Illovo boosts production
South Africa's largest sugar producer, Illovo, has commenced its growth strategy and the first phase of the major expansion project to increase the group's production facility in Zambia to 440 000 tons of sugar per annum has been completed. Benefiting from the increased cane supply and factory upgrade, sugar production is expected to increase to around 275 000 tons in the current year.
The second and final phase of the project is making good progress and is due to be completed in April 2009.
Smaller factory expansions in Malawi and Tanzania were completed in the recent off crop period. Further small expansions are planned in Malawi over the next two years.
The Mali project is making slow progress and sugar production is now only anticipated to commence in December 2010. The requisite concessional debt funding for the agricultural development is being progressed, but it is taking longer than anticipated.
A major expansion of the group’s production facilities in Mozambique has recently been approved and will result in output from this operation doubling over the next three years.
The expansion plans for the group’s Swaziland operations have moved a step closer with good progress having been made on the Lower Usuthu Smallholder Irrigation Project, and impounding of water in the newly-constructed Lubovane Dam has commenced. The project involves the establishment of 12 000 hectares of irrigated agricultural land over a period of six to seven years, a large proportion of which will be developed to cane for delivery to the group’s Ubombo factory where the required additional milling capacity will be installed. The first deliveries of cane are expected in 2009/10. The company’s existing factory operations have significant growth potential and further developments are being pursued across the group.
The reform of the European Union sugar regime continues to take effect and since implementation, domestic sugar quota renunciations have amounted to 5,6 million tons, which is only 400 000 tons below the Commission’s target for quota withdrawals. The various Economic Partnership Agreements and duty-free/quota-free access to the European Union for Least Developed Countries will be of benefit to the group’s operations in Swaziland, Malawi, Zambia, Mozambique and
Generally, climatic conditions have been good across the areas in which the group operates and favourable to crop growth, although in South Africa, following a very dry April and May, severe rains were experienced on the South Coast of KwaZulu- Natal in mid-June. The rains caused extensive damage to agricultural bridges, causeways and road infrastructure as well as landslides on some of the steeper slopes.
Repairs are underway and the two affected mills are back in production following a week’s interruption to operations. For the group as a whole, sugar production is forecast to be around 2 million tons, which is over 200 000 tons above that achieved last year. Cane production is expected to be about 250 000 tons above last year. The company has taken back ownership of the Umfolozi mill, but discussions regarding its long-term future ownership are continuing.
The sugar factories’ performance in general has been satisfactory, although the Nakambala factory in Zambia has taken time to settle down following the first phase of the expansion, which was commissioned about six weeks later than anticipated. The downstream plants at Sezela and Merebank have continued to perform well with furfural production expected to be about 5% above that of last year.
