All data are collected in the Fiscal Year of 2008-2009.

Mozambique / Manufacturing

Tongaat Hulett is an agri-processing business which includes integrated components of land management, property development and agriculture.

The Tongaat Group Limited evolved from a partnership between Edward Saunders and W J Mirrlees, which dates back to 1875. On 7 September 1892 the partnership was incorporated into the Tongaat Sugar Company Limited in Pretoria, South Africa. In the years 1969 to 1970, the company, which had diversified into other businesses, was renamed the Tongaat Group Limited.

The Huletts Corporation Limited had its beginnings in the 1850s, with the original incorporation in 1892 as Sir J L Hulett and Sons, which changed its name to Huletts Sugar Corporation Limited and then to Huletts Corporation Limited. In 1962, Anglo American plc bought its first shares in the Tongaat Group Limited. Anglo American plc has retained its investment in THG and has held an interest of more than 50 percent in THG since 1998.

The company, like many South African entities, was a diversified industrial business with interests in aluminium, building materials, consumer foods, cotton, edible oils, industrial and commercial catering, mushrooms, sugar and agricultural land development, starch and glucose, textiles and transport. Since the early 1990s the Group has systematically divested from a number of these businesses and refocused its operations, leveraging the synergies that exist between its agri-processing operations and prime agricultural land holdings.

Capitalising on the investments in its operations and a solid platform of earnings growth, a strategic review of the Tongaat Hulett’s Group’s operations culminated in the announcement in 2006 of the proposed listing of Hulamin on the JSE and the Hulamin unbundling to create two separately listed, focused companies in 2007, namely: Tongaat Hulett (TH), an agri-processing business which includes integrated components of land management, property development and agriculture; and Hulamin, an independent niche producer of aluminium rolled, extruded and other semi-fabricated and finished products.

This was achieved by the listing of Hulamin on the JSE, followed immediately by the unbundling of the 50 percent shareholding in Hulamin by THG to its shareholders. It was accompanied by the simultaneous introduction of broad-based BEE equity participation in both TH and Hulamin. On the implementation of the above transactions, Tongaat Hulett Group’s name changed and is now known as, Tongaat Hulett Limited.

Tongaat Hulett has a primary listing on the Johannesburg Stock Exchange (JSE), which dates back to 1952, and a secondary listing on the London Stock Exchange (LSE), which dates back to 1939. It employs over 35,000 people, working in about 25 locations in 6 countries, South Africa, Botswana, Namibia, Swaziland, Mozambique and Zimbabwe.

Tongaat Hulett’s sugar operations in Mozambique consist of the Xinavane and Mafambisse sugar mills and surrounding estates with 35,701 hectares under cane. Tongaat Hulett acquired interests in the two mills and cane estates in Mozambique in 1998. The Mafambisse mill was originally built in 1965 and upgraded in the late 1980s at a cost of US$ 50 million. British investors arrived at Xinavane in 1914 and undertook the initial development, building the first mill downstream of the present one. Subsequently, a Portuguese owned company took over the company in the 1950s and relocated the mill to its present site. In 1998 Tongaat Hulett Sugar acquired a 49 percent stake in Xinavane and took over the management in the same year. During the rehabilitation phase that followed, most of the original canals, drains and pumps designed for flood irrigation have been repaired and re-designed to the present flood, floppy and pivot irrigation systems.

In 2007 Tongaat-Hulett Group approved a R1.3 billion expansion of its sugar business in Mozambique. The group will spend R1.16 billion expanding its Xinavane operations, and the Mozambican government has allowed Tongaat-Hulett to increase its stake in the mill to 88 percent from 49 percent. The company will plant 6,500ha more cane at Xinavane, and an additional 2,100ha at the Mafambisse operation.

Mafambisse is situated on the banks of the Pungwe river in the Dondo district of the Province of Sofala some 54 km inland of Beira. Xinavane is situated on the banks of the Incomati River approximately 136 km north west of Maputo.

Through its sugar and starch operations in Southern Africa, Tongaat Hulett produces a range of refined carbohydrate products from sugar cane and maize.

Tongaat Hulett employs a total of 35,444 employees, of whom 12,069 are based in Mozambique

Tongaat Hulett grew profit from operations in 2008 by 35 percent to R1,132 billion with headline earnings improving to R583 million (2007: R61 million). The Mozambique operations’ contribution to profit increased to R250 million (2007: R88 million).

Mozambique’s sugar production in 2008 was 250,191 metric tonnes and will produce 419,000 metric tonnes of sugar this year, a 68 percent increase on the 2008 figures. In 2008 Tongaat Hulett produced 108,000 tons of sugar at Xinavane and 45,000 tons of sugar at Mafambisse. Tongaat Hulett’s total sugar production is set to reach 270,000 tons in 2009 and more than double to over 290,000 tons a year by 2010.

“To create value for all stakeholders, is sustainable and contributes meaningfully to the social and physical environment in which it operates. A high priority is placed on all aspects of safety, health and environment”

Over the past century, Tongaat Hulett has established itself as a leading large scale agri- processing business which has its base firmly established in Southern Africa. Demand for food products is increasing worldwide, renewable energy has introduced a new dimension to agriculture and agricultural trade regimes are changing, with Africa and the European Union (EU) moving closer as a trade bloc. Further opportunities for expansion and growth in Africa are thus emerging. Tongaat Hulett has the established business platform and size to capitalise on these opportunities.

The successful management of the socio-economic and political dynamics of agriculture, land, water, agri-processing, food and energy are integral to the business. The growth and development of Tongaat Hulett’s operations, in the selected regions in which it operates, have involved establishing credible partnering relationships with local communities, governments and employees over time. Its 25 percent South African Black Economic Empowerment (BEE) equity participation transactions and involvement in post settlement land claim solutions, the partnership with the Mozambique government in establishing the Mozambique sugar operations and its programmes to establish indigenous cane farmers in Zimbabwe illustrate the level of understanding and extent of its relationships in the region.

The integrated business model involves land and water management, agriculture, agri-processing and the transition to property development and other uses at the appropriate times. Tongaat Hulett is able to maximise value through the various phases of land usage, from acquisition, agriculture and agri-processing to the transition to property development. This carefully managed process continues to enhance the value of Tongaat Hulett’s remaining land.

Principal subsidiary companies and joint ventures: Acucareira de Mocambique, SARL (Mozambique) (85 percent); Acucareira de Xinavane, SARL (Mozambique) (88 percent).

Tongaat Hulett together with the Mozambique government developed an indigenous out-grower programme and now 997 farmers are being assisted and supported. They currently farm sugar cane on 2,275 ha of land. In May 2007, President Guebuza opened the 56 million m3 Muda Dam built by Tongaat Hulett with the government of Mozambique.

Yet Tongaat has been hit with labour problems in recent months. In 2009 workers at Mafambisse called on the government to “throw Tongaat Hulett out of the country”. The workers said that Tongaat management violates their rights, and claimed that this does not happen in other sugar companies. They claimed that the company used to provide tractors that would carry the coffin, whenever a member of a worker's family died. But the management has replaced this support with a grant of 500 meticais (about US$19 US dollars), which the workers say is not sufficient to purchase transport for a coffin.

Among other complaints, they said that plantation workers are obliged to work from 05H00 to 18H00, without the right to any meals (a 13 hour shift without any breaks would be a serious violation of Mozambican labour legislation). "We don't know what will become of us next year, because the company management is cutting all the workers' rights", said the secretary of the AM trade union committee, Mario Domingos.

He alleged that the management was also dumping fermented waste liquid in the plantation drainage channel, which flowed into and polluted the Pungue River. A Mafambisse regulo (traditional chief) also complained that the current management had broken with the tradition of holding traditional ceremonies at the start of the sugar milling campaign. "These foreigners come here to sabotage our country, because they don't respect our traditions", he said.

In early 2000 Tongaat Hulett threatened to withdraw from Mozambique unless the government resisted IMF pressure to reduce tariffs on sugar imports, arguing that their investments could take ten years to realize a profit at world market prices. As a result, the IMF revised its policies in December 2000.

Sugar is a very important focus of government support in terms of agro industrial policy. The sugar sector, after the privatization of the sugar plantations and mills, has been granted high protection and has received investment incentives such as duty and VAT exemptions for importing capital goods. Sugar, is subject to a variable tariff surcharge that depends on the international price of sugar on top of the normal duty of 7.5 percent.

Temporary exemptions on sales of sugar, vegetable oil and soap have been kept in place until 2010, along with exemptions on equipment, raw materials, spare-parts and certain services supplied in connection with these goods. No import taxes, aside from tariffs and VAT, are imposed, except on sugar and some luxury items.

Under the European Union’s Everything But Arms initiative for least developed countries, Tongaat Hulett has duty-and quota-free access to the EU sugar market. The EU delivered price will remain fixed from 2009 until 2015 at E335.20 (R3,100) a ton, or 19.6 US cents a pound.

The 2009 financial year will mark a significant change in the scale of Tongaat Hulett’s Mozambique sugar operations with the commissioning of the expanded Xinavane sugar mill with an installed capacity to crush 1.7 million tons of cane and produce 208,000 tons of sugar per annum by 2010. The 2009 cane harvest will be drawn from the expansion in the area under cane rising from 8,163 hectares in 2008 to 12,877 hectares in 2009. At Mafambisse the 2,100 hectare expansion at Lamego South will boost sugar production to levels above 100,000 tons by 2010. Utilising the Mozambican expansion project as a catalyst, the operations in Mozambique are implementing an indigenous outgrower programme that will see an initial 7 farmers at Mafambisse and 1,163 farmers at Xinavane being assisted in farming sugar cane on 2,091 hectares of land.

In another development the company indicated in 2009 that it plans to turn sugar cane into renewable energy in Mozambique.