Categorized | Enterprise Development

Sweet deal keeps cane growers and sugar industry afloat

ithalaThe livelihood of about 58,000 people who contribute towards production of 20 million tonnes of sugarcane annually would have been compromised had it not been for the support provided by Ithala Development Finance Corporation.

Sweet deal keeps cane growers and sugar industry afloat

Bearing the brunt of a prolonged drought and an unfavourable economic climate was the Ilembe district on KwaZulu-Natal’s North Coast in which Gledhow Sugar Company operates.

 

The sugar company which is dependent on 45% to 50% supply of sugar cane from land reform growers came under threat after growers experienced difficulty raising their own finances in order to purchase fertiliser and chemicals to rehabilitate their farms.

 

To alleviate the effects of the drought and ensure sustainable throughput of the mill, Ithala provided a R15m debt facility to Gledhow for on-lending to growers supplying sugar cane to the company.

 

The small cane grower programme signalled the start of a partnership between Ithala and the sugar industry some years ago in which black farm ownership and financial inclusion in the sector was prioritised. Key to unlocking transformation in agriculture was land reform which created a means for rural-based businesses to increase agro-processing activity.

 

“Our role as a development finance institution is not confined to funding but forms part of a broader strategic role of support to our clients during times of need. Without such intervention, jobs would be lost and the sustainability of the sector would be challenged,” said Bonginkosi Shangase, Ithala Business Finance Executive.

 

“The drought has been deemed the worst in 23 years with the sugar industry body loss estimated at R1,7bn in gross revenue for the season 2015/16. This has resulted in serious ramifications for our agricultural portfolio, demanding that Ithala be innovative in addressing the challenges.”

 

In the past five years, Ithala has financed over 6300 hectares of agricultural land to historically disadvantaged individuals, many of whom started out as small cane growers. Over the same period, R1.5bn was advanced to primary agriculture and agri-business.

 

The South African sugar industry is an important contributor to the national economy as characterised by its agricultural and industry investments, foreign exchange earnings, high employment and linkages with major suppliers, support industries and customers.

 

The cane growing sector comprises about 29,000 registered sugar cane growers who farm predominantly in KwaZulu-Natal and Mpumalanga.

 

The sugar industry creates direct employment for 137,000 people and indirectly affords 110,000 people a livelihood. This represents 11% of the total agricultural workforce in the country which makes the sugar industry the largest agricultural employer. Approximately one million people – more than two percent of South Africa’s population – depend on the sugar industry for a living.

 

“Many of the farmers are long-standing clients of Ithala and have become very successful. One of our clients, Jacob Masuku, who started out as a small scale farmer, became the first black commercial sugar cane farmer in Pongola. As his first financier, this is an achievement we are most proud of,” added Bonginkosi.

 

“Gledhow facilitates third-party funding and provides security for growers who are unable to raise their own funds at no additional cost to them. The sustainability of the growers is important to us and the funding enables growers to replant roots,” said Paul De Robillard of Gledhow Sugar Company.

 

“The growers at Gledhow are also shareholders in the mill which welcomes any form of assistance to ensure growers develop continuously. The partnership with Ithala provides ongoing support to growers who are the lifeblood of the mill and the community.”

 

Gledhow also has a dedicated Land Reform Department which advises growers on best sugar cane agronomic practices viz. good sugar cane husbandry; timing of herbicide/chemical and adequate fertiliser application based on soil analysis and a comprehensive ripening programme to maximise cane quality.

 

The Gledhow Sugar operation is an efficient, world-class supplier of refined white sugar to the domestic market, supported by a committed and efficient growing community who, together with the manufacturing arm of the business, have at heart the long-term production and transformation interests of the modern day South African Sugar Industry.

 

Based on revenue generated through sugar sales in the South African Customs Union (SACU) region as well as world market exports, the South African sugar industry is responsible for generating an annual estimated average direct income of R12bn. This constitutes R5.1bn in value of sugarcane production.

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