in this regard is ongoing.

Notwithstanding the unresolved matter of the 2022/2023 financial obligations, the business rescue processes at both mills appear to be progressing. Last week, the business rescue practitioners at Tongaat Hulett announced the selection of a strategic equity partner to help save the milling giant’s South African operations. While SA Canegrowers has welcomed this announcement, it remains to be seen what the final arrangements for Tongaat Hulett will be, and whether these can save the sugarcane operations that are so vital to local economies on the North Coast of KwaZulu-Natal.

Russell said that, 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.

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