SUSTAINABILITY

 

MANUFACTURED CAPITAL

   
KEY ELEMENTS
>630 000 TONS OF MAIZE CONVERTED TO STARCH AND GLUCOSE PER ANNUM
ONLY MAIZE WET-MILLER IN SUB-SAHARAN AFRICA
>2,1 MILLION TONS INSTALLED SUGAR MILLING CAPACITY
7 970 HECTARES OF DEVELOPABLE LAND IDENTIFIED FOR CONVERSION

Tongaat Hulett is an agriculture and agri-processing business, focusing on the complementary feedstocks of sugarcane and maize. Its on-going activities in agriculture have resulted in the company having a substantial land portfolio within the primary growth corridors of KwaZulu-Natal with strong policy support for conversion at the appropriate time. A core element of Tongaat Hulett’s strategic vision is to maximise the value generated from the conversion of land in the portfolio by responding to key demand drivers and identifying its optimal end use for all stakeholders. Through its sugar and starch operations, Tongaat Hulett produces a range of refined carbohydrate products from sugarcane and maize, with a number of products being interchangeable. Global sweetener markets continue to be dynamic and the business seeks to optimise its various market positions, leveraging off its current base to maximise revenue from these products. The business’s sugar operations are well placed to benefit from evolving dynamics of renewable electricity and ethanol in South Africa, and the Southern African Development Community (SADC) region. Tongaat Hulett continues to focus on value creation for all stakeholders through an all-inclusive approach to growth and development and regards its constructive interfaces with governments and society to be of significant importance.

The business as it stands today, arose from the merger of the Tongaat Group Limited and the Huletts Corporation Limited, and its operations date back to the mid-1800s. The company has a primary listing on the Johannesburg Stock Exchange which dates back to 1952, and a secondary listing on the London Stock Exchange since 1939.

Tongaat Hulett has, over many years, developed strong relationships with various stakeholders. These partnering relationships continue to contribute towards the achievement of the business’s strategic goals, while also meeting the objectives of its various stakeholders, including shareholders, governments, private farmers and their representative bodies, communities, employees and people impacted by the company’s operations and its growth and development activities.

A key operational objective is the promotion of agricultural sustainability. Tongaat Hulett has policies in place which ensure that land management practices integrate agricultural and sustainability aspects towards achieving broader development imperatives, for example, food security. This approach includes the participation of affected communities, the promotion of community development, improving farm production and farming systems, infrastructure development and land resource planning, conservation and rehabilitation.

SUGAR OPERATIONS

SOUTH AFRICA

The company’s South African sugar operations on the KwaZulu-Natal north coast and in the Zululand region operate four sugar mills at Maidstone, Darnall, Amatikulu and Felixton. These mills have an installed capacity to produce more than 1,040 million tons of sugar per annum. Cane supplies come from a combination of predominately rain-fed own-estates, large-scale commercial and small-scale private farmers in rural KwaZulu-Natal. At the beginning of the 2015/16 season, the South African operations were supplied by 121 530 hectares. The operation’s central refinery in Durban produces some 600 000 tons of high-quality refined sugar per annum, with the primary product being the leading Huletts® brand. The South African sugar product range offers a total sweetener solution including a range of high-intensity sweeteners.

ZIMBABWE

The sugar operations in Zimbabwe consist of Triangle and a 50,3 percent stake in Hippo Valley Estates, representing a combined installed sugar milling capacity of more than 660 000 tons. At the beginning of the 2015/16 season, the Zimbabwe operations were supplied by 44 952 hectares of sugarcane land (own-estates and private farmers) with a potential to produce in excess of 4 million tons of sugarcane. The total refined sugar installed capacity is 140 000 tons and the Triangle ethanol plant has an installed capacity of some 40 million litres over a 48-week production season. The Huletts Sunsweet® brand is the leading sugar brand in the country. The Lowveld in Zimbabwe, with excellent topography, climate and established water storage and conveyance infrastructure for irrigation, is recognised globally as a highly competitive sugar producer. The Zimbabwean operations include the business running the largest cattle herd and extensive game reserves, which have significant potential for tourism.

MOZAMBIQUE

The Mozambique sugar operations comprise the expanded sugar mills and estates surrounding Xinavane and Mafambisse. At the beginning of the 2015/16 season, 29 297 hectares supplied Tongaat Hulett operated mills. Sugar production capacity at the Xinavane mill is more than 250 000 tons in a 32-week crushing season, while the Mafambisse mill has an existing 90 000 tons of sugar production capacity. The two operations have a combined installed milling capacity in excess of 340 000 tons of sugar per annum. The sugar estates are irrigated and are generally located in areas with favourable growing conditions, resulting in high cane and sucrose yields. These favourable agricultural conditions, close proximity to ports, and the technical support from South Africa, position the Mozambique operations well for further growth. The operations also include extensive landholdings, which border the Kruger National Park, and have high tourism potential.

SWAZILAND

Tongaat Hulett’s Tambankulu sugarcane estate in Swaziland is situated in the north east of the country and comprises 3 838 hectares of fully-irrigated farms of which approximately 3 768 hectares are harvested annually. The estate has consistently achieved excellent sucrose yields due to the good soil and growing conditions in the region and delivers its cane to the nearby Simunye and Mhlume sugar mills. The estates have the capacity to produce a Raw Sugar Equivalent (RSE) of some 60 000 tons per annum.

NAMIBIA AND BOTSWANA

The Namibian operation has the capacity to pack and distribute 80 000 tons of sugar per annum while in Botswana, Tongaat Hulett has a 60 000 tons per annum packing and distribution operation. Tongaat Hulett will benefit from future growth in consumption in Botswana and Namibia with its leading Blue Crystal® and Marathon® brands.

RENEWABLE ENERGY

The eight sugar mills in Mozambique, South Africa and Zimbabwe all generate electricity from bagasse during the sugarcane crushing season. In some instances, these operations supply electricity to the grid. In Zimbabwe, Triangle has an ethanol plant which provided 20 million litres for blending with petrol during the 2015/16 year. Tongaat Hulett is well placed to benefit from evolving renewable energy dynamics with the potential to build large-scale renewable electricity plants, as well as the opportunity to convert its export sugar to ethanol in its southern African operations.



VOERMOL FEEDS

The company’s animal feeds operation, Voermol Feeds, is located at the Maidstone mill in Tongaat, KwaZulu-Natal. Tongaat Hulett manufactures and markets a range of energy and supplementary feeds to the livestock farming community through its Voermol® brand, using bagasse and molasses. The production and marketing of high-quality, cost-effective products over the past 50 years, combined with the development of long-term relationships with farmers, agricultural companies and suppliers, has established Voermol Feeds as the market leader in the molasses and pith-based animal feeds industry in South Africa.

STARCH AND GLUCOSE OPERATION

Tongaat Hulett’s wet-milling operation is the major producer of starch and glucose on the African continent. Established in 1919, the starch operation has grown to be an important supplier to a diverse range of South African and African industries. Operating four wet-milling plants - located in Kliprivier, Germiston and Meyerton in Gauteng and Bellville in the Western Cape - Tongaat Hulett converts more than 630 000 tons of bought-in maize per annum into starch and starch-based products. The business manufactures a wide range of products, from unmodified maize starch to highly-refined glucose products, which are key ingredients for manufacturers of foodstuffs, beverages and a variety of industrial products. The company’s Amryal® corn starch, Hydex® and Vaalgold® Gluten 60 remain some of the leading starch, glucose and feed ingredient brands in South Africa. The co-products that are produced during the starch and glucose manufacturing process supply the animal feed industry. The business operates a dedicated Sorbitol facility, which is located in Chloorkop in Gauteng, and has distribution networks and facilities in Zimbabwe, Australasia and the Far East.

The world is continuing to evolve in terms of the selection of a feedstock for the production of sweeteners, with both maize and sugarcane being suitable alternatives. Tongaat Hulett’s significant investments in the production of sweeteners using both feedstocks will ensure that the business is well positioned to benefit from global developments in this area.



LAND CONVERSION ACTIVITIES

Tongaat Hulett has an unequalled portfolio of some 7 970 developable hectares of land in prime positions near Durban and on the north coast of KwaZulu-Natal earmarked for conversion from agriculture to a range of urban and tourism uses over time. The value created for all stakeholders is increasing through an integrated approach to land conversion and development. This reflects progress made on the various value-unlocking activities sustaining the land conversion process together with government, related organisations and key stakeholders in the property industry.

These activities are underpinned by on-going use of the land under agriculture throughout the development cycle and commence with collaborative planning with authorities on optimum use of land for all stakeholders. These lead to the release from agriculture and other development approvals, simultaneously strengthening demand drivers and unlocking infrastructure at key points, while executing optimal sales and development strategies for the various parcels of land.

Further details are provided in Tongaat Hulett’s Portfolio of Land for Conversion in KwaZulu-Natal, available here.

FINANCIAL CAPITAL

R16,676 BILLION   REVENUE +3,2% (2015: R16,155 BILLION)
R1,808 BILLION   OPERATING PROFIT -13,5% (2015: R2,089 BILLION)
R1,262 BILLION   CASH FLOW FROM OPERATIONS -50,2% (2015: R2,533 BILLION)
R1,115 BILLION   LAND CONVERSION PROFIT FROM 121 DEVELOPABLE HECTARES
1,023 MILLION TONS   SUGAR PRODUCTION PRODUCED 1,424 MILLION TONS IN 2013/14
R658 MILLION   STARCH OPERATING PROFIT GREW BY 17,3%
R783 MILLION   HEADLINE EARNINGS -17,1% (2015: R945 MILLION)
230 CENTS PER SHARE   ANNUAL DIVIDEND -39,5% (2015: 380 CENTS PER SHARE)

The results for the year ended 31 March 2016 were attained with record performances from the starch operation and the land conversion and development activities being negated by the impact of the substantial reduction in Tongaat Hulett’s sugar production as a result of poor growing conditions. The nature of sugar milling and cane growing is such that there is a high proportion of fixed costs. In total, revenue amounted to R16,7 billion and operating profit of R1,8 billion was generated, which is 13,5 percent below last year. Cash flow from operations was lower than operating profit, largely as a result of debtors increasing by some R1,3 billion due to the timing of inflows in respect of land conversion activities.

The starch and glucose operation increased operating profit to R658 million (2015: R561 million). There is on-going improvement in the sales mix, enhanced by value added products. Maize costs were competitive and the business benefitted from favourable co-product prices, on-going improvements in operating efficiencies, co-product recoveries and cost control. Sales volumes of prime products were one percent below last year, with gains in the alcoholic beverage sector being off-set by reductions in the confectionery, prepared foods, canning and paper making sectors.

Land conversion and development activities generated operating profit of R1,115 billion from the sale of 121 developable hectares (2015: R829 million from 108 developable hectares). Sales in this period came from Umhlanga Ridgeside precinct 1 (high-intensity urban mixed use: 3 hectares), Ridgeside precinct 4 (high-end residential: 20 hectares), Sibaya Node 1 (high-end residential: 19 hectares), Cornubia (industrial and office: 25 hectares), Umhlanga Ridge Town Centre (high-intensity urban mixed use: 3 hectares), Ntshongweni (retail: 14 hectares), Kindlewood (17 hectares), Izinga (19 hectares) and Bridge City (1 hectare). The profit per developable hectare averaged R9,2 million, in line with the value ranges detailed in the land portfolio document and enhanced through urban planning yielding higher land use integration and density.

The various sugar operations’ total operating profit reduced to R124 million, from R806 million in the prior year. Sugar production volumes in the year to March 2016 reduced by a further 291 000 tons to 1,023 million tons (2015: 1,314 million tons and 2014: 1,424 million tons), in line with previous communication. Volumes were impacted by lower cane yields due to the severe drought in KwaZulu-Natal and poor growing conditions with low rainfall and restricted irrigation levels in Mozambique and Zimbabwe as a result of low water and dam levels. Electricity availability has, at times, also impacted on irrigation in Mozambique and Zimbabwe.

The benefit of improved import protection and higher prices in the various local markets was largely not yet reflected in revenue earned in the 2015/16 year due to the timing of the increases. In addition to lower sugar volumes, export revenues were also impacted by a lower international sugar price, with regional deficit markets and EU exports linked to that price. There are multiple currency dynamics, with positive and negative effects compared to last year. The cane valuations at year end reflect increased domestic market realisations going forward and the impact of a roots fair value cost increase in South Africa and Mozambique, reduced by lower cane yields than were expected at March 2015, in line with current growing conditions.

There has been a significant decrease in the cost base of the sugar operations over the past three years which, together with the impact of lower volumes, has resulted in a reduction of some R1,39 billion in respect of the cost of goods, services, transport, marketing, salaries and wages, in real terms compared to 2012/13.

The South African sugar operations, including agriculture, milling, refining and various downstream activities have seen an operating loss of R5 million (2015: R261 million profit). As a result of the drought (including the Darnall mill not being opened in the 2015/16 season) production volumes were 323 000 tons (substantially below the 541 000 tons of last year and the 634 000 tons of the year before). The overall reduction in volumes was partly off-set by focused cost reductions and some improvement in local market pricing earlier in the year, with a reducing impact of imports into the local market. The animal feeds operation was negatively affected by the shortage of feedstock.

The Tambankulu Estate in Swaziland recorded operating profit of R40 million (2015: R29 million), which reflects the impact of improving sugarcane prices, with a raw sugar equivalent of 56 000 tons being produced (2015: 57 000 tons).

The Mozambique sugar operating profit reduced to R74 million (2015: R130 million) due to lower volumes and lower export sales prices. Sugar production was 232 000 tons compared to 271 000 tons last year. The 29 percent local market price increase only came into effect towards the end of the year.

The Zimbabwe sugar operating profit reduced to R15 million compared to R386 million in the prior year. Sugar production of 412 000 tons was below the 445 000 tons of the prior year. There were both lower export sales volumes and lower export prices. Domestic market sales volume levels have been maintained. The strength of the US dollar has exerted pressure, particularly in respect of US dollar based costs (such as wages and salaries) and Euro based revenues.

Finance costs of R680 million (2015: R617 million) were commensurate with the borrowing levels and prevailing interest rates.

Cash flow from operations was some R1,3 billion (2015: R2,5 billion), after the absorption of R989 million in working capital (R44 million in the prior year). Capital expenditure increased by R509 million, mainly as a result of the starch coffee/creamer production facility expansion, various boiler and electricity related upgrades and a SAP ERP system implementation. After taking all of the aforementioned into account, net debt at 31 March 2016 was R5,1 billion (2015: R4,0 billion).

Headline earnings attributable to Tongaat Hulett shareholders amounted to R783 million (2015: R945 million). A final dividend of 60 cents per share has been declared, bringing the annual dividend to 230 cents per share (2015: 380 cents per share). The annual dividend cover of three times is considered prudent in view of current sugarcane growing conditions.

HUMAN CAPITAL

KEY ELEMENTS
Leadership bench strength
40 858 people employed across six SADC countries (peak milling season)
Tongaat Hulett is the largest private sector employer in Zimbabwe and Mozambique
20 515 employees attended training during the year
Employee base transformation
KEY PRIORITIES GOING FORWARD
Leadership capability and management development
Diversity and Transformation
Technical training in core functions

Tongaat Hulett’s human resource approach is aligned with and supportive of the company’s strategic objectives and operating plans. This approach is informed by external dynamics, such as socio-economic, regulatory, market and legislative factors, as well as internal operational priorities and resources requirements. The effectiveness of Tongaat Hulett’s human resources strategy is assessed on an on-going basis, with plans being implemented on a localised basis to ensure their relevance and impact within each specific operating context.

The business recognises the importance of providing a locally-relevant and competitive value proposition to attract, employ, retain and develop a diverse range of people who are able and motivated to contribute to the achievement of the business’s strategic goals, within the framework of the company-wide employee transformation programme.

EMPLOYEE BASE

The total workforce as at 31 March 2016 was 31 230 (2014/15: 34 363), which includes full-time employees, fixed-term contractors, seasonal and casual workers. In light of existing operational challenges, employee costs is optimised without negatively impacting on operational requirements.The breakdown of Tongaat Hulett’s employee base per country as at 31 March 2016 is as follows:

Operating
country
Full-time
(Permanent)
Fixed-term
contractors
Seasonal
and casual
workers (Nonpermanent)
  Total* Peak Season Total1
South Africa 3 250 860 1 238 5 348 4 224
Mozambique 7 901 2 100 944 10 945 16 425
Zimbabwe 10 771 3 274 0 14 045 18 741
Swaziland 412 13 165 590 1 134
Botswana 105 9 0 114 117
Namibia 136 52 0 188 217
Total 22 575 6 308 2 347   31 230 40 858

1Employee total at the peak of the sugar milling season - October 2015

The total number of employees decreased by 10 percent compared to the previous year, with the largest reduction arising in the seasonal and casual workers category. Where required, the company will continue to focus on maximising the performance of its labour force to contain costs and improve productivity, while, where possible, preserving jobs and adequate skills supply.


PERFORMANCE MANAGEMENT

A formalised performance management process is used across the company. It is aligned with business goals and results, and formal assessments occur against pre-determined key performance indicators for reward purposes. This formal process also provides for the identification of high performers and talent for on-going performance enhancement and retention, while also providing input on areas for employee training and development aligned with operational requirements.

 

TRAINING AND DEVELOPMENT

SPECIALISED SKILLS

Tongaat Hulett’s operations require skills in agriculture, marketing (milling and refining), technical and engineering, marketing, sales, distribution and commercial skills. As many of these are specialist requirements for the sugar and starch agri-processing functions, key positions demand appropriately qualified and skilled, highly specialised and experienced people. Tongaat Hulett aims to maintain the required human capital capacity by improving the skills of current employees and attracting new resources from the external labour market, while building future capacity through various interventions. The company’s employees possess a range of skills, from highly skilled professionals to artisans and semi-skilled employees. The following table illustrates the spread of skills amongst professional and skilled employees across the company’s value chain.

  Number
(as at
31 March 2016)
Average age
(as at
31 March 2016)
Number
terminated
(1 April 2015 -
31 March 2016)
Number
appointed
(1 April 2015 -
31 March 2016)
University and College qualifications 1 312 42 54 73
Artisans 721 38 47 21
Total 2 033 40 101 94

Other employees would be categorised as the semi-skilled and low-skilled. The company continues to focus on ensuring adequate skills supply.

EMPLOYEE TRAINING, DEVELOPMENT 
AND SKILLS PROGRAMMES

Employee development programmes are informed by the analysis of business needs and operating challenges compared against existing skills supply, levels of competence and performance, prioritising the core functions of the company. This includes consideration of compliance requirements in various functions. This resulted in the identification of five categories of skills improvement programmes included in the infographic below.

A total of 20 515 employees received training during the 2015/16 financial year (2014/15: 22 420), with a total training and development spend of some R42,5 million (2014/15: R37,6 million).

Training and development programmes are prioritised differently across the operations, based upon their differing operational focus areas and competence requirements. As such, the report is comprehensive for all operations whilst interventions may vary at individual sites. Detail about the programmes follow.

SAFETY AND COMPLIANCE TRAINING AND CERTIFICATION PROGRAMMES

These programmes are considered high priority and have a continued focus on employee safety and welfare, and on operational goals. The safety and compliance training and certification programmes include Safety, Health and Environment (SHE) training and motorised equipment (such as forklift) training. New training interventions are implemented should additional key safety training requirements be identified.

Programme categories  Number of employees who attended training from 1 April 2015 to 31 March 2016  Percentage
of total
training programmes 
Safety, compliance training and certification 
SHE  11 164  44,1% 
Driver - forklift/crane/tractor  2 245  8,9% 
First aid  867  3,4% 
Advanced accident and emergency care  12  0,0% 
Food safety  1 256  5,0% 
Defensive driving  779  3,1% 
Occupational Health and Safety legislation  356  1,4% 
Alco meter use (Alcohol detecting machine)  68  0,3% 
Fire fighting  566  2,2% 
Total  17 313  68,3% 

OPERATIONS/CORE FUNCTIONAL
SKILLS TRAINING PROGRAMMES

To achieve the company’s business goals at operational level, core competency interventions were rolled out, including agriculture, farm management, supervisory management, technical, production and manufacturing skills programmes. Training is extended to third parties who form part of the company’s agriculture supply chain; specifically private and small-scale farmers.

Programme categories  Number of employees who attended training from 1 April 2015 to 31 March 2016  Percentage
of total
training
programmes 
Operations/core functional skills training 
Agricultural skills  4 735  18,7% 
Engineering and technology  247  1,0% 
Information technology  224  0,9% 
Admin/business skills/finance  252  1,0% 
Human resources  290  1,1% 
Small growers programme  90  0,4% 
Process training/Boiler attendant programme  90  0,4% 
Commercial and marketing  49  0,2% 
Manufacturing and production  118  0,5% 
Medical  319  1,3% 
Total  6 425  25,4% 

LEADERSHIP AND MANAGEMENT DEVELOPMENT PROGRAMMES


Tongaat Hulett has a pool of competent and experienced leadership in all its operations, as well as skilled technical and operational management teams, which have ensured continued company success over time.

As market dynamics evolve and operational excellence is pursued, the continued development of leadership bench strength and management resources for the future is prioritised. The recently completed leadership and management development programmes were based on a business driven action learning methodology, balancing company skills needs and individual employee development needs.

The management development programme (MDP) which focussed on operational excellence, included 85 candidates from five countries. The 39 senior management development programme (SMDP) candidates were mostly from the executive and professional layer within the operational and management teams of five countries. The architectures of these programmes, while academically sound, were framed and driven by business needs identified by the company leadership, based on operational goals and strategic thrusts, with varying intended outcomes. At the completion of the project, participants were required to present Business Impact Projects (BIP) which provided possible solutions to actual business problems. The implementation of a number of these projects is planned for the coming year.

The SMDP’s BIP presentations, which were part of the final formal assessments, were also evaluated by the company’s senior executives which included Managing Directors, functional heads and the Chief Executive Officer (CEO).

Programme categories  Number of employees who attended training from 1 April 2015 to 31 March 2016  Percentage
of total
training
programmes 
Leadership and management development programmes 
Supervisory skills  224  1,0% 
Senior management development programme  39  0,2% 
Management development programme  85  0,3% 
Total  368  1,5% 

LONG-TERM SKILLS SUPPLY
(GRADUATE DEVELOPMENT)

Long-term skills needs are identified by assessing the medium and long-term requirements of operational positions to cater for the future demands of the business. To address this, various graduate and entry-level development programmes are in place, mainly in agriculture, manufacturing and production, and commercial functions.

In partnership with youth employment acceleration organisations and higher education institutions, the company implemented a production trainee programme, graduate development programmes and formal agriculture skills training programmes. While these interventions are in response to the challenge of youth unemployment and access to education, skills training and job-placements, they are structured to align with the skills needs of the company in terms of capacity and competence requirements in the long term. These business-aligned processes enhances the absorption of candidates into entry-level opportunities in the company.

The long-term skills development and graduate programmes comprise a range of support mechanisms from school level to tertiary and workforce entry level. These include education bursaries, engineers-in-training (EIT), in-service training and learnerships. The programme targets females, individuals from previously disadvantaged backgrounds and local talent in line with the company’s transformation objectives in each of the countries in which it operates. These skills and graduate development programmes are structured to be accessible to individuals with varying levels of competency and work readiness and vary in focus and roll-out mechanisms in the different geographies.

Tongaat Hulett had 463 school-leavers and graduates in training at various levels of development during the 2015/16 financial year (2014/15: 452).

The table below provides a summary of the various programmes across all operations:

Graduate development programmes,
entry-level skills training (All operations) 
Programme  Number of
participants
 
Engineers-in-training (EIT)  26 
Agronomist trainees 
Agriculture farm manager training 
Agriculturist-in-training  20 
Strategic sourcing trainees 
Production  21 
In-service trainees  34 
SHE trainees 
Apprenticeships (various trades)  99 
Learnerships 
Graduate trainees  12 
Communications and marketing 
Student development programme 
General learners/trainees  46 
Workplace experience  46 
Bursaries  47 
Company assisted study aid schemes  90 
Total  436 
Percentage of total training programmes  1,8% 

Specific artisan training, as detailed below, is generally longer in duration than the graduate development programme. There was a significant decline in the number of artisans in training in 2015/16 since a large portion was trained the previous year.

Artisan training (All operations) 
Programme  Number of participants 
Artisans-in-training  125 
Artisan development  79 
Artisan aid development programme  42 
Total  246 
Percentage of total training programmes  1,8% 

The company has recognised that youth unemployment is a significant challenge in the countries in which Tongaat Hulett operates, where the largest portion of the population are young people. There exists, to some extent, a mismatch between employer and industry specific operational skills requirements and the skills possessed by the youth, neccessitating various interventions by the company.

Agricultural training and
development programme

A potential shortage of technical skills in agronomy, sugarcane agriculture and estate management skills for medium to longer term placement in the company resulted in the development of an internal agricultural training and development programme (ATDP). Initially launched in 2006, the programme was re-launched in 2015, aiming to address some of the shortfalls identified in the initial course, namely the independent implementation of the training in each country without using cross-operations capabilities to enrich the outcomes. The programme now focusses on providing trainees with exposure to best practice in various areas of sugarcane agriculture and estate management competencies across three of the countries in which Tongaat Hulett operates, namely Mozambique, South Africa and Swaziland.

Read more


Production trainee programme

As is the case with various elements of the agricultural and agri-processing operations, Tongaat Hulett starch requires specialised skills in production. As the only wet-miller in South Africa these skills are not readily available and tend to involve a steep learning curve for new employees, resulting in long training periods to reach full competence.

Read more


LEADERSHIP BENCH STRENGTH

Increased focus is being placed on retaining and developing talent, improving the succession ‘bench strength’ and thus the long term sustainability of the company.

TALENT DEVELOPMENT AND CAREER
ADVANCEMENT PROGRAMMES

The company has established talent management processes which aim to attract, develop and retain high performing and talented employees based on operational and long-term skills requirements. Talent development and career advancement programmes provide employees with opportunities to learn, grow and advance their careers through various interventions. These vary from an employee study support scheme, structured internal training programmes, formal development programmes, as well as changes in and enhancements to roles and responsibilities, thereby improving their skills and possibilities for career advancement. Based on their level of development, some employees are put through interventions that support their personal growth, in areas other than purely core skills training. Examples include life skills and group specific interventions such as Communication skills training. Participation in these interventions were as follows:


Programme categories  Number of employees who attended training from 1 April 2015 to 31 March 2016  Percentage
of total
training
programmes 
Talent development and career advancement 
Life skills 464  1,8% 
Other interventions, specific to groups/individuals  60  0,2% 
Total  524  2,0% 

LEADERSHIP SUCCESSION PLANNING

Given the dynamics and challenging operating environment and the company’s strategic goals, the company focuses on long term and immediate term succession bench strength for leadership roles, senior management in the operations and critical skills across the company. Talent management and succession planning processes are in place to identify, develop and retain identified high potential and high calibre talent internally, while bringing in highly skilled talent from the external market to fill various key roles in the company.

DIVERSITY AND EMPLOYEE
TRANSFORMATION

Due to the priority placed on transforming the employee base, diversity and transformation goals are embedded in all human resource interventions rolled out across the company; with particular focus on three geographies namely South Africa, Zimbabwe and Mozambique. Over time, Tongaat Hulett achieved a steady improvement as a result of focused interventions and processes, including attracting, retaining and advancing the careers of women throughout the business, localisation of skills in Mozambique, and the advancement of designated groups in South Africa.

Tongaat Hulett has a stable workforce with very few exits across all levels of the organisation, which affects the pace of transformation. New appointments can only be implemented as positions become available. Cognisance should be given to the various labour supply dynamics and challenges across the labour markets per country, labour market competitor activity, and the fact that the operations are primarily rural based, which impacts the size of the available market from which the company can access suitable candidates.

COMPLIANCE WITH LEGISLATION AND
REGULATIONS AND GOOD CITIZENSHIP

As a responsible corporate citizen, Tongaat Hulett acknowledges that significant value is unlocked through transformation and fair and equitable treatment of its employees. While the company complies with all relevant legislative and regulatory frameworks in all countries in which it operates, the transformation programmes are implemented based on the understanding of the value they bring, rather than merely to comply with legislation.

While significant transformational focus is on females, it has been established that certain agricultural and agri-processing positions have, in the past, not been viewed as attractive career choices to female candidates. The company has various youth focussed interventions to assist in changing perceptions and opening up these fields to increased female participation.

In Mozambique, employee retention trends over the past three years are encouraging with regards to localisation objectives, with the exit rate of local skilled employees being only half that of the average exit rate, which will positively impact on localisation rates over time, and redirection of dependence on many expatriate skills.

In South Africa, the operating companies, which incorporate sugar, starch and developments, comply with the various employment and transformation legislations relating to affirmative action, employment equity, skills development, B-BBEE and other relevant laws.

A strong employment equity culture has been fostered over many years and significant improvements achieved. In terms of the representation of designated groups, particular emphasis is placed on Africans, black women and persons with disabilities. As at 31 March 2016, 64,3 percent of management (2014/15: 63,3 percent) and 86,5 percent of skilled and supervisory positions are filled by black employees (2014/15: 85,4 percent). In terms of the professional skills profile, 77,5 percent of the university and college qualified employees are black (2014/15: 76,1 percent), with women constituting 48,1 percent (2014/15: 46,3 percent).

Women constitute 32,1 percent of the workforce across South African operations (2014/15: 32,8 percent). Women at senior management level increased from 18,6 percent to 18,9 percent, the proportion of black females in management increased from 22,3 percent to 24,2 percent, and black females in top management increased from 28,0 percent to 29,2 percent by March 2016.

In line with South African regulations, information for the South African operations for the period 1 April 2015 to 31 March 2016 is detailed in the table below. Of the overall training costs of R42,5 million, a total of R28,7 million was spent on the South African operations, with the different categories of spend outlined below:

1 percent skills levy  R14,3 million 
Training spend as a percentage of leviable amount  2,0 percent 
Number of person days trained  3 715 
Number of person days available  972 096 
Percentage trained person days  0,38 percent 
Number of persons trained  1 631 
Expenditure on African, Coloured and Indian employees  R21,4 million 
Expenditure on African, Coloured and Indian women  R7,7 million 
Expenditure on employees with disabilities  R61 487 

Tongaat Hulett recognises and embraces the initiation of the UN Sustainable Development Goals as they are aligned with the company’s aspirations, specifically in the areas of Goal Five: “Achieve gender equality and empower all women and girls”, and Goal Eight: “Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”.

INDUSTRIAL AND
EMPLOYEE RELATIONS

Tongaat Hulett is cognisant of the socio-economic situations that impact on its employees in the various countries in which it operates. It continues to monitor these dynamics and how they affect employees through various internal and external means, including through organisations such as organised labour formations to which it’s employees belong.

The company endeavours to provide the maximum notice period possible to employees for any significant operational changes. In general, these are not included in collective agreements, except where they relate to changes that will result in short-time, although with multiple unions across six countries, these provisions can vary.

FREEDOM OF ASSOCIATION AND
COLLECTIVE BARGAINING

Tongaat Hulett employees have the right to freedom of association. With 11 recognised unions in the six countries in which it operates, the company strives to maintain constructive, respectful relationships and a climate of agreement in union relations.

During the year in review, the Botswana union was changed from the Botswana Beverages and Allied Workers Union to the Cashiers Shop Assistant and Allied Workers Union. The formally recognised trade unions are provided in the table below.

Industrial action occurred in some of the company’s operations during the financial year, mainly arising from legal and structured engagement processes and within acceptable parameters. A total of 22 days and three hours of strikes were recorded, involving 7 127 employees at a cost of R150,6 million.

In Zimbabwe, the company was faced with a wage related industrial action in December 2015, with a total loss of 21 working days, following unsuccessful conciliation. The strike was concluded through an agreement brokered by the local Labour Ministry.

A one day strike, involving 93 employees, occurred in one of the starch operations and a three hour strike, involving 120 employees, affected one of the sugar operations.

Throughout the strike periods, the company tried to minimise negative operational impact on its various stakeholders as far as it was possible. The company continues to engage with and maintain sound relations with all recognised trade unions across all operations.

Country  Recognised union 
South Africa  Food and Allied Workers Union (FAWU)
National Sugar and Refining and Allied Industries Employees Union (NASARAIEU) 
Southern African Equity Workers Union (SAEWA)
United Association of South Africa (UASA)
National Union of Public Service and Allied Workers (NUPSAW) 
Zimbabwe  Sugar Production and Milling Workers' Union of Zimbabwe (SPMWUZ)
Zimbabwe Sugar Milling Industry Workers' Union (ZISMIWU)
Zimbabwe Hotel and Catering Workers' Union (ZHCWU)
Mozambique  Sindicato Nacional dos Trabalhadores da Industria Do Açucar e Afins (SINTIA)
Swaziland  Swaziland Agriculture and Plant Workers Union (SAPWU) 
Botswana  Cashiers Shop Assistant and Allied Workers Union (CASAWU)
Namibia  Namibian Food and Allied Workers Union (NAFAU)

DISCIPLINARY PROCEDURES

Just, equitable, non-discriminatory and consistent disciplinary codes and procedures form the foundation of corrective behaviour, in line with the relevant labour legislation. These are monitored and reviewed to ensure just and equitable treatment, while focussing on reducing case turn-around times. If any employee feels unjustly treated, they are entitled to exercise their rights in terms of their operation’s internal appeal procedure and the relevant legislation. Disciplinary codes and procedures have been implemented at local operations, after negotiations with the relevant trade unions.

GRIEVANCE PROCEDURES

The company’s grievance procedures are intended to create an environment that is conducive to good employee relations, by facilitating prompt and fair action by the company in response to legitimate complaints by employees. Internal communication aims to make employees aware of the grievance procedures, which are structured to ensure that grievances are resolved as near to their point of origin as possible, and within a reasonable timeframe.

The company implements interventions to address these grievance, such as through the enlistment of engineering and maintenance managers to address work environment grievances at plant level, or through management training should management practice grievances be received.

PERSONS WITH DISABILITIES

Tongaat Hulett is committed to providing a work environment that empowers people with disabilities to reach their potential and contribute productively to the work environment. In line with transformation objectives, the company aims to create an enabling work environment for persons with disabilities, understanding the value they add to the organisation. Aligned with legislated reporting requirements, there were 57 employees with disabilities as at 31 March 2016 (2014/15: 63) in South Africa. This constituted 1,1 percent of the total employee complement (2014/15: 1,1 percent).

CORPORATE CITIZENSHIP

HUMAN RIGHTS

Within its sphere of influence, Tongaat Hulett works to protect basic human rights. The company is a signatory to the Universal Declaration of Human Rights, in which it commits, among others, to supporting freedom of association and collective bargaining at its locations, as well as preventing child and/or forced labour. Tongaat Hulett has incorporated human rights principles in its practices, and operates within a Code of Business Conduct and Ethics, which supports its commitment to a policy of fair dealing, honesty and integrity in the conduct of its business. All new employees are familiarised with and become signatories of this Code of Business Conduct and Ethics upon joining the company.

CHILD LABOUR, FORCED
AND COMPULSORY LABOUR

Tongaat Hulett does not make use of child labour and does not tolerate the inhumane treatment of employees, including any form of forced labour, physical punishment or other abuse.

ANTI-BRIBERY AND CORRUPTION

Tongaat Hulett endeavours to uphold core business values and actively works to prevent corruption and bribery. The company has procedures in place that provide guidance on areas such as dealing with gifts and donations. Employees of Tongaat Hulett who do not comply with the company’s Code of Business Conduct and Ethics face disciplinary action, including dismissal.

Deloitte’s Tip-Offs anonymous provides an anonymous reporting channel for unethical behaviour in the workplace. This service has been rolled out across all six countries in which Tongaat Hulett operates with country specific telephone numbers to make it as user friendly and accessible as possible.

SOCIAL AND RELATIONSHIP CAPITAL

KEY ELEMENTS
R190,4 million spent on SED initiatives (2014/15: R140,7 million)
14 percent reduction in lost time injuries compared with 2015
12 consecutive years included on the FTSE/JSE Responsible Investment Index
2015 Investment Analyst Society Awards: Overall Winner
Awarded best export company in the manufacturing industry: Mozambique 2015
KEY PRIORITIES GOING FORWARD
Zero fatalities and improved safety performance
Enhanced sustainable agricultural practices through agricultural improvement process

Tongaat Hulett has long-standing relationships with multiple stakeholders and the business endeavours to maintain and further develop these associations to create value for all parties. The process to increase Tongaat Hulett’s understanding of its stakeholders is on-going and includes identifying key clusters based on the degree to which they influence or are impacted by the company, and documenting the various proactive engagements that are already in place as the business seeks to further strengthen these relationships which are outlined in the table below.


  Nature of engagement  Priorities for stakeholders  Outcomes 
Shareholders, investors and
analysts 
  • Multiple regular meetings with CEO, CFO and key executives
  • Roadshows locally and abroad
  • Annual and interim results presentations and publications
  • Annual general meeting
  • Interactions managed by the Tongaat Hulett investor relations team
  • Clear communication of the company’s performance, strategy and prospects going forward
  • Return on investment and growth in value
  • Tongaat Hulett continues to improve on reporting its strategy and prospects
  • Improved understanding of the company’s ability to create long term value among investors and analysts
Government
authorities
and regulators 
  • Partnerships on joint projects
  • Forums discussing existing and emerging initiatives
  • Ad hoc meetings
  • Compliance monitoring
  • Compliance across operations with local, provincial and national regulations
  • Effective partnerships towards achieving articulated government objectives, projects and policies
  • Demonstrable company support towards sustainable socio-economic growth in the region
  • Tongaat Hulett has systems in place to ensure compliance with regulatory frameworks
  • On-going partnership with relevant government authorities on various initiatives including sugar expansion in rural communities and land conversion activities
Private farmers 
  • Groups are organised according to logistical areas of operation
  • Maximum return in terms of revenue received for sugarcane and maize
  • Support from the company towards the long-term sustainability of private farmers
  • Access to maximum quality seed cane and cost savings on key inputs such as fertiliser and herbicides
  • Assistance in unlocking grant funding from relevant authorities
  • Sustainable integrated farming model for staple foods implemented across Southern African Development Community (SADC) region
Local
communities 
  • Regular and ad hoc local forums with traditional and community leaders
  • Development of small-scale private farmers in the communal areas identified for sugarcane expansion
  • Regular interaction at local level through the socio-economic development (SED) provision of basic needs and services
  • Access to sustainable jobs and economic opportunities
  • Affordable education, training and access to healthcare, basic amenities and infrastructure
  • The conservation of the community’s way of life, culture and environment
  • Additional direct and indirect jobs
  • SED investment addressing a broad range of needs in Mozambique, South Africa, Swaziland and Zimbabwe
  • Health programmes for all employees extend to communities, including counselling, screening and treatment for both HIV/AIDS and malaria
  • On-going schooling and infrastructure development projects involving local communities
Employees 
  • Regular collaboration on topics of employee protection, diversity and performance management
  • A variety of internal communication channels, including the company intranet, internal newsletters and briefings
  • Stable employment relationships and job security
  • A working environment that guarantees health, safety, fairness and equal opportunity
  • Opportunities for upward and sideways career movement within the organisation
  • Freedom of association and the right to collective bargaining
  • Training and development
  • Sound corporate governance practices aligning remuneration with performance
  • Managers across operations interact with trade unions in an open and constructive manner
  • On-going healthcare and wellness programmes across rural operations, particularly in Mozambique, Swaziland and Zimbabwe
Customers,
suppliers and
service providers
 
  • Regular interaction on procurement processes, responsible sourcing standards and supply chain management
  • Regular interactions with customers on various matters
  • Local procurement
  • High quality products at competitive prices that attract consumers and encourage brand loyalty
  • Access to quality housing and property solutions
  • Product innovation and growth of the business
  • Professional and mutually beneficial trade relationships and robust supply chain mechanisms
  • Product responsibility and food safety
  • Tongaat Hulett continuously improves the quality, taste and innovative features of products at reasonable prices
  • The land developments undertaken by Tongaat Hulett have catered for all levels of society with housing solutions being developed for low, middle and high-end income earners
  • Land developments take cognisance of the evolving needs of society i.e. business, recreation, leisure etc.
  • The company operates under the relevant regulations, standards and laws to ensure the quality and safety of all its products

SOCIO-ECONOMIC DEVELOPMENT (SED)

Tongaat Hulett’s objective of creating value for all stakeholders through an all-inclusive approach to growth and development underpins the various SED initiatives. This is driven from the business’s core values which include integrity and a commitment to ethical behaviour. Tongaat Hulett has articulated the principles which it embraces in its approach to SED in the graphic to the right:

The company exceeded its commitment of allocating one percent of annual headline earnings to SED for the 12 months to 31 March 2016 by investing R190,5 million (2014/15: R140,7 million), including the cost of company-sponsored occupational and primary healthcare services. Operations in Zimbabwe, Mozambique and Swaziland accounted for 84 percent of the total amount invested in SED initiatives. Key elements of SED spend for the year are as follows:

Healthcare

  • With the majority of operations being located in rural areas, a significant amount is invested in running healthcare facilities for employees and local communities
  • R87,6 million was invested in health-related activities during the period, including activities related to dealing with the impact of HIV/AIDS.

Basic Needs

  • R8,9 million was invested in basic needs and social development, which includes food security projects and the provision of basic materials to uplift communities around company operations.

Sports, arts and culture

  • The company acknowledges the important role that arts, sports and culture can play in the development of successful rural communities.
  • R17,5 million was invested in these initiatives during the year.

Education

  • R18,9 million was invested in education initiatives across the company.
  • This included the purchase of exercise and textbooks and new chairs in the estate schools in Mozambique, Swaziland and Zimbabwe.

FOOD SECURITY

The need to produce food with minimal environmental impact has never been more challenging given the current impacts of dietary patterns, declining soil quality, water scarcity, energy price fluctuations and the unpredictability of climate change. Tongaat Hulett understands the crucial role that agriculture can play in improving food security, and ensuring environmental safety. As a member of the United Nations Global Compact, Tongaat Hulett is committed to accelerating its disaster risk reduction activities and to make food production systems more resilient and capable of absorbing the impact of disruptive events.

PROMOTING SUSTAINABLE
AGRICULTURE

Tongaat Hulett assists small-scale farmers to become professional growers as this improves living conditions for rural communities, while improving food security in a sustainable manner. Inclusive agricultural growth is promoted: small-scale farmers produce part of their own food requirements and surplus production is available for local and regional markets.

The company applies a range of conservation methods and compliments agricultural extension projects with a portfolio of partnerships in advanced crop science and land-use strategies to ensure that every field is environmentally assessed before planting. In selected areas, depending on soil conditions and other agronomic influences, a range of cover crops are used to improve soil conditions and nitrogen prevalence for the subsequent sugarcane crop. This is implemented with the view that better farming practices will halt and in some instances reverse the negative process of soil degradation. At the same time, farmers are encouraged to use existing farmland more efficiently. Sustainable farming solutions include not tilling the land, crop rotations, bringing vegetation back to degraded land and planting vegetation around fields to prevent erosion.

Winter Maize Project

Tongaat Hulett is committed to contributing to food security for the communities that surround its sugar producing operations in Zimbabwe. In the year to 31 March 2016, Zimbabwe experienced adverse weather conditions which had a significant impact on maize production. In recognition of the need for basic food, Tongaat Hulett produced 1 300 tons of maize which has been distributed to vulnerable rural communities. This project supports the United Nations, Sustainable Development Goal of ending hunger and achieving food security.

Read more

SUPPLY CHAIN

Greater awareness of stakeholder needs highlights supply chain opportunities. Tongaat Hulett is committed to innovative procurement initiatives that deliver value to the business, stakeholders across the value chain and the communities in which it operates.

To optimise the benefits, cross functional teams involving strategic sourcing, human resources, SHE and various business operations, continue to work together on identifying initiatives that have the potential to deliver positive economic, social and environmental outcomes, including:

  • Strategic Sourcing Centre of Excellence - establishing a strategic sourcing function and institutionalising new and best practice approaches to the company’s procurement function. The team is building long-term sustainable procurement and strategic sourcing capabilities and skills, while enhancing policies, processes and systems.
  • Local procurement and enterprise development projects - an enterprise and supplier development strategy has been developed, aligned to the strategic sourcing end-state strategy - both of which are being rolled out and operationalised across the business. A concerted effort is applied in collaboration with the rest of the business to uphold the current favourable B-BBEE status of Tongaat Hulett, from a South African context, and to improve BEE compliance and align it to the Revised Agri-BEE, Property and relevant “still-to-be gazetted” sector codes.
  • Green procurement initiatives - suppliers of the company demonstrate commitment to research, development and delivery of safer, resource efficient and environmentally-friendly goods and services as a good business imperative. Special focus is being paid to import replacement and local and intra-Africa trade programmes as opposed to off-shoring sourcing options, to reduce the carbon footprint and support local production and economic development.

PREFERENTIAL PROCUREMENT

Tongaat Hulett is committed to supporting suppliers, improving their empowerment credentials and introducing black-owned and black women-owned SMEs as suppliers to the business. The objective of preferential procurement under the Department of Trade and Industry’s current B-BBEE Codes of Good Practice (in South Africa) includes the promotion of B-BBEE compliance by all supplying entities and provides targets for procurement from Exempted Micro Enterprises (EMEs), Qualifying Small Enterprises (QSEs), black-owned EMEs and black women-owned EMEs. Furthermore, with enhanced recognition given for preferential procurement from value-adding suppliers and enterprise development beneficiaries, the procurement of locally-produced goods and services is actively supported, to assist in developing sustainable income streams for such new entities and create jobs. Major inroads have been made in transforming the supplier base with solid improvement plans to close current gaps in the preferential procurement space.

For the period ending 31 March 2015, adjusting for the various levels of recognition of BEE spend allowed for in the BEE Scorecard (dependant on the BEE level of suppliers), the total recognised BEE spend was R7,131 billion which is 103,83 percent of the eligible spend. R473,8 million (6,9 percent) was in relation to QSE B-BBEE spend, R161,7 million (2,4 percent) in relation to EME B-BBEE spend, R121,3 million (1,8 percent) was in relation to black-owned EME suppliers and R28,4 million (0,4 percent) was in relation to black-women owned EME suppliers.

SAFETY, HEALTH AND ENVIRONMENT (SHE)

A recently revised Safety, Health and Environmental Policy statement, signed by the CEO in August 2015, re-assured stakeholders that Tongaat Hulett subscribes to the principle of ‘zero harm’. The ‘zero harm’ philosophy is embedded in the company’s business framework as a core value. Momentum gained over the past 10 years in developing current SHE practices is being raised and directed at creating an interdependent SHE culture that relies on everyone’s responsibility and participation. An all-inclusive stakeholder engagement approach is therefore being adhered to, in encouraging employees, contractors, private farmers and members of surrounding communities to actively care and participate in SHE campaign programmes.

Stakeholders are always encouraged to take ownership of their own safety and health as individuals and to do the same for other people interfacing with them in the workplace, community and social environments. It is agreed between stakeholders that protecting the environment and its resources is a collective responsibility for everyone. All stakeholders are therefore involved with relevant SHE thrusts outlined below.

SAFETY

Regrettably, a total of five work related fatalities were suffered during the year 2015/16. The fatalities experienced are deeply concerning and are thus receiving a high level of attention within the company.

Nevertheless, Tongaat Hulett’s safety performance has improved during the past decade having been built up on established safety management systems and various safety improvement initiatives. It is acknowledged that focusing purely on systems, without the support of dedicated high level safety interventions, would have only driven safety improvement to a certain extent. The company has been consciously introducing targeted fatality risk control initiatives that were reviewed periodically. This approach has contributed to a sustained safety improvement realised so far.

Notwithstanding the fatality challenges experienced, the company’s safety performance continues to improve in terms of serious injuries that result in loss of time. A Lost Time Injury Frequency Rate (LTIFR) of 0,073 per 200 000 hours worked, was achieved in 2015/16 reflecting a milestone achievement since SHE management systems were established more than a decade ago. This LTIFR achievement suggests a consistent performance reflecting on a LTIFR of 0,085 achieved in 2014/15, 0,087 achieved in 2013/14 and 0,094 in 2012/13.

The following key factors are attributed to the LTIFR improvement:

  • A structured risk management programme providing for business baseline, activity based and continuous risk assessment processes determines how safely work should be done.
  • Audit management protocols enable occupational risks/shortcomings to be identified and addressed proactively while incident review processes reveal learning points from incidents that can be shared to prevent re-occurrences.
  • A SHE culture of caring is campaigned for and practiced to support individuals and employee teams.

FOOD SAFETY

Tongaat Hulett has a reputation of being a producer of high-quality products. To ensure that this reputation is maintained and the company continues to meet the needs of customers in the food industry, Tongaat Hulett manages its maize requirements on a non-genetically modified basis using a sophisticated identity preservation system. In addition, on-going attention is paid to the requirements of FSSC 22000 (a Food Safety System Certification used by food manufacturers which is aligned with ISO 22000 and includes Good Manufacturing Practices), ISO 22000 and ISO 9001, in terms of quality and food safety standards at all operations.

With regard to the proposed tax on sweetened beverages, the South African sugar industry, which includes Tongaat Hulett, continues to engage closely with government to understand it's thinking and intentions.

Sugar or sucrose is a natural plant product. It is produced by the sugarcane plant in much the same way that other plants, such as fruit and vegetables, produce sugars. Neither white nor brown sugar contains additives or preservatives of any kind, although the excessive consumption of any foodstuff, no matter how harmless, is not conducive to good health. Sugar is a natural and healthy contributor to the enjoyment of food as part of a sensible and balanced diet.

HEALTH

Tongaat Hulett has 40 858 employees (peak milling season) working at 27 locations in six countries in Southern Africa. Health issues across the region where Tongaat Hulett operates are therefore varied. The company is dealing with a challenge to tackle common health issues in a coordinated manner to optimise health and enhance productivity in employees’ lives and workplaces. While aligned health procedures are in place at all operations, country specific geopolitical issues are expected to influence the readiness and ability of Tongaat Hulett to partner with relevant stakeholders and implement associated programs in the various operating countries.

HIV and AIDS

HIV/AIDS remains the single biggest health challenge as shown by Tongaat Hulett’s 2015/16 statistics detailed below:

  • Employees currently receiving anti-retroviral treatment (ART) through company-provided ART: 3 768
  • Voluntary counselling and testing (VCT) uptake: 88,4 percent
  • Employees knowing their status: 90,5 percent
  • Number of new employees confirmed HIV+ on testing: 1 187
  • Number of employees currently HIV+: 4 689
  • HIV prevalence: 21,6 percent
  • Cost of ART: R1,9 million
  • Seasonal employees/contractors VCT uptake: 9 951
  • Seasonal employees/contractors on ART: 1 080

Tongaat Hulett acknowledges that more than a fifth of its workforce is HIV positive and the company has already invested significantly in the treatment of those affected by HIV. The increasing number of new infections in 2015/16 (5 percent of workforce) is a lagging indicator in the fight against HIV. The apparent high number of new infections is in part due to HIV+ employees presenting for re-testing mainly in Mozambique and to a lesser extent in Zimbabwe as testing is being done anonymously. The company is determined to improve its HIV/AIDS management programmes and close the gap between current performance and the 90:90:90 stretch target set by the World Health Organisation (namely 90 percent of workforce should be tested; 90 percent of HIV+ people should enrol for ART; 90 percent of those on ART should remain on ART). In response to these objectives, Tongaat Hulett will:

  • Enhance preventive efforts
    • Intensify awareness campaigns
    • Promote male medical circumcision at all operations
  • Stretch VCT (HIV councelling and testing) targets for 2016/17
  • Scale up ART
    • Increase investment to achieve 90 percent on treatment
    • Strengthen treatment, monitoring and follow up

The company’s existing relationships with governments and NGO’s are critical to the success of the objectives detailed above.

Primary healthcare

Primary healthcare includes the provision of maternal child health care, control of communicable diseases e.g. cholera, tuberculosis and measles and treatment of acute ailments such as colds. Tongaat Hulett continues with current efforts to provide cost effective primary health facilities and programmes for its employees. In areas where government-supported health facilities are not readily accessible, this service is being extended to employees’ families. This is mainly in Zimbabwe, Mozambique and Swaziland. Private Public Partnerships are being pursued to optimise on resources available while at the same time increasing effectiveness in dealing with essential community engagement issues.

Malaria

Malaria remains a health challenge in Zimbabwe, Swaziland and Mozambique. Integrated malaria control programmes that include vector control, awareness, personal protection, diagnosis and treatment will continue. Bioassays (resistance testing) are being conducted to ensure effectiveness of current indoor residual spraying initiatives. There were no malaria-related fatalities recorded at Tongaat Hulett’s operations during 2015/16. There was a nine percent decrease in the number of malaria cases recorded in 2015/16 compared to the previous year.

Occupational healthcare

Noise Induced Hearing Loss (NIHL) emerged as an issue of concern at all operations. Varying degrees of percentage hearing loss are being detected during medical surveillance programmes. The three main contributory factors have been identified as:

  • The old design and age of equipment in use at most operations
  • An aging workforce who are more susceptible to effects of noise
  • Improper use of Hearing Protective Devices (HPD) by employees

While engineering solutions continue to be explored and are being implemented where possible, the focus going forward is to ensure increased protection of those at highest risk.

The occupational health plan is focusing on:

  • Increased awareness and education
  • Review and enforcement of more stringent administrative control measures
  • More aggressive management of early NIHL to prevent progression
  • Provision of custom made HPD for those with >5 percent loss of hearing

Heat-related occupational disorders are increasing with the rise in temperatures in the region. Work operations involving high air temperatures or strenuous physical activities can result in dehydration and heat stress in employees working in those operations. Heat stress management procedures are being revised to enhance risk mitigation factors. In the meantime, education and awareness campaigns are being offered.

There were two (2014/15: 0) occupational health cases with irreversible health effects registered in 2015/16. Both instances related to noise induced hearing loss. A total of 10 occupational health cases with reversible effects were recorded, the same as in the previous year.

INTELLECTUAL CAPITAL

KEY ELEMENTS
MARKET-LEADING BRANDS
PATENTS
INTELLECTUAL PROPERTY
KEY PRIORITIES GOING FORWARD
RETENTION OF THIRD-PARTY CERTIFICATIONS
GROW MARKET SHARE RESPONSIBLY THROUGH
INNOVATION AND THE DEVELOPMENT OF
HIGH-QUALITY PRODUCTS

Tongaat Hulett’s intellectual property is protected through employment contracts and confidentiality agreements and/or license agreements with external parties. These agreements establish ownership of and rights to trademarks, copyright, trade secrets, innovations and inventions resulting from any dealings with the company. In the sugar operation, a portfolio of patents is managed by a knowledge management specialist in consultation with patent attorneys. Protection of patentable ideas is achieved by immediately obtaining provisional patents, with targeted national and international patenting.

Tongaat Hulett holds 14 patents registered in Australia, Brazil, China, Colombia, Indonesia, India, Mauritius, Mexico, South Africa and USA. It is a proprietor of 369 registered trademarks in Australia, Botswana, Lesotho, Namibia, New Zealand, Philippines, South Africa, South Korea, Swaziland, Taiwan and the United Arab Emirates. The company has 50 domain names registered to it.

THIRD-PARTY CERTIFICATIONS

Tongaat Hulett continues to benchmark its performance against global best practices to ensure the sustainable management of broader issues, including SHE and food safety. Operations subscribe to various internationally-recognised management systems and/or specifications that include NOSA, OHSAS 18001, ISO 14001, ISO 9001, FSSC 22000 and ISO 22000.

All operations are certified to either NOSA five-star systems or OHSAS 18001 covering occupational health and safety. During the year to 31 March 2016, Darnall Mill’s NOSA system certification was suspended due to the fact that the mill did not run during the season. Of the 19 operations, 18 are certified to the ISO 14001 environmental management system with the remaining one being at an advanced stage of implementing it's management system. A total of four out of five starch operations and part of two of the eight sugar processing operations are certified to FSSC 22000 food safety management systems in accordance with the current requirements of the business.

PRODUCT RESPONSIBILITY

Tongaat Hulett complies with the relevant safety, health, environmental and quality legislation in each of the countries in which it operates, while striving to implement industry best practice. The production facilities have been certified under the ISO 9001:2008 quality management system. In South Africa, the operations have adopted Hazard Analysis Critical Control Points (HACCP), where appropriate. Downstream products supplied to the pharmaceutical industry are required to meet the standards of the Food and Drugs Act. Tongaat Hulett ensures that appropriate information is provided to its customers. All product labels contain information about the product, in compliance with the respective country legislation and labelling regulations.

BRANDS

A number of Tongaat Hulett brands hold prominent positions in their respective markets in different product categories and geographic locations. The company’s objective is to grow its market share responsibly through innovation and the development of high-quality products.

The following table provides a summary of the major brands:

Huletts®

White sugar
Brown sugar

Over 120 years in the market
Market leader in South Africa
Recognised as one of the top three icon brands in the ASK Africa survey over the past three years
Huletts Sunsweet®

White sugar
Brown sugar

Market leader in Zimbabwe
Voermol Feeds®

Animal feeds

Market leader in the molasses and pith-based animal feeds industry in South Africa
Blue Crystal®

White sugar
Brown sugar

Market leader in Botswana
Marathon®

White sugar
Brown sugar

Market leader in Namibia
Amryal®
Hydex®
Vaalgold®

Leading starch and glucose brands

NATURAL CAPITAL

KEY ELEMENTS
HAZARDOUS WASTE REDUCED BY 84 PERCENT
SEVEN CONSECUTIVE YEARS OF PARTICIPATING IN THE CDP
IMPROVING SCOPE 3 REPORTING
KEY PRIORITIES GOING FORWARD
PROMOTING SUSTAINABLE AGRICULTURE
IRRIGATION EFFICIENCY
SCOPE 1 GHG EMISSION REDUCTION
WATER MEASUREMENT

ENVIRONMENTAL STEWARDSHIP

Research subsequent to the Millennium Ecosystem Assessment (2001) indicates that natural resources, globally, remain under stress. Ecosystem degradation is a concern for most businesses given its indispensable role in global socio-economic systems. As a major user of land, biodiversity and water, Tongaat Hulett’s agri-processing and land development operations are significantly impacted by natural systems and in turn impact on the environment and local communities. As a responsible corporate citizen, Tongaat Hulett seeks to demonstrate its commitment to sound environmental stewardship, within a context of sustainable and ethical practice. Compliance with legal requirements is a minimum requirement, with operations striving to establish and accord with local and international best practices. In line with this approach, the company aims to retain and/or secure certification to ISO 14001 Environmental Management System standard across all its operations.

CLIMATE CHANGE

Agriculture is vulnerable to changes in climate and weather patterns. Tongaat Hulett recognises the need to adapt to the physical impacts of climate change, which will affect operations, particularly through the availability of water and the occurrence of extreme weather events. Tongaat Hulett operations are being impacted by current El Niño conditions, with research suggesting a tentative but inconclusive link between the strength of El Niño and climate change. Given the 40 percent decline in production in the South African sugar operation as a consequence of the El Niño weather pattern, the company is engaging with experts on a number of innovative initiatives, including programmes to improve irrigation efficiency and more drought resistant crop varieties.

Tongaat Hulett’s approach to dealing with the impacts of climate change includes a drive towards greater energy-efficiency and the business is actively encouraging suppliers across the full value chain to do the same. The company participates in public environment forums and during the past year this included the 2015 United Nations Climate Change Conference (COP21), parliamentary discussions and the Davis Tax Committee on the proposed carbon tax in South Africa.

CARBON MANAGEMENT

As part of its broader response to climate change, Tongaat Hulett participated in the CDP (formerly Carbon Disclosure Project) for the seventh consecutive year. The CDP is an independent initiative that encourages transparency on climate change-related issues, with an emphasis on emissions disclosure. The company’s carbon footprint analysis was conducted according to the Greenhouse Gas (GHG) Protocol, a widely used international accounting tool. Details of the company’s actions underway are provided in the public response to the CDP, available at www.cdproject.net Tongaat Hulett tracks and monitors its GHG emissions, seeking through on-going efforts to improve the accuracy and reporting of its carbon footprint.

During the year, business operations emitted 811 994 metric tons CO2 equivalent (CO2-e) Scope 1 emissions (2014/15: 800 231). The company purchased electricity that emitted 305 794 metric tons of CO2-e (2014/15: 288 459). The total Scope 3 emissions were 32 496 metric tons CO2-e covering business travel, comprehensive supply chain transport and distribution by third-party companies (2014/15: 19 102). In the 2015/16 reporting period, employees booked nearly 6 310 business trips, flying more than 6,250 million kilometres, resulting in 1 217 metric tons CO2-e being emitted from business travel. The total Scope 1, Scope 2 and Scope 3 carbon emissions for the period under review was 1 150 284 metric tons CO2-e and the turnover was R16,676 billion, which equates to 69 grams of CO2 emitted per Rand generated. The GHG emissions have been verified by a third-party service provider.

Overall, there was a 1 percent increase in Scope 1 emissions from the previous period, 6 percent increase in purchased electricity due to more irrigation and 70 percent increase in Scope 3 owing to improved reporting in upstream and downstream distribution of products by third party service providers.

Total emissions from South African operations, calculated at 688 067 metric tons CO2-e, includes emissions of 359 696 metric tons CO2-e emanating from the South African sugar operations. Tongaat Hulett recently completed a study with the assistance of carbon specialists which found that the company’s sugar farms sequester carbon at a rate of 12 tons per hectare per annum from sugarcane produced. Using this rate, Tongaat Hulett’s 39 116 hectares (grown from company-owned and leased land) equates to 469 392 metric tons sequestered CO2-e per annum. The South African sugar operations could benefit from the carbon capture and storage of CO2 in the growing of sugarcane if the National Treasury allows for sequestered emissions to be deducted from the company’s carbon footprint. Therefore 218 675 metric tons would have been subject to carbon tax in this financial year had it been instituted.

ENERGY

The introduction of a suitable regulatory framework for the provision of privately-produced alternative electricity to the national grid in South Africa could potentially result in Tongaat Hulett expanding the business’s ability to generate electricity from bagasse, a renewable resource produced as a co-product of the sugar production process. In the short to medium term, this would involve infrastructure development projects across the company’s sugar mills to significantly increase electricity generation from bagasse. For the year ended 31 March 2016, Tongaat Hulett used a total of 889 451 MWh (2014/15: 908 460 MWh) of electricity across all of its operations and offices. It generated 366 885 MWh (2014/15: 449 100 MWh) from its sugar mills, predominantly from bagasse, and sold 33 388 MWh (2014/15: 32 650 MWh) to the national grid. Other sources of fuel that are used include coal 282 885 tons (2014/15: 280 646 tons), diesel 12,7 million litres (2014/15: 12,7 million litres), petrol 0,994 million litres (2014/15: 1,04 million litres), gas 492 397 GJ (2014/15: 427 910 GJ) and wood.

AIR QUALITY

The deliberate strategy of burning bagasse ahead of coal as a fuel by sugar mills significantly improves the quality of emissions in terms of particulate matter, noxious gases, carbon and sulphur oxide. Wet scrubbing technology continues to be used by most operations to remove fly-ash from the flue gas to ensure that emissions meet acceptable air quality standards. Tightening regulatory constraints and changing societal expectations in relation to air emissions present challenges and opportunities for the business. While some emissions will always be inevitable because of the very nature of manufacturing operations, the company realises the need to improve performance. In 2015, it implemented a significantly revised air quality protection standard which sets high performance expectations on operations in line with respective country-specific legal regimes.

The primary use of coal as a fuel to fire boilers at the refinery in South Africa presents challenges in improving the quality of emissions. To address this, the company has developed an improved process technology solution which could be applied at that operation.

BIODIVERSITY AND LAND MANAGEMENT

A total of 7 970 developable hectares of land in KwaZulu-Natal has been identified for conversion, at the appropriate time, in support of growth and development of the region. This conversion is carefully managed and coordinated in line with broader government objectives and spatial policies. A major element of this conversion includes the rehabilitation of the affected ecological systems through a range of biodiversity improvement practices.

Soil health plays a critical role in maintaining biodiversity. Experts warn that 33 percent of world soil is already moderately to highly degraded due to erosion, nutrient depletion, acidification, urbanisation, and chemical pollution, putting future supplies of food, water and energy at risk. Tongaat Hulett continues to rehabilitate currently unproductive land to agriculture, while also securing additional sugarcane supply to its mills.

WATER RESOURCE MANAGEMENT

Water resources management takes place in the context of the water-energy-food nexus and is informed by the CDP Water Disclosure, the 2030 Water Resources Group (2030 WRG), the National Water Resources Strategy released by the South African Department of Water Affairs and the Alliance for Water Stewardship. Tongaat Hulett is involved in water partnership projects addressing locally-relevant issues such as watershed protection, access to safe drinking water, sanitation, agricultural water efficiency, and education and awareness.

The CDP’s water programme provides a framework that enables companies and investors to take meaningful action to improve water security worldwide. Investors collectively managing more than US$63 trillion and multinational companies with a combined procurement spend of US$214 billion requested companies to respond through CDP’s water programme in 2015.

As an agriculture and agri-processing business, water is a vital part of Tongaat Hulett’s daily operations. Climate change, with its consequent impacts on water availability and water quality, continues to impact a number of the regions in which Tongaat Hulett and its suppliers operate. Water pollution has the potential to increase operational costs and compromise the quality of produced products. It is therefore in Tongaat Hulett’s interest to ensure sustainable management of shared water resources in the regions where it operates and procures from.

“For these reasons, the CDP acknowledged Tongaat Hulett’s continued commitment to transparent corporate water stewardship. The business has been responding to its stakeholders’ requests for information via CDP since 2011, and this year its water response was assessed against the CDP’s water scoring methodology. The result indicates that Tongaat Hulett:

  • Measures impacts and is taking steps to reduce them.
  • Identifies water risks at the river basin level and reported response strategies to tackle them.
  • Monitors total water withdrawals by source, consumption and discharges by destination.
  • Has implemented a water policy and a strategic framework that outlines clear action.

The business is committed to improving its water management practices to maintain consistent and high-quality production in the future. While improving water security globally is an ambitious undertaking, the actions that companies such as Tongaat Hulett are taking demonstrate an understanding of the scale and nature of the challenge as well as the importance of addressing it. We congratulate Tongaat Hulett on their actions thus far and encourage the company to continue to improve its corporate water stewardship.” 
Cate Lamb - Head of CDP's Water Programme

Input water sources include water abstracted from rivers, water available in sugarcane and water purchased from municipal sources. Most sugar mills operate in remote locations and therefore assist in the provision of potable water to local communities. For the reporting year ended 31 March 2016, the total water input was 704 399 mega litres (2014/15: 634 488) of which 5 903 mega litres (2014/15: 7 368) was produced from sugarcane and 4 420 mega litres (2014/15: 8 450) was supplied to communities or sold to local municipalities. Overall, there was a 20 percent decrease in water produced from sugarcane as the business crushed less cane due to drought.

EFFLUENT MANAGEMENT

The company remains committed to achieving ‘zero effluent` disposal. Current efforts are aimed at reducing effluent discharged from production processes and ensuring containment of excess effluent that would be subjected to a dilution process prior to being re-used in irrigating nearby crops where practical. Most of Tongaat Hulett’s sugar mills recycle and re-use water within the factories, while the remaining effluent undergoes biological treatment (aerobic and anaerobic) to reduce its chemical oxygen demand to acceptable levels before being discharged in accordance with the relevant environmental requirements.

The remaining mills are progressing with environmental management programmes to adopt best practices and ensure legal compliance as a minimum. Water that is produced as part of the sugar milling process is largely used for the irrigation of sugarcane on adjacent estates and effluent produced at the central sugar refinery is disposed of into the municipal sewer for treatment. The quantity and quality thereof is monitored to ensure compliance with the relevant specifications.

WASTE MANAGEMENT

Tongaat Hulett continues to effectively and efficiently manage waste to protect human health and the environment, minimise disposal costs, and avoid creating future liabilities. It is working towards reducing the amount of hazardous waste produced from production processes with the ultimate objective of achieving ‘zero hazardous waste’. Various options are being explored to reduce, re-use and recycle waste before its ultimate disposal. Operations based in South Africa, Mozambique, Botswana, Namibia and Swaziland make use of registered waste companies that collect non-valuable hazardous waste from operations and dispose of it at designated hazardous landfill sites. The Zimbabwean operations have constructed hazardous disposal sites that are registered by the regulatory authority and are subject to annual statutory and third-party audits.

During the reporting period 2015/16, 10 387 tons of general waste (2014/15: 12 096 tons), 2 486 tons of scrap metal (2014/15: 2 455 tons) and 763 tons of hazardous waste (2014/15: 4 822 tons) was generated and disposed of in accordance with applicable legislation.

ENVIRONMENTAL INCIDENTS AND COMPLIANCE

The company responded to most concerns raised by affected stakeholders, mainly from surrounding communities. There were no serious incidents or non-monetary sanctions for non-compliance with applicable environmental regulations registered during the year under review. The established community liaison forums between Tongaat Hulett and interested parties continue to address environmentally-related complaints.

A total of two Level 2 incidents (2014/15: 1) and 416 Level 1 (2014/15: 581) incidents were recorded while 92 complaints (Level 1: 92 and Level 2: 0) were registered and attended to. Most of the Level 1 complaints were recorded at starch operations being related to odour emanating from production processes. Appropriate corrective action and engagement processes with affected parties were undertaken. The Level 2 incidents were reported at Triangle operations in Zimbabwe and Agricultural operations in South Africa. Most Level 1 incidents were related to vandal fires as well as illegal dumping incidents perpetrated by unidentified members of the public.

INDEPENDENT THIRD-PARTY ASSURANCE

Environmental Resources Management (ERM) has provided independent third-party assurance over selected sustainability content of the Integrated Annual Report 2016. The assurance was conducted in line with the AccountAbility AA1000 Assurance Standard (Revised, 2008) (Type I Moderate level). The engagement was conducted using the AA1000 AccountAbility Principles Standard (2008) criteria and those of the GRI G3.1 Sustainability Reporting Guidelines. For the detailed assurance statement refer to
www.tongaat.com/2016/ermassurance.pdf

 

CASE STUDIES

Case study - AGRICULTURAL TRAINING AND DEVELOPMENT PROGRAMME

A potential shortage of technical skills in agronomy, sugarcane agriculture and estate management skills for medium to longer term placement in the company resulted in the development of an internal agricultural training and development programme (ATDP).

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Case study - PRODUCTION TRAINEE PROGRAMME

As is the case with various elements of the agricultural and agri-processing operations, Tongaat Hulett starch requires specialised skills in production.

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Case study - CORNUBIA SOCIO-ECONOMIC SUSTAINABILITY AND INNOVATION PROGRAMME (SSIP)

Tongaat Hulett’s land development approach is inclusive, taking into account the societal realities of every area where it is involved. At Cornubia, for example, multiple issues and stakeholders affect the project’s ability to create a better life for all, requiring innovative engagement and solutions.

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Case study - JOBS FUND PARTNERSHIP

Tongaat Hulett, in partnership with the Jobs Fund, is working to create more than 2 850 new jobs as part of a rural development and sustainable job creation initiative.

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Case study - WINTER MAIZE PROJECT

Tongaat Hulett is committed to contributing to food security for the communities that surround its sugar producing operations in Zimbabwe. In the year to 31 March 2016, Zimbabwe experienced adverse weather conditions which had a significant impact on maize production.

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