Social unrest warning for South Africa with 40,000 jobs on the line
SA Canegrowers, representing 27,000 small-scale growers and 1,100 large-scale growers, has formally written to President Cyril Ramaphosa asking for urgent intervention to save the sector.
This follows one of the sector’s biggest companies, Tongaat-Hulett, heading for liquidation later this month.
The group warned that, should the company be liquidated, the entire sector would lose access to critical infrastructure, and 40,000 direct jobs could be lost.
This would be devastating for the communities surrounding its operations, increasing the risk of economic and social unrest, it said.
On 12 February, it was confirmed that Tongaat Hulett would be liquidated after business rescue practitioners exhausted all possible options to save the 134-year-old company.
Hearings on the liquidation are scheduled for next week.
While the company has crumbled due to accounting irregularities, financial misstatements and governance failures under former management, worsening market conditions also played a decisive role.
Notably, domestic sales declined sharply as large volumes of low-priced imported sugar entered South Africa.
Cheap imports of sugar have left many canegrowers on the brink, and despite government reforms aimed at strengthening the industry, representative groups have seen no real relief.
SA Canegrowers has now appealed directly to Ramaphosa, the ministers of Finance, Trade, Industry and Competition, Agriculture, and Public Works and Infrastructure, calling for urgent intervention.
The group said the industry is facing debilitating pressures:
- The potential liquidation of Tongaat Hulett Limited.
- The uncertainty surrounding its milling operations.
- The unprecedented surge in imported sugar.
- The continued impact of the Health Promotion Levy.
“Tongaat Hulett’s liquidation is not merely about the survival of a single corporate entity, but the systemic importance of the company’s milling operations to the broader South African sugar value chain and economy,” it said.
Losing critical infrastructure
SA Cangrowers chairman, Higgins Mdluli, said that Tongaat Hulett’s mills are critical infrastructure, stressing that of South Africa’s 28,000 large- and small-scale sugarcane growers, Tongaat Hulett is the only milling company available to 18,000 growers.
“There is no economically viable alternative milling option for these growers,” he said.
“If these Tongaat Hulett’s operations fail or enter unfunded liquidation without structured intervention, the consequences will not be contained within a balance sheet.”
The majority of South Africa’s growers will immediately lose market access, and their estimated 40,000 directly employed workers will face unemployment, he warned.
“The surrounding rural communities will immediately be vulnerable to economic and social unrest.”
Mdluli also warned of further financial pain in the sector.
Specifically, in the South African sugar industry, millers and growers share revenue of sugar sales through the Sugar Industry Agreement framework.
An unfunded liquidation of Tongaat Hulett will mean that Tongaat Hulett’s levy payments will cease, requiring all growers and the remaining millers to make up the shortfall, as will the sale of Tongaat Hulett’s existing stock of refined sugar.
“All of South Africa’s sugarcane growers will be severely negatively affected by the liquidation, unless some form of agreement can be reached to keep the milling operations open,” Mdluli said.
The next wave of pain will come from the current surge in imports, which SA Canegrowers warned will be exacerbated.
“Allowing Tongaat Hulett’s operational footprint to collapse would accelerate South Africa’s dependence on sugar imports, increasing long-term exposure to volatile global prices and exchange rate risk,” it said
Currently, global sugar prices and the exchange rate may favour importers, but the volatile nature of these markets means that South Africa would be exposed to an uncontrollable inflationary risk.
“What may appear to be a contained corporate failure would, in reality, trigger dire cascading economic consequences across KwaZulu-Natal, Mpumalanga and the national food and beverage system.”
Because of these huge risks to canegrowers and South Africa as a whole, the group has appealed to President Cyril Ramaphosa and his cabinet to step in.
SA Canegrowers is calling for the following urgent government action:
- Review and amend the sugar import dollar-based reference price to bring it in line with global economic realities.
- Do everything within their power to ensure that the Tongaat mills and refinery remain operational in the immediate future and beyond.
- Scrap the Health Promotion Levy (sugar tax).
- Recommitment to the outcomes of the Sugarcane Value Chain Master Plan 2030.
“Urgent, coordinated government intervention is required to prevent a failure whose consequences would extend far beyond a single company,” it said.
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