Cost management a top priority at Gledhow

Effective cost management and innovation are now at the top of the agenda at the Gledhow Sugar Mill north of Durban as South Africa’s sugar industry undergoes transition and transformation unlike any seen before in its 100-year history.

Executive Board Vice-Chairman at the mill, Paul de Robillard said the most critical question of any aspect of the milling operation was now to constantly question its value.

“Anything that has a cost that cannot be justified has to be reviewed and cut if necessary.  The sugar industry has been transforming by sheer necessity for a long time, but now we are an industry in transition. And yes, trends are on a downward trajectory, particularly as we face circumstances such as changing weather patterns beyond our control and now the high level of sugar imports that are pouring into the country. We have to re-think our strategies in what is a high overhead industry and challenging business environment,” de Robillard said.

Sugarcane has been milled at Gledhow since 1879 with many modifications to the facility since then.

In 1912 a new and much larger mill was built with a refinery added in 1958 and in 1988 a conditioning tower was built to improve the “keeping quality” of the refined sugar.

The mill was originally owned by some of the founders of KwaZulu-Natal’s sugar industry namely Sir Charles George Smith, Lewis Reynolds, William Pearce and the Crookes brothers, namely George, Fred and John, before finally being bought out by the sugar marketing and distribution company CG Smith in 1975. CG Smith changed its name to Illovo Sugar Limited in 1994 (now named Illovo Sugar Africa since it was bought out by former major shareholder Associated British Foods in 2016). In 2004 the mill was sold to sugarcane farmer and businessman, Patrick Sokhela’s family trust, in what was considered a groundbreaking black economic empowerment deal.

In 2009 Illovo Sugar again became a shareholder (30%) with the paper and pulp giant, Sappi (10%) and growers supplying to the mill gaining 25.1%. The Sokhela’s family trust retained 34.9%.

SEVERE CHALLENGES BUT NOT THE WORST

Looking back over the mill’s history de Robillard – who has worked in the industry for 37 years – is quick to point out that while the current challenges facing the industry are severe, they are not the worst in its history.

“We had the challenges of the 1980s when there was an embargo on our sugar. Two sugar mills were about to close and the drought was really bad then. And it was in 1978 that the impact of Eldana became really significant in the industry. Under certain weather and agronomic conditions the Eldana pest can damage up to R900 million worth of sugarcane in one season. Recently we have seen the emergence of another pest, the Longhorn Beetle. That is a deep concern. But Gledhow under its new partnership has been going strong for 8 years and I think we can put that down to the fact we are a small and innovative company. When we need to make decisions we can make them quickly. We are the only sugar mill supplied with cane mainly from black growers. That is a first in South Africa, and we are very proud of that.  Also we have blue chip customers who have been loyal to us since 2009 and despite the flood of sugar imports into the country, that has to say something about the quality of the sugar we produce,” he said.

Another interesting trend according to de Robillard was the migration of small scale growers to medium scale through the government’s land reform programme. “This is a significant trend as they are now becoming commercial growers. I believe their success can be directly attributed to the aggressive support programmes by the sugar industry to assist this sector. What the sugar industry has also done is convert many farmers who were growing sugarcane on a one or two-acre plot to form co-operatives resulting in sustainable economies of scale,” he said.

PRAGMATIC POLICIES NEEDED FOR THE INDUSTRY

And while the good rains towards the end of last year and early this year seemed to auger well for this season’s harvest, a long dry spell recently has meant a decrease of about 7% of the original target of 1 375 000 tons of cane through the mill by the close of the season in December. That target, however, is still better than the previous three years during the country’s crippling drought.

A further challenge, according to de Robillard was promoting better relationships between the South African government, business and the sugar industry. “If we are to tackle the level of sugar imports – over  400 000 tons of sugar has been imported into South Africa over the past 12 months – we have to establish and maintain an excellent tri-partite relationship that is committed to pragmatic policies aimed at protecting the agriculture sector,” he said.

The Gledhow sugar mill supplies mainly to the country’s industrial market a strategy, which de Robillard said, had worked in the mill’s favour. “Also the quality of the sugar we produce here is very high and that has stood us in good stead.”

And while the cogeneration of electricity from the country’s sugar mills was a debate that seemed stalled, de Robillard who also serves on the South African Sugar Association board, said the mill’s partnership with the Sappi mill – which was just a stone’s throw from them – was critical as they were able to supply them all the bagasse they needed.

Finally the ongoing discussion at government level on the introduction of a sugar tax on sugary drinks has the industry deeply concerned.  “The uncertainty over the introduction of the sugar tax is a big deal. We are watching those discussions very closely as there is no doubt if the tax is imposed it will have a huge impact on our mill and other stakeholders within the industry,” he said.

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