SUSTAINABILITY

 

MANUFACTURED CAPITAL

   

Tongaat Hulett is an agriculture and agri-processing business, focusing on the complementary feedstocks of sugarcane and maize. Its ongoing 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 SADC region. Value creation for all stakeholders through an all-inclusive approach to growth and development is a key focus area for the business and Tongaat Hulett regards its constructive interfaces with governments and society to be of significant importance.

The current structure of the company 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 dating back to 1952, and a secondary listing on the London Stock Exchange since 1939.

Societal dynamics are increasingly relevant, and therefore the strong relationships that Tongaat Hulett has developed with various stakeholders are of significant importance. These partnering relationships continue to contribute towards the achievement of the business’s strategic objectives, 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.

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 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 2016/17 season, the South African operations were supplied by 122 856 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% stake in Hippo Valley Estates, representing a combined installed sugar milling capacity of more than 640 000 tons.

At the beginning of the 2016/17 season, the Zimbabwe operations were supplied by 45 339 hectares of sugarcane land (own-estates and private farmers) with a potential to produce more than four million tons of sugarcane. The total refined sugar installed capacity is 140 000 tons and the Triangle ethanol plant has an installed capacity of 42 million litres over a 48-week production season. The securing of adequate water availability is important, and the completion of the Tokwe-Mukorsi dam (1,803 million megalitre capacity), in addition to the existing 1,740 million megalitres of the Mutirikwi dam, significantly improves water security of the operation.

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 2016/17 season, 29 120 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. The larger Xinavane operation will benefit from the construction of the Moamba dam (760 000 megalitre capacity) and the extension of the Corumana dam wall which will result in its capacity being increased from 880 000 megalitres to 1,260 million megalitres by May 2019.

The favourable agricultural conditions, 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 3 740 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 estate has 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 using its Marathon® brand while in Botswana, Tongaat Hulett has a 60 000 ton per annum packing and distribution operation with its leading Blue Crystal® brand.

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 21,4 million litres for blending with petrol during the 2016/17 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 more than 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 is 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 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 to produce 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 7 709 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 company’s sugar mills in South Africa are supplied by more than 120 000 hectares of sugarcane land, of which some 34% is farmed by communal or small-scale farmers and land reform growers, and just over 7% is owned by Tongaat Hulett. The business is focused on creating stakeholder value through converting land within its portfolio of prime land near Durban and Ballito to enable investors, developers, end-users and authorities to access bankable shovel-ready real estate investment projects that yield the best possible urban use.

Durban is one of the fastest growing cities and as part of its endevours to improve its sustainability the city has joined the Rockefeller Foundation’s 100 Resilient Cities Programme. Tongaat Hulett has partnered with the city on this initiative which aims to improve the city’s resilience and long-term sustainability.

These activities are underpinned by ongoing 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. This leads 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 regarding these ongoing processes are provided in Tongaat Hulett’s Portfolio of Land for Conversion in KwaZulu-Natal, available here.

FINANCIAL CAPITAL

The various sugar operations generated operating profit of R1,271 billion (2016: loss of R15 million). This is reflective of more effective import protection dynamics, improved local market prices and higher prices realised for exports, especially into regional African markets and the EU. Sugar production totaled 1 056 000 tons (2016: 1 023 000 tons), with volumes impacted by low cane yields due to the drought experienced in KwaZulu-Natal and poor growing conditions with low rainfall and restricted irrigation levels in Mozambique and Zimbabwe as a result of low dam levels. The momentum established to reduce costs has been maintained across all operations.

The South African sugar operations, including various downstream activities, produced operating profit of R390 million (2016: loss of R85 million). Sugar production started to recover, amounting to 353 000 tons (2016: 323 000 tons), costs were well contained and Tongaat Hulett increased its share of total industry production to 22 percent (2016: 19,5 percent), leading to an increased proportion of local market sales. The local market saw significantly better pricing and sales mix dynamics. The higher value of standing cane is reflective of the yield recovering in the next crop following the good summer rainfall in the past six months. Voermol animal feeds has contributed well, with increased margins.

The Mozambique sugar operating profit improved to R308 million (2016: R25 million). Sugar production was 198 000 tons (2016: 232 000 tons). Domestic market sales of locally produced sugar increased by 21 percent, for the whole industry, as a result of better protection against imports and improved sugar distribution and availability in more remote areas. Local market price increases and higher export prices positively impacted revenue and cane valuations. The Metical weakened substantially against the Rand and the US dollar, benefitting the operations with sizeable Metical based costs and revenue linked to the US dollar.

The Zimbabwe sugar operating profit increased to R504 million (2016: R9 million). Sugar production increased by 10 percent to 454 000 tons (2016: 412 000 tons). Local market sales volumes and mix improved due to there being lower imports into the market. Exports increased on the back of higher production and prices realised into the EU and regional markets were some 20 percent above the previous year. As part of an ongoing process, involving Government and farmers, to review the division of proceeds, an upward adjustment to the milling portion was made in the past year, with the commensurate recovery for sugar milling.

The starch and glucose operation recorded an operating profit of R510 million (2016: R658 million). Margins were negatively impacted in the second half of the year by maize costs which were at import parity levels following the drought of the past season and by lower co-product revenues. An improved sales mix was achieved during the period due to the successful replacement of imported volumes with local production and ongoing market development for modified starches and powdered glucose. This was offset by lower volumes as the prevailing economic climate led to lower consumer demand.

Land conversion and development activities recorded operating profit of R641 million (2016: R1,115 billion). The major contributors were Sibaya (high-end residential, retirement and school - 57 developable hectares sold), the industrial area of Cornubia (6 hectares), high-intensity mixed use areas of uMhlanga Ridgeside (2 hectares) and uMhlanga Ridge Town Centre (1 hectare), integrated affordable residential at Bridge City (3 hectares and further high end residential at Izinga (4 hectares) and Kindlewood (2 hectares), totaling 75 developable hectares compared to 121 developable hectares sold in the prior year. Revenue, costs and profit recorded per developable hectare vary, reflective of the degree of enhancement through urban planning, land use integration and density, location and the intensity of infrastructure investment and are in line with the value ranges communicated previously. During the year, the remaining interests in the Zimbali properties were disposed of to IFA for a cash component and in exchange for their joint venture share of the Westbrook/Zimbali South Banks land, resulting in some R24 million being recognised in operating profit.

The stronger Rand exchange rate at the year-end against the US dollar in respect of Zimbabwe and the Metical in respect of Mozambique has led to a reduction in the foreign currency translation reserve on consolidation into Rands of these operations’ balance sheets, which is reflected in the statement of changes in equity and other comprehensive income.

Operating cash flow (after working capital movements) was R3,176 billion which is a R1,3 billion increase over the R1,863 billion of last year. Sugar cash flows improved as a result of higher revenue and operating profits, as well as lower root planting costs and capital expenditure during the past drought. The land conversion and development activities generated stronger operating cash flow, with significant proceeds being received and after development expenditure related payments being made. In total, after taking into account capex and root planting costs which totaled R1,2 billion (2016: R1,9 billion), there was a net cash inflow (after dividend payments) of R544 million, compared to a net cash outflow of R1,278 billion last year. Tongaat Hulett’s net debt at 31 March 2017 was R4,780 billion, compared to R5,101 billion at March 2016. Finance costs of R810 million (2016: R680 million) were commensurate with the borrowing levels during the period and the higher interest rates.

Taking all of the aforementioned into account, headline earnings for the year increased by 44,6 percent to R982 million (2016: R679 million).

A final dividend of 200 cents per share (2016: 60 cents per share) has been declared bringing the annual dividend to 300 cents per share (2016: 230 cents per share).

HUMAN CAPITAL

Key Elements

Leadership bench strength

Employee-based transformation

R45,8 million spent on training and development



Key priorities going forward

Leadership capability and management development

Transformation

Technical training in core functions

Tongaat Hulett’s human resource approach is aligned to and focussed on contributing towards the company meeting its strategic objectives. The view is both short and long term, focusing on managing the day to day requirements while building on the capabilities and capacity of the company for the future.

Total employees at the end of March 2017 was 30 512, compared to 31 230 in 2016. This includes full-time employees, contractors, seasonal and casual workers. The total number of employees during the peak of our milling season was 38 221 (2015/16: 40 858). The sugar operations shut down the mills between December and April/May, resulting in fewer seasonal employees, such as cane cutters, during this time.

The breakdown of Tongaat Hulett’s employee base as at 31 March 2017 is as follows:

Operating country  Full-time (Permanent) Fixed-term contractors  Seasonal and casual workers
(Non-permanent)
Total  Employee total at the peak of the sugar milling season - 2016/17 
South Africa  3 272  655  1 139  5 066  5 788 
Mozambique  6 048  2 272  2 843  11 163  14 918 
Zimbabwe  10 126  3 185  13 311  16 044 
Swaziland  406  26  209  641  1 112 
Botswana  104  13  117  119 
Namibia  212  214  240 
Total  20 168  6 140  4 204  30 512  38 221 

 

TRAINING AND DEVELOPMENT

Appropriate training and development programmes are an investment in both our employees and the long-term sustainability of the organisation. Tongaat Hulett’s diverse operations rely on an extensive range of skills, some of which are specialised. This needs to be retained within the company while a pipeline is built to ensure future capacity. The following table shows the existing qualified skills base within the organisation. A focussed capability building model is implemented across the company, as detailed here.

The business invested R45,8 million (2015/16: R42,5 million) on 31 284 training programmes (2015/16: 25 339) which were attended by 25 533 employees (2015/16: 20 515), with some employees attending more than one programme. An overview of training programmes follows and a comprehensive breakdown of these programmes can be found at www.tongaat.com in the comprehensive sustainability report.

Programme categories  Number of employees who attended training
from 1 April 2016 to 31 March 2017 
Percentage of total training programmes 
Safety and compliance training and certification  17 887  57,18 
Operations/core functional skills training  11 315  36,17 
Leadership and management development programmes  387  1,24 
Talent development and career advancement  1 178  3,77 
Graduate development programmes, entry-level skills training  371  1,19 
Artisan training  146  0,47 


CAPABILITY BUILDING MODEL

While there was a year-on-year decrease in the number of artisans being trained, more investment was focused on existing engineering employees. This is demonstrated by a significant increase in the number of employees receiving engineering and technology training, from 247 in the previous year to 485 this year.

Other areas which saw a marked increase in the number of employees receiving training were SHE, which increased from 11 164 in 2016 to 12 798 this year, Agricultural skills which increased from 4 735 to 8 241 and Information technology which increased from 224 to 1 438 employees trained during the year.

Some of the highlights of the training programmes are as follows:

  • Within the starch and sugar operations, a comprehensive programme to address artisans’ skills gaps is underway, where skills gap assessments are completed and specific personalised development plans are compiled for each artisan. Training is already underway in some operations to address these gaps. Additionally, six unqualified artisans within the starch operations were identified and encouraged to volunteer undergoing recognition for prior learning. Four of these artisans have been trade tested and certified as fitters and instrument mechanicians. A further two are in the process of being evaluated.
  • A partnership has been established between the Mozambican operations and the Eduardo Mondlane University in Maputo to source and create opportunities for final year students to complete their six-month workplace experiential training at the Xinavane mill, which creates a talent pipeline for the mill to select high potential students to participate in the three-year EIT programme.
  • The apprenticeship programme in the Zimbabwe operations has attracted the attention of Government and other local blue chip companies, with organisations such as Delta and Mimosa Mines seconding their apprentices to the Zimbabwe operations on a full cost recovery basis, thereby ensuring that existing artisan development competencies are used to build on skills availability within Zimbabwe.
  • The Namibian operations decided to provide across the board general upliftment training to all the production workers of the company. During the past year, a considerable portion of training budget was allocated to “Basic Money Sense” and “Life Skills” training provided to production workers. Positive feedback from employees includes the significant impact that the training has had on improving the quality of their lives.

 

CURRENT AND FUTURE LEADERSHIP

Tongaat Hulett is focused on building and strengthening leadership capability and bench strength, as well as succession planning and talent management. After the 2015 management development programme (MDP) and the senior management development programme (SMDP), some of the participants have been promoted. Others have been earmarked for possible promotions or enlarged roles with some featuring in succession plans for critical roles. The identified high potential and high performance individuals are receiving due attention and further personalised development and coaching actions have been put in place. In addition, a few of the key business improvement projects completed by the participants during the MDP and SMDP have been selected for adaptation and implementation to resolve identified business challenges. The next MDP commenced in May 2017.

Succession planning for all pre-retirement employees aims to ensure that enough time and resources are allocated to ensure that there are suitably trained and skilled employees available to succeed them when they retire. Where gaps are identified, recruitment initiatives look to identify, attract and hire highly talented individuals to build the strength of the succession pool. Further to this, talent management practices exist to retain and grow high potential individuals across the company.

SELECTED ORGANISATIONAL RENEWAL, REORGANISATION AND ORGANISATIONAL CAPABILITY INITIATIVES

The company continues to review business structures and processes to ensure that these are optimised for future success. During the past year, the development operation embarked on an organisational renewal process in response to the need to shift from a largely project management centric approach to a more empowered, agile and entrepreneurial platform. This process adopted a multi-step progression including diagnostic, design and build, implementation, transitioning teams and individuals and embed. Agreement was reached on the business strategy, operating model and the design of a new organisational structure, which is being resourced using a comprehensive battery of selection processes. Further learning and development initiatives will assist in transitioning the teams and individuals. Key benefits emerging from this process include the following:

  • Business re-alignment and role definition with better and sharper focus on development’s ability to fulfil its operational and strategic business imperatives.
  • Transformation at individual and organisational levels, positively impacting on the socio-economic landscape within which the company operates.

 

ACCELERATING EMPLOYEE TRANSFORMATION

Aligned with the strategic intent of creating value for all stakeholders, Tongaat Hulett understands the significant value that can be unlocked through transformation. Diversity and transformation goals are embedded in all human resource interventions rolled out across the company and management are committed and equipped to achieve success. The focus on transformation includes the upliftment of women in all countries in which Tongaat Hulett operates. Within the South African context, all relevant transformational legislation, relating to employment equity, affirmative action, B-BBEE, skills development and other applicable laws, are complied with.

The company’s stable workforce, with very low employee turnover affects the pace of transformation, however various avenues to accelerate this are being investigated on an ongoing basis, and where appropriate, pursued. Tongaat Hulett has achieved a steady improvement over time, through 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, particularly African women.

In the South African operations, as at 31 March 2017:

  • 65,1 percent of management are black employees (2015/16: 64,3 percent).
  • 87,9 percent of skilled and supervisory positions are black employees (2015/16: 86,5 percent).
  • 80,1 percent of the university and college qualified employees are black (2015/16: 77,5 percent).
  • 49,4 percent of the university and college qualified employees are women (2015/16: 48,1 percent).
  • 32,1 percent of the workforce across South African operations are women (2015/16: 32,1 percent).
  • 21,1 percent of senior management level are women (2015/16: 18,9 percent).
  • 24,9 percent of management are black females (2015/16: 24,2 percent).
  • 33,3 percent of top management are black females (2015/16: 29,2 percent).

A total of R30,7 million, of the overall training costs of R45,8 million, was spent on the South African operations in the past financial year. As required by legislation, a breakdown of this training, from 1 April 2016 to 31 March 2017, including the different categories of spend, are detailed in the table below:

1 percent skills levy  R14 238 278 
Training spend as a percentage of leviable amount  2.2% 
Number of person days trained  43 267 
Number of person days available  976 329 
Percentage trained person days  4,43% 
Number of persons trained  1 691 
Expenditure on African, Coloured and Indian employees  R 27 318 661 
Expenditure on African, Coloured and Indian women  R 14 725 267 
Expenditure on employees with disabilities  R 25 720 

 

PERSONS WITH DISABILITIES

Persons with disabilities continue to add value to the company. High unemployment rates exist among people with disabilities and as such, supporting transformation objectives, the business aims to create an enabling work environment for persons with disabilities. Aligned with legislated reporting requirements, there were 50 employees with disabilities as at 31 March 2017 (2015/16: 57) in the South African operations. This constituted 1 percent of the total employee complement (2015/16: 1,1 percent).

The decrease in employees with disabilities was due to employee attrition, and the reduction in new hires resulted in limited opportunities to recruit employees with disabilities in the past year.

EMPLOYEE VALUE PROPOSITION

Tongaat Hulett is working to position itself as an employer of choice, to attract, retain and grow employees within the company, with focus on high potential and skilled people, aligned with transformational objectives. The value proposition is being reviewed across the organisation, which includes elements of employee benefits, remuneration and career development initiatives. Read more about this in the Remuneration report, starting here.

HR MANAGEMENT INFORMATION SYSTEMS

To standardise systems and simplify reporting across the company, SAP ERP is being implemented across all sites. This has been a multi-phased project, with the human capital management (HCM) module having gone live in the South African, Swaziland and Zimbabwean operations in the past financial year. This includes employee and management self-service, organisational management, time and leave management and personnel administration. The other countries are due to go live in the next financial year. While initial teething challenges have been experienced, these continue to be addressed and overall, this project looks to unlock future value for Tongaat Hulett.

FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING

The right of workers and employers to form and join organisations of their own choosing is a basic human right. As indicated in the table below, there are formally recognised unions in all six countries in which Tongaat Hulett operates and the business strives to maintain constructive, respectful relationships with these 12 unions. Should employees or unions believe that these rights are being contravened, the company has a formal grievance procedure, as detailed here, which aims to address, and if necessary escalate, their grievance.

A total of 26 084 employees are covered by collective bargaining agreements. These stipulate the minimum terms and conditions of employment that will govern the employment relations in the respective countries. The minimum notice, which will be provided to employees and their elected representatives prior to the implementation of significant operational changes that could substantially affect them, depends on the country in which they are based, and ranges from three weeks to three months. In some instances, these provisions are included in the collective bargaining agreements. The formally recognised trade unions are as follows:

 

 

Country  Recognised Unions 
South Africa  African Meat Industry and Allied Trade Union (AMITU)
Food and Allied Workers Union (FAWU)
National Sugar and Refining and Allied Industries Employees Union (NASARIEU)
Southern African Equity Workers Union (SAEWA)
United Association of South Africa (UASA)
Zimbabwe  Zimbabwe Hotel and Catering Workers Union (ZHCWU)
Zimbabwe Sugar Milling Industry Workers’ Union (ZISMIWU)
Sugar Production and Milling Workers' Union
of Zimbabwe (SPMWUZ)
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)

In Swaziland, SAPWU members comprising 94 percent (958 employees) of the workforce, embarked on a 42-day wage related industrial action from 29 July to 9 September 2016, which cost the company R6 million. The employees requested a 12,5 percent increase, with a two-year wage increase agreement finally being reached.

Some 65 Mozambican employees embarked on an illegal four-day strike at a cost of R135 328.75. The Mafambisse-based tractor drivers requested an upgrading of their job grades, but based on the findings of a previously completed job grading review, this was not granted. Union and Ministry of Labour representatives assisted in resolving the matter. The employees faced disciplinary action for participating in an illegal strike as stipulated in Mozambican Labour Law. With a compliment of over 11 000, the participation in the strike equated to less than 1 percent of the Mozambique workforce.

DISCIPLINARY PROCEDURES

Disciplinary codes and procedures must be fair, non-discriminatory, equitable, consistent and guided by the relevant labour legislation. These codes and procedures form the foundation of corrective behaviour. As part of the disciplinary procedure, employees are:

  • Notified timeously of their hearing
  • Receive clarification of the charges against them
  • Afforded an opportunity to be represented
  • Afforded an opportunity to call their own witnesses
  • Afforded an opportunity to cross-examine witnesses
  • Guaranteed that proceedings are chaired by a neutral person
  • Afforded the right to an appeal process

Disciplinary codes and procedures have been implemented at local operations, after negotiations with the relevant trade unions.

GRIEVANCE PROCEDURES

Good employee relations are further enhanced through grievance procedures by facilitating prompt and fair action by the company in response to legitimate complaints by employees. The procedure aims to secure mutually acceptable resolutions to grievances through a framework for all employees to deal with grievances raised effectively, and to facilitate their resolution as near to their point of origin as possible, and within a reasonable timeframe. Though internal communications, employees are:

  • made aware of the opportunity to express grievances.
  • encouraged to voice their grievances without the fear of victimisation, intimidation or prejudice.
  • encouraged to use the procedure, but also warned not to abuse it with false grievances.

 

HUMAN RIGHTS

Tongaat Hulett is a signatory to the Universal Declaration of Human Rights and is committed to supporting freedom of association and collective bargaining at its locations. It is also committed to preventing child labour and does not tolerate the inhumane treatment of employees, including any form of forced or compulsory labour, physical punishment or other abuse. Human rights principles are incorporated in the company’s practices and are included in the Code of Business Conduct and Ethics. All new employees are familiarised with and become signatories of the code upon joining the company.

Management processes assist in monitoring adherence to these commitments and ensuring that there are no contraventions. Company operations in all six countries only hire employees 18 years and older. Employment records, including identification numbers, are monitored to ensure compliance with this requirement.

Formalised employment contracts, collective bargaining agreements and union participation ensures fair labour practices and prevents any form of forced or compulsory labour. In addition to formalised procedures to address grievances, including any human rights abuses, the company subscribes to a Tip-Offs anonymous service, which is well communicated at each site, and with full investigation of all reported incidents. Any employee who is found to behave in contravention to the Code of Business Conduct and Ethics faces disciplinary action which could result in termination of their employment, and where applicable, they could face legal action.

ANTI-BRIBERY AND CORRUPTION

Aligned with its commitment to a policy of fair dealing, honesty and integrity in the conduct of its business, Tongaat Hulett actively works to prevent corruption and bribery, including procedures 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.

SOCIAL AND RELATIONSHIP CAPITAL

Key Elements

R186,3 million spent on SED Initiatives (2015/16: R190,5 million)

2016 Investment Analyst Society Awards Winner: Consumer Products Sector

13 consecutive years included on the FTSE/JSE Responsible Investment Index



Key priorities going forward

Zero fatalities and improved safety performance

Implementing the South African National Standards (SANS) 16001 on wellness management systems

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

  Nature of engagement  Priorities for stakeholders  Outcomes 
Shareholders, investors and analysts 
Government authorities
and regulators in the region 
Private farmers 
Local communities 
Employees 
Customers, suppliers and service providers 


SOCIO-ECONOMIC DEVELOPMENT (SED)

Tongaat Hulett recognises that societal dynamics have an increasing impact on all its operations. Given this context, the business has articulated its strategic goal of striving for a relationship with society that is based on shared value and prosperity. This strategic goal has been described as “Value creation for all stakeholders through an all-inclusive approach to growth and development”. Tongaat Hulett’s SED activities are one of the vehicles used to strengthen and, in some instances, build improved relationships with Government and society, specifically those stakeholders that are most impacted by business activities. The business has articulated the principles which it embraces in its approach to SED and these include:

  • Corporate governance - the business continues to adhere to legal and accepted business practices
  • Corporate social responsibility - the company demonstrates responsibility to society by minimising any negative impact and extending philanthropic and charitable inputs to the communities that it operates in
  • Social sustainability and innovation - Tongaat Hulett is developing innovative practical approaches to transform society and the environment thereby uplifting communities

The business exceeded its commitment of allocating one percent of annual headline earnings to SED for the 12 months to 31 March 2017. For the year to 31 March 2017, Tongaat Hulett invested R186,3 million in its SED initiatives (2015/16: R190,5 million), including the cost of company sponsored occupational and primary healthcare services. Operations in Zimbabwe, Mozambique and Swaziland accounted for 91 percent of the total amount invested in SED initiatives.

Key elements of SED spend for the period are as follows:

HEALTHCARE

  • With most operations being in rural areas, a significant amount is invested in running healthcare facilities for employees and local communities.
  • R68,6 million was invested in health-related activities, of which R1 948 445 was specifically allocated to dealing with the impact of HIV/ AIDS.

BASIC NEEDS

  • Tongaat Hulett continues to invest 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. R15,9 million was invested in these initiatives during the year. In Zimbabwe and Mozambique soccer plays a significant role in communities and Tongaat Hulett sponsors various teams in these operations.

EDUCATION

  • R19,6 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 world’s food systems play a central role in the well-being of ecosystems and human societies, and are a key driver of economic livelihoods. They contribute to most of the 17 SDGs adopted by the UN in 2016. However, today’s food systems will not be able to feed the world’s growing population both nutritiously and sustainably. Agricultural output in sub-Saharan Africa is primarily derived from small-holder farmers, who account for more than 80 percent of all farmers in the region. The greatest challenge facing most of these farmers is a lack of technical farming skills, capital and adequate mechanisation. In addition, they farm on small parcels of land that are often degraded and have no access to irrigation. It is for these reasons that most smallholder farmers in the region cannot produce optimally. Tongaat Hulett understands the crucial role that agriculture can play in improving food security, and ensuring environmental safety. Its strategy is underpinned by the following parameters:

Change of attitude in agriculture

  • Agriculture will thrive when government, businesses, policymakers, civil society and farmers (commercial and smallholder) jointly develop solutions to improve food security.

Land reform and water storage capacity

  • Select beneficiaries based on farming experience, provide them with proper and adequate support, and establish partnerships between them and organised agriculture.

Greater investment in agriculture

  • Increase expenditure and direct it to improving agricultural infrastructure, research and development, and education and training for smallholder farmers.

Make agriculture an attractive career option for young people

  • Developing innovative tools and measures that will ensure that all farmers, and particularly smallholders, can improve their competitiveness. In addition, ensure that young people are made aware of farming as a business career option that offers great opportunities to engage in all areas of the value chain.

PROMOTING SUSTAINABLE AGRICULTURE

Tongaat Hulett supports farm management practices that boost soil carbon sequestration such as climate smart-agriculture, mulching and intercropping. It 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 complements 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. The business understands that for agriculture to be sustainable, land and water must be used efficiently to reduce negative impact on the environment and ensure resilience to climate change.

SUPPLY CHAIN

Tongaat Hulett has maintained its current Level 4 B-BBEE rating, and will continue striving to improve this result. The draft Agricultural (AgriBEE) Sector Codes were released for public comment in October 2015 and are expected to be gazetted during the course of 2017. The Property Sector Codes were gazetted on 9 June 2017, the draft of which had been released for public comment in November 2015. The increased compliance levels and introduction of priority elements in the draft revised AgriBEE Sector Codes and the new Property Sector Codes have placed greater emphasis on ownership, skills development as well as enterprise and supplier development (ESD).

In conjunction with government’s call for a quicker pace and intensive action on economic transformation, the business is executing on an innovative ESD strategy, with the aim of diversifying the supplier base with special focus on localization. There are targeted efforts to support small, medium and micro sized enterprises (SMMEs), while prioritising black-owned and black women-owned enterprises through various initiatives such as preferential payment terms, innovative financing options on land sales, encouragement of joint ventures between large enterprises and exempt micro enterprises (EMEs) and/or qualifying small enterprises (QSEs). There is continuous engagement with B-BBEE non-compliant as well as unrated suppliers, with an objective of helping these suppliers transform their businesses and/or get the necessary verification - to obtain the requisite B-BBEE certificates.

Further details on Tongaat Hulett's B-BBEE certificate is available at www.tongaat.com.

SAFETY, HEALTH AND ENVIRONMENT (SHE)

Tongaat Hulett is achieving encouraging progress along its ZERO HARM journey and strives to strengthen stakeholder partnerships in this campaign. The company’s SHE policies and cardinal rules empower every individual stakeholder, including employees, contractors, farmers and people from surrounding communities, to take total ownership of their safety and health as well as that of their peers. Every Tongaat Hulett stakeholder is always challenged to take individual responsibility in protecting the environment from harm and use resources in a responsible and sustainable manner for the benefit of current and future generations.

The company’s leadership demonstrates commitment to adhering to SHE principles, deploying necessary resources and providing desired guidance to stakeholders for the ZERO HARM goal to be realised and sustained.

SAFETY

Regrettably, a total of three work related fatalities were suffered during the year 2016/17. There was a reduction in the number of fatalities recorded in 2016/17 when compared to the five suffered in 2015/16. However, given that Tongaat Hulett’s ZERO HARM campaign is targeted at eliminating fatalities as a top priority, it is deeply concerning to have had fatality experiences in the year.

Fatality risk management protocols were revisited and strengthened to avoid further loss of lives at the workplace.

The company’s safety performance in terms of serious injuries that result in loss of time slightly declined in 2016/17 when compared to the previous year. A Lost Time Injury Frequency Rate (LTIFR) of 0,093 per 200 000 hours worked, was achieved in 2016/17 reflecting a negative trend for the first time in more than five years following a prior consistent performance of 0.073 achieved in 2015/16, 0,085 (2014/15), 0,087 (2013/14), 0,094 (2012/13) and 0,010 (2011/12). This decline was partly caused by an increase of five lost time injuries and a significant reduction of employee hours worked amounting to ten million hours less when compared to those recorded in 2015/16.

Total Recordable Cases Frequency Rate and Total Injury Frequency Rate were at 1,46 (2015/16: 1,27) and 3,41 (2015/16: 3,82). This performance suggested an improvement in the reporting of minor incidents that result in minor injuries requiring mild medical treatment without experiencing loss of time. The reporting of minor first aid cases however, declined slightly. A dedicated campaign is being pursued to encourage the reporting of these minor incidents that could easily go unreported.

Nevertheless, Tongaat Hulett’s safety performance still compares satisfactorily with leading benchmarked companies across the world, particularly in terms of LTIFR. The company is gaining meaningful progress along its ZERO HARM journey as demonstrated by the following milestone achievements realised by some of its operations in 2016/17:

  • Undertaking pro-active/reactive top executive “stand-back” reviews of operations experiencing unsatisfactory business and/or safety trends considering a correlation between both aspects.
  • Adopting a new risk matrix and consistently applying it in risk-assessment processes that determine high fatality risk topics and relevant critical control protocols to be deployed.
  • Strengthening behaviour-based interventions and contractor management protocols to enhance a sustainable ZERO HARM culture within the organisation.

FOOD SAFETY

Tongaat Hulett’s longstanding reputation of being a producer of high-quality products continues to grow and is acknowledged by its stakeholders, which include customers, regulatory authorities and third-party auditing bodies within and outside the food industry. Such a reputation is protected and strengthened through adherence to structured food safety processes that include managing maize and sugarcane requirements on a non-genetically modified basis and applying a sophisticated identity preservation system. Compliance with these systems and processes is monitored through several annual customer audits that apply global audit protocols. In addition, ongoing 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. In 2016/17, all starch operations, the refinery in South Africa and sugar packaging stations for Xinavane mill in Mozambique, Triangle mill in Zimbabwe and Namibia operations retained certification for FSSC 22000 or ISO 22000 on food safety management systems. Other pack stations are at different stages in preparing to secure similar certifications.

Regarding the health promotion levy (previously referred to as the tax on sweetened beverages), the South African sugar industry, which includes Tongaat Hulett, continues to engage with government. 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 38 221 employees (peak milling season) working at 27 locations in six countries in southern Africa. Health issues across the region where the business operates are therefore varied. Tongaat Hulett’s thrust on sustainability requires sound management of business risks, including those posed by ill health among its employees and people from surrounding communities. These risks can result in increased absenteeism, increased production costs and reduced productivity. Managing all health-related risks is therefore imperative to Tongaat Hulett’s continued viability.

While geographical location may have some unique effect, health concerns are similar in areas where Tongaat Hulett has business interests. The need for integrated management of health risks for chronic illness, occupational injuries and diseases, mental diseases and disability is a key health focus area. Elements of key health focus areas entail:

  • HIV/AIDS management
  • Wellness and disease management
  • Occupational health programmes with emphasis on managing risks of noise induced hearing loss
  • Malaria case control

HIV, AIDS AND TB MANAGEMENT

All Tongaat Hulett operations are now fully compliant with the World Health Organisation strategy of “test and treat” in the management of HIV and AIDS - i.e. all persons who test positive will go onto treatment immediately irrespective of their CD4 count status. Furthermore, the 90:90:90 approach has been adopted by all operations in setting following internal targets:

  • 90 percent of workforce should know their HIV status
  • 90 percent of HIV+ people should be on antiretroviral therapy (ART)
  • 90 percent of those on ART should remain on ART

Performance for the past year (2016/17) against these parameters was 92:83:94. The only target not achieved was largely because of employees who prefer to access non-company based schemes to obtain ART. This is evident in South Africa where many employees access treatment from state and private facilities. Their statistics are therefore not captured in Tongaat Hulett’s records as being on treatment. Key statistics of the HIV/AIDS management programme for the 2016/17 fiscal year are:

  • Employees currently receiving ART through company-provided ART: 3 919 (2015/16: 3 768)
  • Voluntary counselling and testing (VCT) uptake: 88,8 percent (2015/16: 88,4 percent)
  • Employees knowing their status: 91,8 percent (2015/16: 90,5 percent)
  • Number of new employees confirmed HIV+ on testing:642 (2015/16: 1 187)
  • Number of employees currently HIV+: 4 752 (2015/16: 4 689)
  • HIV prevalence: 22,7 percent (2015/16: 21,6 percent)
  • Cost of ART: R1,9 million (2015/16: R1,9 million)
  • Seasonal employees/contractors VCT uptake: 7 930 (2015/16: 9 951)
  • Seasonal employees/contractors on ART: 1 144 (2015/16: 1 080)

An increase in HIV prevalence was realised even though the number of new infections declined by 46 percent and the number of employees currently HIV positive only increased by 1 percent. This is attributed to the significant reduction in the total number of employees as shown by the reduction of employees’ hours, amounting to seven million hours.

While the retention rate of ART is high, the challenge for non-South African operations is ensuring that those on treatment are virally suppressed. This is because of the limited access to viral load testing. Opportunities for private-public partnerships are being explored.

WELLNESS MANAGEMENT

Mental health issues, stress and non-communicable diseases worldwide are contributing to the burden of disease among employees. While acute infectious diseases (e.g. malaria) still rank as the leading cause of ill health, non-communicable diseases are increasingly featuring in the causes of ill health among employees. The company is working towards implementing the South Africa National Standards (SANS) 16001 on wellness management systems to ensure best practices are adopted and measured for compliance.

MALARIA

Heavy rains experienced throughout the region in late 2016 and into 2017, increased pockets of stagnant water and thus mosquito breeding sites. This resulted in malaria endemics in Zimbabwe and Mozambique. This is despite the presence of integrated malaria control programmes that include vector control, awareness and personal protection. The situation was compounded in Zimbabwe by lack of malaria control activities in the new outgrower farms within and bordering Tongaat Hulett operations. Outgrowers are being engaged to resuscitate these controls. There were no malaria-related fatalities recorded at Tongaat Hulett’s operations during 2016/17.

OCCUPATIONAL HEALTH RISK MANAGEMENT

The occupational health risk of main concern is that of noise induced hearing loss as this adversely affects the livelihood of employees even after they leave employment. As part of managing this risk, the company focuses on early identification of those at highest risk, and taking necessary precautionary measures before the severity of hearing loss increases. Various other occupational health risks are monitored through periodic medical surveillance programmes to ensure employees are not showing signs of over exposure to inherent risks.

In 2016/17, there was no occupational health related fatality (2015/16: 0) nor occupational health case with irreversible health effects (2015/16: 2) recorded. A total of 12 occupational health cases with reversible health effects (2015/16:10) were registered in the year.

INTELLECTUAL CAPITAL

Key Elements

Market-leading brands

Patents

Intellectual Property



Key priorities going forward

Retention of third-party certification

Growing 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 the 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

SHE and food safety performances are benchmarked against global best practices to promote continuous improvement and stakeholder satisfaction. 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 retained certification to either NOSA 5 Star systems or OHSAS 18001 covering occupational health and safety. All 19 main operations are now certified to the ISO 14001 environmental management system. All starch operations, the refinery, and pack stations for Xinavane, Triangle and Namibia operations retained certification for FSSC 22000 or ISO 2200 on food safety management systems.

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

Several 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 business’s major food and animal feed brands:


NATURAL CAPITAL

Key Elements

Reduced emissions by 1 percent

Eight consecutive years of participating in CDP Carbon, 4 years in CDP Water

Improvement in Water Resources Management



Key priorities going forward

Improving soil health and promoting sustainable agriculture

Energy efficiency

Emissions reduction

Smart irrigation solutions

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 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 comply with local and international best practices. In line with this approach, the company aims to retain certification to ISO 14001 Environmental Management System standard across all its operations.

With the increasing demand to grow more food, the responsibility lies with agriculture and agri-processing businesses to look after the soil in areas in which they operate. Since healthy soil forms the foundation of food production in successful agriculture, unproductive soil can be rehabilitated through the adoption and implementation of more environmentally friendly approaches. This is promoted by the three main interlinked principles of Conservation Agriculture: minimal soil disturbance, permanent soil mulch cover and crop diversification.

CLIMATE CHANGE

According to the United Nations Food and Agriculture Organisation, there is no doubt that climate change impacts food security. Overhauling farming and food systems will be complex due to the vast number of stakeholders involved, the multiplicity of farming and food processing systems and differences in ecosystems. The effects of climate change on agricultural production and livelihoods will vary across countries and regions. Tongaat Hulett recognises the need to adapt to the physical impacts of climate change, which may affect operations, particularly through the availability of water and the occurrence of extreme weather events. The company continues to engage with experts on several innovative initiatives, including programmes to improve irrigation efficiency and more drought-resistant crop varieties.

Sub-Saharan Africa will experience the largest increase in the number of poor, partly because its population is more reliant on agriculture. Therefore, success in transforming food and agricultural systems will largely depend on supporting smallholders in adapting to climate change. Tongaat Hulett relies on agricultural products produced in greatly varying agro-ecological and socio-economic conditions. Solutions are tailored to these conditions, but overall, significant improvements in food security, as well as resilience to climate change is achieved by introducing sustainable agricultural practices.

Tongaat Hulett’s approach to dealing with the impacts of climate change includes increasing resource-use efficiency, cutting fossil fuel usage and avoiding direct environmental degradation, enhancing productivity sustainably and reducing dependence on external inputs. Improved crop production and fertiliser management offer the greatest potential to reduce nitrous oxide emissions, while also reducing input costs. Increasing stocks of soil organic carbon improve crop yields and build resilience to drought and flooding, but also sequester carbon. The company participates in public environment fora and, during the past year, this included Business Unity of South Africa (BUSA), the Industry Task Team on Climate Change (ITTCC), parliamentary discussions and the Department of Environmental Affairs (DEA) on Carbon Budget and Carbon Tax alignment.

CARBON MANAGEMENT

As part of its broader response to climate change, Tongaat Hulett participated in the CDP (formerly Carbon Disclosure Project) for the eighth 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 per the Greenhouse Gas (GHG) Protocol, published by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute and has reported Scope 1 and 2 GHG data in compliance with ISO14064:3. Terra Firma Solutions has provided limited assurance on Scope 1 and 2 GHG data in accordance with ISO14064:3. Details of the company’s current actions are provided in the public response to the CDP, available at www.cdproject.net. Tongaat Hulett tracks and monitors its GHG emissions, seeking through ongoing efforts to improve the accuracy and reporting of its carbon footprint.

During the year, business operations emitted 857 028 metric tons of CO2 equivalent (CO2-e) Scope 1 emissions (2015/16: 811 994). The company purchased electricity that emitted 260 565 metric tons of CO2-e (2015/16: 305 794). The total Scope 3 emissions were 19 702 metric tons CO2-e covering business travel, comprehensive supply chain transport and distribution by third-party companies (2015/16: 32 496). In the 2016/17 reporting period, employees booked 7 274 business trips, flying more than 5,675 million kilometres, resulting in 1 067 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 1 137 295 metric tons CO2-e and the turnover was R17,915 billion, which equates to 63 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 decrease in emissions from the previous period, a 15 percent decrease in purchased electricity due to improved weather conditions resulting in less irrigation, and a 39 percent decrease in Scope 3.

Total emissions from South African operations, calculated at 712 015 metric tons CO2-e, includes emissions of 404 215 metric tons CO2-e emanating from the South African sugar operations. Tongaat Hulett completed a study with the assistance of global carbon experts, 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 44 604 hectares (grown from company-owned and leased land) equates to 535 248 metric tons CO2-e sequestered in this financial year. 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, 176 767 metric tons would have been subject to carbon tax in this financial year.

ENERGY

Energy efficiency is one of the regions challenges compounded by the need for an affordable, sustainable energy supply. The most practical and immediate route to success is not the building of new power-generating plants, but the use of less energy from the national grid. Eskom has long called for a voluntary 10 percent reduction by users to assist with the balance of electricity supply and demand, particularly at peak periods. It will take years for the government-backed utility to commission enough new power stations to cater for the backlogs in supply. 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 2017, Tongaat Hulett used a total of 649 958 MWh (2015/16: 889 451 MWh) of electricity across all its operations and offices. It generated 436 322 MWh (2015/16: 366 885 MWh) from its sugar mills, predominantly from bagasse, and sold 28 662 MWh (2015/16: 33 388 MWh) to the national grid. Other sources of fuel that are used include coal 300 268 tons (2015/16: 282 885 tons), diesel 10,9 million litres (2015/16: 12,7 million litres), petrol 0,857 million litres (2015/16: 0,994 million litres), gas 472 349 GJ (2015/16: 492 397 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, and 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. 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. The execution of the first phase of this process technology solution is expected to take place during 2017. This technology implementation is aligned with the refining operation's commitment to reducing emissions and achieving its compliance objectives as agreed with the authorities.

BIODIVERSITY AND LAND MANAGEMENT

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.

A total of 7 709 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.

The business works to avoid and minimise biodiversity loss and land disturbance, while improving its biodiversity management practices. This approach, which has been well established over many years, focuses on implementing the mitigation hierarchy of avoidance, minimisation, restoration, and offsets where appropriate.

WATER RESOURCE MANAGEMENT

Water is an essential input in the business, all operations are affected by uncertainties and challenges associated with water consumption. According to the 2030 Water Resources Group projections, without improvements in the way water is managed and used, the world could face a 40 percent supply gap by 2030. It is for this reason that the business is using the Water Risk Filter Tool to assess the water risk exposure to share in the implementation of sound water stewardship strategies at the watershed level.

To this end Tongaat Hulett is partnering with other stakeholders in the uMhlathuze Water Stewardship Programme. The uMhlathuze region of the Pongola-Umzimkhulu Catchment Management Area is facing significant water stress. This is significantly impacting economic activity and livelihoods, particularly within the Richards Bay industrial complex and is also affecting agricultural and forestry activities in the middle and upper reaches of the catchment. In the context of the critical drought situation in South Africa, the uMhlathuze is one of the most affected areas.

 

 

NEED FOR COLLECTIVE ACTION AT SCALE

It is recognised that businesses, landowners, government and civil society are already collaborating on water-related risk mitigation through other fora, primarily around the Richards Bay area. However, these efforts do not consider the need for collective action at the catchment scale, or to unlock resources and action from national and international parties to assist in efforts in the catchment. These and other parties in the uMhlathuze region therefore recognise the need for focused and immediate collective action to facilitate improved water resources management by all relevant stakeholders, resulting in improved water security for all water users. Stakeholders include the Department of Water and Sanitation; KwaZulu-Natal, Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH - International Water Stewardship Programme, Grindrod, Mondi South Africa Division, National Business Initiative (NBI), Pongola Umzimkhulu Proto Catchment Management Agency, Strategic Water Partners Network, Tongaat Hulett, Transnet and WWF South Africa.

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 on several the regions in which Tongaat Hulett and its suppliers operate. Water pollution has the potential to increase operational costs and compromise the quality of 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.

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 2017, the total water input was 720 713 megalitres (2015/16: 704 399) of which 6 279 megalitres (2015/16: 5 903) was produced from sugarcane and 3 679 megalitres (2015/16: 4 420) was supplied to communities or sold to local municipalities. Overall, there was a 2 percent increase in water input.

EFFLUENT MANAGEMENT

A philosophy of "target zero effluent" disposal is subscribed to across all operations. It is understood that it entails a journey involving upgrading production processes and infrastructure and shifting operational culture, aiming to reduce effluent discharge as a priority before treating and reusing the minimal amount that must be discharged. The quality of effluent being discharged is subjected to ongoing internal and third-party monitoring processes to ensure it meets minimum specifications set by statutory authorities. Water that is produced as part of the sugar milling process is largely used for the irrigation of sugarcane on adjacent estates while 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. The remaining mills are progressing with environmental management programmes to adopt best practices and ensure legal compliance as a minimum.

The Maidstone mill, in South Africa, is currently developing a Request For Proposal for the building of an effluent treatment plant, to treat effluent to the standard required for discharge to watercourses.

WASTE MANAGEMENT

In line with the "ZERO HARM" principle, Tongaat Hulett manages waste from its operational processes with a "target zero hazardous waste" mindset. Efforts are directed towards reducing the amount of hazardous waste being generated. Waste management plans follow a hierarchy of control steps to reduce, re-use and recycle waste before earmarking for 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. Zimbabwe-based 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 2016/17, 10 209 tons of general waste (2015/16: 10 387 tons), 3 080 tons of scrap metal (2015/16: 2 486 tons) and 413 tons of hazardous waste (2015/16: 763 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.

There were no Level 2 or 3 environmental incidents nor complaints recorded in the year (2015/16: 2 Level 2 Incidents; 0 Level 3 Incidents). A total of 425 Level 1 incidents were recorded (2015/16: 416) while 142 Level 1 complaints were registered and attended to (2015/16: 92). Most Level 1 incidents were related to vandal fires (in sugarcane fields) and illegal dumping incidents perpetrated by unidentified members of the public. There were also incidents/complaints of dust, environmental noise and effluent smell particularly at Maidstone mill. At Starch operations, Level 1 environmental odour complaints were recorded related to nuisance odour often experienced during plant start-up or stoppages.

Operational processes were adjusted to improve odour emanating from production processes. At Tongaat Hulett Sugar Maidstone mill, purging of the system with lime and keeping to irrigation times reduced the odour complaints but these were also weather dependent. Environmental noise at the same operation was caused by malfunctioning of equipment, which was repaired. The impact of dust from all operations is monitored through dust fall out processes. The plan that was previously committed to refurbishing feed dryers at Tongaat Hulett Starch Kliprivier mill was completed in July 2016 and optimisation of dryer operation after installation was also completed.

 

CASE STUDIES

Case study - RESILIENT CITIES PROGRAMME

Tongaat Hulett’s commitment to ZERO HARM and sustainable development has been reinforced by its recent partnership with the eThekwini Municipality and Dube TradePort Corporation, through which Durban has joined the Rockefeller Foundation’s 100 Resilient Cities Programme. Focused on building a city that will withstand the changes of time, climate and society, it aims to create a city that will survive and thrive in spite of environmental and societal changes.

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Case study - ENGINEERING SKILLS UPLIFTMENT PROJECT

Tongaat Hulett’s starch operations requires scarce technical skills, and as such training and development initiatives look to grow these skills and address succession and retention in these critical positions. The engineering skills upliftment project is an example of one such technical training initiative. In 2016, a gap assessment and closure project involved 62 participants, comprising artisans, technicians and co-ordinators. They each underwent skills gap assessments and specific personalised development plans were compiled. Based on these results, 23 gap closure initiatives were prioritised. The focus was to drive competency acquisition and demonstrate application of skills through performance measurement. The selected employees varied in age, gender, race and experience.

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Case study - SHARLENE NARRAIDU

Tongaat Hulett is committed to creating an environment for its employees to learn and grow. Sharlene Narraidu’s career at the company is an example of this commitment in action. Prior to joining the company in November 2000, her first job was with Legend Security as a security guard at the Tongaat Hulett Maidstone mill. Her responsibilities included access control, patrolling the mill and searching sugar trucks. Her time at the company has seen her grow from a senior recruiting clerk/secretary/receptionist at sugar’s agricultural operations to the technical skills development manager for the South African sugar operations.

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Case study - UPLIFTING COMMUNITIES THROUGH THE SORGHUM GRAIN PROJECT

One of Tongaat Hulett’s objectives is to build relationships with society based on shared value and prosperity. An example of this commitment is demonstrated through the company’s Zimbabwean operations that identified the opportunity to purchase its sorghum requirements from a community-based outgrower programme that was developed in conjunction with government and community leaders. This project supports the UN Sustainable Development Goal of ending extreme poverty in all forms by 2030.

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Case study - GROWING TONGAAT HULETT'S TALENT POOL THROUGH INVESTMENTS IN EDUCATION

Tongaat Hulett’s operations require many skilled employees, particularly engineers and artisans. Over the past few years, the business has employed several people that have benefitted from the Programme for Technological Careers (PROTEC). Tongaat Hulett has had a long-standing relationship with the PROTEC Tongaat branch, which is located at the Maidstone mill. The company’s investments in PROTEC contributed to the education and development of a student that qualified as a mechanical engineer. She is now employed at the South African sugar refinery and is making a significant contribution to the development of previously disadvantaged students throughout South Africa. Tongaat Hulett’s ongoing commitment to investing in education speaks to the UN Sustainable Development Goal to ensure inclusive and equitable quality education.

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Case study - CHANGING THE LIVES OF RURAL COMMUNITIES THROUGH PARTNERSHIPS

The Graca Machel small-scale grower association members in Xinavane are celebrating their first sugarcane harvest. In 2015 they were one of five small-scale grower associations that partnered with the European Union (EU), the Mozambican Government, BancABC and Tongaat Hulett to establish sugarcane plantations. The project, which aimed to foster economic stability and create successful, sustainable communities cost a total of €3 918 774. This was funded by an EU grant of €1 545 596 and a BancABC loan of €2 373 278. The five associations, comprising 362 farmers, established 530 hectares of irrigated sugarcane farmlands, with all cane supplied to Tongaat Hulett’s Xinavane mill. In addition, 30 hectares of irrigated food crops was established to assist in ensuring food security. This project supports the SDG of ending extreme poverty in all forms by 2030 and of ending hunger, achieving food security and improved nutrition and promoting sustainable agriculture.

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