Tongaat-Hulett taking action
Peter Staude, Chief Executive of Tongaat-Hulett said today that all its
businesses are implementing actions to counter the negative impact of current
conditions on the Group.
The sugar industry in South Africa is
particularly facing one of its most extreme challenges in recent history brought
about by a number of factors converging at the same time.
important factors being the rapid strengthening of the Rand against the US$ to
levels last seen in early 2000; cost push pressures since 2000 that have
rendered the industry less competitive in US$ terms; the recently announced
reduction in the domestic market sugar price; and the “dumped” world market
price being at its lowest level in recent years largely attributable to the
rapidly growing Brazilian sugar industry that is expanding even though there is
little movement in world sugar trade liberalisation.
This environment has
been exacerbated by poor rainfall in many parts of the cane belt with production
in some of the worst affected areas reaching full-blown drought
On 13 November 2003, Tongaat-Hulett Sugar Managing Director Bruce
Dunlop announced that the company had initiated consultations with Entumeni mill
employees, their representative Unions and cane growers regarding the company’s
proposal to close the Entumeni sugar mill. Consultations with stakeholders are
In a further development today, Dunlop briefed employees that
the company intends to cut its overheads by at least half. This would inter alia
require the downsizing of its head office at La Lucia. Consultations with
employees that might be affected would commence shortly. The intention is for
centralised services to operations throughout Southern Africa to be downsized
and where appropriate merged with activities closer to the ‘coal face’. All
services operating out of La Lucia will be reviewed including Finance and
Accounting, Information Technology, Purchasing and Procurement as well as
Technical Services. Outsourcing where appropriate would be considered. The La
Lucia office has a complement of 190 employees.
At the same time Dunlop
announced a review of the make-up of the Tongaat-Hulett Sugar Board as well as a
re-organisation of executive responsibilities with an emphasis on a leaner and
flatter structure. This is to be followed by a review of management structures
at Tongaat-Hulett Sugar’s mills, refinery and agricultural estates in South
Africa. The feasibility of relocating from the La Lucia offices in Umhlanga
Rocks Drive to smaller premises and the need for an office in Maputo would also
be examined. Major emphasis will be placed on empowering employees at operating
level to assume greater responsibility and accountability for Tongaat-Hulett
Peter Staude commented that the restructuring at
Tongaat-Hulett Sugar was one of the actions being taken in the Group to get its
businesses into better shape and to energise the organisation to become more
proactive and action orientated in unlocking earnings growth opportunities
within the Group with a greater sense of urgency.
Over and above cost
reductions, other areas of focus include volume growth initiatives,
rationalisation of facilities and the optimisation of capacity utilisation.