Not enough to save 134-year-old company in South Africa
The South African government has rushed to introduce new rules aimed at helping the embattled sugar industry following the looming liquidation of Tongaat Hulett.
However, despite the gazetted reforms aimed at strengthening the industry, the South African Farmers Development Association (SAFDA) says they do not address the key problem of cheap imports.
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.
The practitioners approached the KwaZulu-Natal High Court to terminate business rescue and place the group into provisional liquidation.
It entered business rescue in October 2022 following accounting irregularities, financial misstatements and governance failures under former management.
This destroyed roughly R12 billion in shareholder value and severely damaged its balance sheet and access to funding.
Worsening market conditions also played a decisive role. Domestic sales declined sharply as large volumes of low-priced imported sugar entered South Africa.
The potential collapse of Tongaat’s operations has been described as catastrophic for the regional economy, with roughly 250,000 jobs supported by the cane-growing sector at risk.
In response, Trade, Industry and Competition Minister Parks Tau gazetted regulatory changes intended to strengthen the industry.
However, the South African Farmers Development Association (SAFDA) said the reforms have been widely misunderstood and do not actually deal with imports.
Speaking in a recent interview, SAFDA chairman Siyabonga Madlala said the policy is being misinterpreted as protection against foreign sugar.
“The regulation that’s been gazetted does not necessarily speak to the deep-sea imports that actually ravage the sugar industry,” he said.
Instead, he explained that the measures focus on how the local industry manages its own production and exports.
New rules still help
The new rules specifically deal with so-called “carry-over tonnages”, allowing producers to store unsold sugar at the end of a season while still paying farmers.
“When we produce sugar, that which we can’t sell in the season, we can actually store it, but be able to pay our farmers and carry it over to the next season,” Madlala said.
“The regulations allow us to pay our farmers in that season, so it helps us manage our cash flows.”
He added that it also improves the recoverable value price farmers receive. “It bumps up our RV price in that context so that farmers don’t only get paid in the following season when the sugar is sold.”
However, he stressed the changes provide no protection from imports. He noted that the industry has applied to the International Trade Administration Commission for a tariff review.
“We are still appealing to the government for swift implementation of the tariff review so that we can be protected from the deep-sea imports.”
The scale of the problem remains severe. “The sugar imports we are talking about are still ravaging us. We’re sitting with over 150,000 tons of imported sugar as we speak,” he warned.
Madlala argued that imported sugar is frequently dumped below its real production cost due to subsidies abroad.
“Most of the industries in other countries are subsidised by their governments to even export sugar,” he said.
“The prices you fetch in the market are cheap prices not reflective of the real cost of production.”
Local producers also face higher labour and compliance costs. “We don’t even compare to those countries in terms of cost of production,” he said.
“Others don’t even have minimum wage. We are subjected to a minimum wage in this country, and the farming conditions are not the same.”
He warned that the consequences extend far beyond the industry itself. “By buying imported sugar, it means we are actually exporting jobs,” he said.
“Our country is facing serious unemployment, and it’s not the time we can be exporting jobs—in actual fact, we’ll be killing our local farmers.”
This article has been updated.
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