Tongaat Hulett to resume sugar production in Mozambique after injecting US$29.5m

MOZAMBIQUE – South African based sugar producer, Tongaat Hulett is set to resume operation at its Mozambican subsidiaries, the Xinavane and Mafambisse sugar mills by April with an investment of about US$29.5 million.

The decision comes after a long period of uncertainty arising from possible criminal mismanagement and financial hurdles which led to a forensic probe on its 2018 financials that led to the company’s share trading suspended on both the Johannesburg and London stock exchanges.

Beginning of February saw a new dawn for the sugar processor when it resumed trading on the local bourse, JSE.

The promise of new investment was revealed by the general manager of Tongaat Hulett in Mozambique, Tendai Masawi, when he presented a report on the activities of the Xinavane company to the chairperson of Mozambique’s Confederation of Business Associations (CTA), Agostinho Vuma.

“We will not close either the Mafambisse or the Xinavane sugar factory”, pledged Masawi. The units will continue to produce. Tongaat Hulett has taken the decision not to close these sugar factories.”

With the launch of the 2020 production set for April 7, the millers target is to produce 213,000 tonnes of sugar, of which 60,000 tonnes will be refined white sugar for the confectionery and soft drinks industry.

“We shall produce 175,000 tonnes of sugar at Xinavane and 38,000 tonnes at Mafambisse. We shall work on 18,000 hectares of sugar cane, involving 6,000 producers,” said Masawi.

Vuma expressed his satisfaction at this announcement, and said that Tongaat Hulett’s decision showed confidence in the Mozambican market.

“We were concerned at the situation of the two companies because what they produce is part of the agro-business value chain. Sugar is a raw material for the drinks industry. We are pleased to hear that, on 7 April, the machines will start to roar again,” he said.

Tongaat Hulett holds 85 per cent of the shares in the Mafambisse company and 88 per cent in Xinavane. The rest of the shares are held by the Mozambican state through IGEPE (Institute for the Management of State Holdings).

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The Xinavane mill is the largest sugar producer in Mozambique with an installed capacity to produce 250,000 tonnes a year while Mafambisse has the capacity to produce 92,000 tonnes.

In other related news, Tongaat Hulett has entered into negotiations for the potential sale of its starch division in South Africa as it grapples to reduce its huge debt.

The talks come after Tongaat had committed itself to reducing its debt by R8.1billion (US$543.2m) by March 2021 and identified a combination of cost savings and cash flow initiatives such as asking shareholders for about R4bn (US$268.2m).

These included the sale of certain non-core assets as well as an equity capital raise and the disposal of core assets or majority stakes in core assets.

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