AYABONGA CAWE: Might more rum and molasses production be a way out of Tongaat hole?

For a country that has produced sugar for more than a century, aside from a few craft distillers I discovered after a quick search, we really don’t have a “rum culture” to speak of.

I mentioned this last week to a colleague as we discussed the sad fate that may befall many in the sugar-growing parts of our country after Tongaat Hulett went into business rescue. Might more rum and molasses production be a way out of this quagmire? Maybe part of it.

Many small-scale cane growers, whose incomes from annual harvests cover their wage, input, replanting and other costs and a little margin, are out of pocket already as the 130-year-old company failed to honour its payments for the September product. Soon nearly 15,000 workers’ jobs may be at risk, many of them working for the 4,300 cane growers who feed the mills.

For the people of KwaZulu-Natal it comes at an inopportune time, as SA Cane Growers Association vice-chair Kiki Mzoneli said on MetroFMTalk last week on the eve of the association’s meeting with Tongaat Hulett’s business rescue practitioners.

“We had riots in KwaZulu-Natal where they looted the farms and some of the farms were burnt. And then there were the floods,” Mzoneli said.

While some suggest mill closures will have to be part of the solution, reintegrating smaller cane growers into the supply chain will not be easy. According to Khanya Ndzululeka from Setana Capital, “there are potential buyers out there in the markets, but to actually get into a big corporate supply chain [of other millers such as Illovo or RCL] is difficult”.

Few avenues

The looming closure of the mills in Amatikulu, Felixton and Maidstone may reduce not just milling capacity in the sector but also foreclose market opportunities for those who are to a great extent reliant on the lost capacity for incomes. “Once the sugar mills stop working and the sugar that is being delivered is not crushed, we will have a crisis in the area,” Mzoneli said.

This outcome is an indication of how firms such as Tongaat Hulett have shaped places like “Natal”, with their historic political mechanisms of rule (colonial indirect rule and indentured labour, for instance) and the spatial distribution of infrastructure such as rail and roads, but also the vulnerabilities arising from the dependence of many local producers (small and large) on so few avenues to market for the cane they grow.

Whatever the eventual fate of this old sugar producer may be — it also has tentacles in property development and elsewhere — this episode is a reminder that the task of achieving agrarian transformation (rather than just land reform as a form of empowerment) demands diversified markets. It also requires opportunities for value creation and incomes in the countryside, rather than a focus on existing productive activities, even where settlements, commercial infrastructure and capabilities may be solely geared to such activities.

While some have called for the government to intervene, it is unclear what form such intervention might take. Using trade policy to curb imports (at what cost?), or reviewing the mill-level implications of the sugar tax on the fiscal side, perhaps?

Whatever action is taken it must not be aimed at bailing out management (past and present) and shareholders, but to create new opportunities for sugar workers, cane growers large and small, and entrepreneurs in downstream value-added markets (biofuels, alcohols, molasses, feed and pharmaceuticals). 

The goal should be to leverage the heritage of multiple generations of cane production to produce new products and services, where these are feasible. For every mill lost, the government must consider how the state can crowd in the resources required for transitional opportunities and future alternatives.

After all, we produce more sugar for the mill than Cuba, and if we innovate and explore new opportunities communities from Groutville to Maidstone and Pongola may yet raise a glass of rum to toast their exit from this crisis.

• Cawe, a development economist, is MD of Xesibe Holdings and hosts MetroFMTalk on Metro FM.