SOUTH AFRICA – In a strategic move aimed at revitalizing the sugar industry in the South African Development Community (SADC), the Fund for Sustainable Sugar Industry Development in Africa (FSID), backed by US-based private equity firm Lusitania Investment Capital, has secured an impressive R18.8-billion for strategic partnerships within the sugar sector.
The investment is set to enhance the industry’s capabilities by the end of the 2024/25 fiscal year.
Lusitania, through FSID, has set aside substantial investments of R9.5-billion in Angola and R6.6-billion in Mozambique, with plans to acquire Tongaat Hulett’s Mozambican business, including its liabilities and debts.
The FSID, in alignment with its objectives, aims to promote the cultivation of high-value commodity crops, employ sustainable food production methods, and enhance overall efficiency within the industry.
While the fund focuses on creating, consolidating, and expanding the industry’s presence, it also aims to encourage innovation, thereby creating investment opportunities that strengthen the sugar value chain.
Luis Revés, a representative of Lusitania and FSID, emphasized the potential benefits of their proposal for Tongaat Hulett, stating; “it will be a substantial financial income for South African operations, its liabilities, and the restructuring plan, while significantly reducing the current group’s debt”
However, the proposal faced challenges as it was rejected by Tongaat Hulett’s board in June 2022. Despite this setback, FSID managed by Zambezi Golden Assets is forging ahead with its investment plans, looking to invest nearly US$2.8 billion in the SADC region by the end of the 2024/25 fiscal year.
Delays in some merger and acquisition processes have been attributed to third-party involvement and electoral events in certain African countries.
Diversification key to industry revival
In parallel, the South African Sugar Association (SASA) is working closely with the government and other industry stakeholders to address challenges in the local sugar industry.
The expiration of Phase 1 of the Sugarcane Value Chain Master Plan to 2030 prompted the government to grant a two-year extension, allowing industry players to restructure and diversify.
SASA Executive Director Trix Trikham highlighted the need for diversification to mitigate the negative impacts of the Health Promotion Levy (HPL), commonly known as the Sugar Tax, introduced in 2018.
The sugar industry faced significant job losses, mill closures, and a substantial revenue decline. “To address youth unemployment, SASA introduced the Youth Placement Programme (YEP), allocating R5.2 million annually since 2018,” stated Trikham.
As part of the Sugarcane Master Plan, SASA is exploring diversification opportunities, including bioethanol, cogeneration, food additives, and bioplastics, leveraging sugar cane’s flexibility to produce various products.
Trikham acknowledged the challenges in existing diversification plans and urged the government to collaborate with the industry to navigate critical issues and align with the objectives of the Sugarcane Master Plan.
The simultaneous efforts by the private sector, represented by FSID, and the government-led initiatives underline a comprehensive approach to address challenges and ensure the sustainable growth of the sugar industry in the SADC region.
As these strategies unfold over the coming years, they hold the potential to reshape the industry landscape and drive economic development in the region.
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