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August 05, 2008

South African sugar concern expects quick turn-around in Zimbabwe

The CEO of South African firm Tongaat Hulett is upbeat about the company’s prospects in Zimbabwe, which is recognised to be the lowest-cost sugar producer in Southern Africa, where he believes the economic situation could sweeten in the next 18 months.

Peter Staude said on August 4 that once an improvement was effected, it would be a “fantastic time” to expand in the country, and that his company would invest “substantial” amounts.

Tongaat Hulett had not invested in the troubled Southern African State for the past 15 months, but had rather been working hard to maintain its skills and infrastructure base there, he noted.

“We do believe that, over the next period, the macroeconomic conditions are likely to be re-established in Zimbabwe, and that time will be a fantastic time to even expand those operations,” Staude said. “In the next year-and-a-half is my own personal prediction, that you will see the macroeconomic conditions being re-established.”

Tongaat Hulett’s assets in the country include Triangle and a 50,35% stake in Hippo Valley Estates, which together had the capacity to produce 600 000 t/y of sugar, as well as ethanol.

In 2007, these operations produced only 349 000 t.

“I believe that, once the will is there, it is not so difficult to do that turnaround,” commented Staude.

One of the quicker improvements for Tongaat Hulett would be getting better pricing for its product, which had been far lower than the average regional price. “That’s made it very difficult to run a viable enterprise,” he said.

“The second thing that we’ve been working on, and we’ve been working on it for some time, is that we’ve got outgrows around our sugar mills, and those outgrows have really been suffering under these conditions,” stated Staude. “It’s very important to re-establish them to get back to the 600 000 t/y of production we can do out of the sugar mills there.”

Asked if the company would be looking to expand in Zimbabwe as rapidly as it had done in Mozambique, Staude replied: “absolutely.” He was reluctant to disclose what amount of money Tongaat Hulett might invest in Zimbabwe once the macroeconomic situation had improved, but did say that the numbers would be “substantial.”

Meanwhile, in Mozambique, the company was undertaking agricultural and milling expansion projects worth R1,3-billion ($180 million), which it said were progressing well towards “substantially increased production in the 2009 season.”

At its Xinavane plant, 2009’s production would show a 140% increase on the figure for 2008.

On Tongaat Hulett’s website, it said that the lowveld in Zimbabwe, where the Hippo Valley and Triangle operations were situated, was recognised as the lowest-cost sugar producer in Southern Africa, if not the world.

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