“This is the first time growers from a widespread geographic area and all demographic sectors have worked together to tap into the inherent potential that can be unlocked from owning a company which we all rely on for our sustainability, ” said Dave Littley, acting MD of the new consortium, Zululand Agricultural Holdings. To raise the purchase price and initial operating costs, all growers in a 100km radius of the Amatikulu supply region in Mtunzini, KwaZulu-Natal were offered shares in the holding company.
One share was offered for each ton of sugarcane produced over the past five years. With the Amatikulu tonnage averaging 1,5 million tons, some 1,5 million shares were allocated to growers. Littley was responsible for the formation of the holding company and sourcing the funding, a task involving 5 500 small scale growers and more than 100 commercial growers. Assets included in the deal were 15 ridged-drawbar trucks (R1,8 million each) and various movable assets used at the depot. A mutually beneficial long term lease agreement was negotiated with Tongaat Hulett for the use of the depot and office complex.
“The deal also included contracts to transport 360 000t sugarcane and the company picked up contracts for another 100 000t in the first week. Everyone agreed to a new five-year contract and we hope to grow by 15% per year for the next four years,” said Littley. The new contracts encompass loading and offloading times to give a more accurate reflection of true haulage costs.
“If these are improved by the grower or mill, the haulage rate per ton will be dropped. All drivers and management are on a basic market related salary, plus incentive bonuses when targets are met,” he said. The competitive haulage cost, backed by yearly dividends, was only half of the cost saving measures introduced by new management. “If the length of the milling season is improved as a result of co-operation between millers and growers/ hauliers, about R8/t sugarcane delivered to the mill is saved for every week the season is shortened. We will also be pursuing timber haulage contracts during the off season,” Littley said.
Kwanalu president Brian Aitken has bought 20 000 shares in the company. Aitken said the deal marked an important step for growers wanting to work towards value chain enhancement. “Growers want to get involved in the whole value chain, of which transport is one component. By buying the company in a co-operative format, the wheels are in motion to get involved in other forms of sugarcane value adding when the opportunity arises,” Aitken said.
The consortium took over on 6 April. Aitken said an effective management team and board of directors was in place. Unitrans Sugar and Agriculture Division GM Robby Stevenson confirmed the deal but reserved comment.