Looming job crisis as Tongaat Hulett defaults on grower payments

Thousands of local sugar cane farming jobs are at immediate risk after Tongaat Hulett failed to pay the R401-million owed to growers on October 31.

The sugar giant entered into voluntary business rescue last Thursday, just four days before the payment deadline for cane delivered in September.

This could be catastrophic for farmers and their employees, particularly those with smaller operations who need immediate payment to fund their next crop and wages.

The South African Canegrowers Association estimates that 4 300 growers supply Tongaat Hulett’s three mills north of Durban – at Maidstone, Amatikulu and Felixton.

“More than 4 000 of these are small-scale growers who are especially vulnerable.

“Yet, it is also important to stress that the viability of the sugar industry is dependent on the survival of both large and small-scale growers, as the larger producers provide the bulk of the cane tonnage that is required to keep the mills running at 350 tonnes an hour.

“They also cross subsidise small-scale growers through a variety of financial support mechanisms,” said SA Canegrowers chairman, Andrew Russell.

Locally, growers are mainly based in Darnall, KwaDukuza, Shakaskraal, Tongaat, Ndwedwe and Isinembe.

It is difficult to overestimate the importance of cane growing to these communities, given its history as the main industry of the North Coast and in the creation of towns in outlying areas.

“It is crucial to ensure the sugar value chain is restored and operates without any further disruption. If not, the immediate money loss to our local economy will be significant,” said iLembe Chamber CEO, Cobus Oelofse.

Aside from the growers themselves, just shy of 15 000 permanent and seasonal workers will be affected.

“This excludes all other stakeholders in the cane delivery process, including haulers, input suppliers, mill workers and other service providers,” said Russell.

When the outstanding payments will be made, or whether they will be made at all is unknown. About R345-million in cane was delivered in October, raising further concerns for farmers when payment is due at the end of November.

Tongaat Hulett did not commit to a specific date of payment when approached by the Courier on Monday.

“To the extent possible and practical in the circumstances, contracts and undertakings will be respected and will be dealt with in accordance with the provisions of Chapter 6 of the Companies Act. The business rescue practitioners (BRPs) and company will be communicating with farmers in this regard,” said the company.

To what extent daily mill operations were continuing also remains unclear.

The South African Farmers Development Association (SAFDA) said they believed Tongaat Hulett mills had decided to boil off cane.

“This means they are clearing all the processing pipelines with the aim of stopping the milling process for a certain period. Farmers are advised to not cut any new cane, but clear their fields of all cane that has been harvested and deliver it,” the association said last Friday.

Tongaat Hulett did not indicate whether cane was still being processed.

“It is too early in the process for the BRPs to comment in detail on any potential impact on daily operations. They have dedicated people working very hard to find the best way forward for those associated with Tongaat,” said the company.

Updates are expected after a meeting between Tongaat Hulett and farming representatives and creditors, likely to be held on November 8.

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