Sugar-cane farmers in KwaZulu-Natal are worried they may face delays in payments for their produce as one of the millers, Gledhow, entered business rescue earlier this month.
This is less than six months after Tongaat Hulett also went into a similar process.
Business rescue is a form of insolvency protection that keeps creditors at bay while practitioners try to save the indebted or financially troubled company.
The Gledhow mill in KwaDukuza crushes sugar for more than 245 growers who produce more than 1.1-million tonnes of sugar cane a year. SA Canegrowers, an industry organisation, says this amounts to 6% of the industry’s total output. These growers employ more than 3,400 workers from surrounding communities.
After Tongaat Hulett, which operates three sugar mills, went into business rescue in October, growers who are paid 30 days after delivering cane to the mills were paid late. It led to uncertainty over the future of sugar-milling operations on the North Coast of KwaZulu-Natal.
The cane growers say as the new season begins in April Gledhow’s suppliers face similar uncertainty about whether the mill will operate normally and whether it will be able to make payments in time.
Gledhow is owned by a consortium comprising Ushukela Milling (34.9%), Illovo Sugar (30%), the Gledhow Growers Share Trust (25.1%) and Sappi (10%).
Gledhow said in a statement about its decision to voluntarily enter business rescue that increases in costs such as energy and fertiliser were not absorbed by sugar price increases. This was as a result of the pricing restraints imposed under the SA sugar master plan. This worsened the company’s operating margin and cash-flow constraints.
It said the July 2021 riots in the province and the April 2022 floods had worsened its position. Union Uasa said in a statement that insurers had not paid all the flood-related insurance claims, which made the mill’s situation untenable.
Gledhow said the company would continue to produce sugar as efficiently as possible, with paying staff salaries a priority, as well as covering cane payments, production and maintenance costs.
But SA Canegrowers CEO Thomas Funke said: “From our experience of the Tongaat Hulett process, there remains some trepidation as to the ability of the mill to make timeous grower payments.”
Industrial economist Neva Makgetla said the sugar industry in KwaZulu-Natal had been in structural decline for decades. This was in part because it is too costly to produce sugar in the province as it does not receive enough rain. This makes farmers rely on irrigation, a more costly alternative.
Sugar cane grown in Mpumalanga, Mozambique and Eswatini is cheaper to produce due to heavier rains in those regions.
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