Following the alarm sounded by SA Canegrowers over Tongaat Hulett and Gledhow mills’ payment defaults, the SA Farmers Development Association (Safda) said yesterday it was uncertain how the new season was going to unfold because farmers depended on the millers to collect levy on behalf of the Grower Association.
SA Canegrowers chairperson Andrew Russel said yesterday that Tongaat Hulett was unable to pay more than R900 million that was due to the SA Sugar Association (Sasa) at the end of March, while a further default by the Gledhow mill – which is also in business rescue – had resulted in an 8% drop in the final RV price (the price that growers receive for the cane processed) for the 2022/2023 season.
Russell said these defaults would cost the industry R1.5 billion, of which R1bn was deducted from the growers’ proceeds (the RV price).
“More than 20 000 small-scale growers will have to carry their share of the cost of these decisions, with the RV price (the final revenue determined for growers) dropping by R424 per ton at the end of the season. The resulting decline in revenue now threatens the livelihoods of thousands of small-scale growers, and the workers they employ,” Russell said.
SA Canegrowers said these defaults were in violation of the Sugar Act and Sugar Industry Agreement and had lowered growers’ revenue, placing thousands of small-scale and commercial growers in danger of losing their businesses.
The organisation said that in declining to meet their industry obligations, the business rescue practitioners at these companies were withholding funds generated from the work of the mills’ supplying growers, to the detriment of these growers’ operations, workers and suppliers.
The payments in question were levies and monies collected on behalf of the Grower Association, Sasa, and the other millers. The Grower Association and Sasa levies were critical income sources for Sasa and the Grower Association in particular, while the millers’ redistribution was also important to all millers’ sustainability. Every section of the industry was said to be therefore suffering immense hardship owing to the decision taken by the business rescue practitioners.
Russell said SA Canegrowers had, therefore, written to Department of Trade, Industry and Competition Minister Ebrahim Patel to request government’s intervention in light of the business rescue practitioners’ decision not to pay the amounts owing to the industry.
“Even as the industry explores possible legal action, urgent action is needed to protect the industry’s small-scale growers, workers, and value chain partners from financial ruin.”
However, Safda executive chairperson Dr Siyabonga Madlala said the industry did not anticipate that the business rescue practitioners would withhold Tongaat payments that were due to Sasa as per Tongaat Hulett Sugar obligations arising under the Sugar Industry Agreement (SIA) and the Sugar Act.
“The decrease in the final RV Price has affected growers plans for the new season (2023/2024), some farmers are owing the milling companies and they are expected to pay back the money asap,” Madlala said.
Madlala said the default payment levy of the local market impacted negatively on the final RV Price for the 2022/2023 season and left growers devastated.
“The forecast final RV Price was close to R6 000 per ton of RV, however, the Local Market Redistribution non-payment levy from THS resulted in a reduction of industry proceeds by R1.5 billion, of which R962 million was paid by growers as per the current sugar industry division of proceeds. The final RV price payable to growers for 2022/2023 season was R5 435.07 per ton of RV,” Madlala said.
South African Sugar Millers’ Association chief executive Deane Rossler said it was policy not to comment on the affairs of its individual members.
“The partnership between millers, refiners and growers, which is governed by sugar legislation, particularly the Sugar Industry Agreement, requires that statutory obligations are met in order to ensure the success of the partnership. We are hopeful that the current challenges faced by the industry can be resolved in the interest of the industry and the ongoing contribution of the sugar industry to the economy,” Rossler said.
BUSINESS REPORT