UMFOLOZI FEATURE

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U M F O L O Z I S U G A R M I L L

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umfolozi Sugar Mill is owned by a group of four investors comprising a large cane growing company, the largest cane grower in northern KwaZulu-Natal,

an unlisted public company whose shareholders grow sugar cane and a large alcohol producing company.

By Ian Armitage

marvelt h e m I l l I N g

The milling sector of South Africa’s sugar milling and refining industry employs upwards of 7,000 people in 14 sugar mills and at the

companies’ administration offices, which more often than not are in KwaZulu-Natal or Mpumalanga.

Illovo Sugar Ltd and Tongaat Hulett Sugar Ltd own four mills each while Tsb Sugar RSA Ltd owns three mills. Gledhow Sugar Company (pty) Ltd, UCL Company Ltd and Umfolozi Sugar Mill (pty) Ltd own one mill each.

Two of the mills owned by Tsb Sugar RSA Ltd are located in the Mpumalanga province, while the remainder of the mills are located in the KwaZulu-Natal province.

South Africa’s sugar output fell 12.4 percent in 2010/11 to 1.909 million tonnes.

“It is a competitive industry and diversity is the key factor in today’s highly integrated sugar milling operations,” says Dr Adrian Wynne, Umfolozi Sugar Mill (pty) Ltd’s CEO.

As the former industrial affairs director at the South African Canegrowers Association (SACGA), there are few that know more about this industry than Dr Wynne.

It was his knowledge of the industry which first brought him to the attention of those at Umfolozi – a mill owned by a group of four investors comprising a large cane growing company, the largest cane grower in northern KwaZulu-Natal, an unlisted public company whose shareholders grow sugar cane and a large alcohol producing company.

“Until 2009, Umfolozi Mill was part of Illovo,” Dr Wynne explains. “After protracted negotiations with certain other interested groups a consortium consisting of UCOSP Ltd, UVS, Charl Senekal and NCP Alcohols was formed, and on 1st April 2009 the Mill formerly changed hands again, becoming what is now the Umfolozi Sugar Mill (Pty) Ltd. There are effectively two shareholders - GrowerCo holding 75 percent, comprising UCOSP Ltd, UVS, Charl Senekal, and the other 25 percent being held by NCP Alcohols.”

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The Umfolozi Sugar Mill (Pty) Ltd, affectionately called USM, at the start of its first season (2009/10) employed approximately 240 staff with an expected crush of approximately 1,200,000 tons of cane in a 36 week milling season to produce approximately 140,000 tons of sugar.

“How am I finding the challenge of CEO? Enjoyable,” Dr Wynne, who is driving growth within the business, continues. “It was a steep learning curve initially, but it is a great challenge and a very exciting place to be; there are lots of new, projects on the horizon and it is a great place to be. We are starting off from the most basic business model you can imagine and so it is just growth and development and opportunity, which is wonderful; very exciting.”

Building on the work of Tony Charlton, Dr Wynne was quick to praise his predecessor. “He provided a tremendous stabilising influence on the business – he has lots of experience, is mature and a very assertive individual.

“He oversaw the transition into the new entity.”

The former loss leader – which Umfolozi undoubtedly was – has turned a corner and is going from strength to strength.

And the firm has a “number advantages” over other players, as Dr Wynne continues.



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“The South African sugar industry is one of the most cost competitive producers of high-quality sugar in the world,” he says. “Obviously we are governed by the Sugar Act. The Act provides for an Agreement to regulate the affairs of the sugar industry, including those who grow sugarcane and produce sugar and associated sugar products. But, because we are owned by growers, we feel we are at an advantage and are faced with somewhat-less red tape.

“Also the Act is amended from time to time in response to changing circumstances in the industry and we think a change is coming that will be favourable to us.

“Thirdly, there has been a global shortage of sugar and

prices have reached record highs. Locally, because of drought, there has been a shortage of sugar in South Africa. Our intention was to bag sugar and sell it to the local market. From that perspective, the conditions, we couldn’t have asked for a better opportunity to get into local sugar sales. That has been very exciting and we have probably got a bit ahead of expectations.”

Another exciting opportunity lies in generating electricity. Umfolozi Sugar Mill already generates power from cane residue, which it burns to generate power.

“This is a very exciting area. There have been a lot of policy changes at a national government level that is facilitating the possibility of the power we generate being sold into the national grid and we look forward to participating in the renewable energy sector,” Dr Wynne says. “We produce electricity already but it is for our own consumption. The intention is to increase capacity and export the surplus to the national grid.”

Opportunity also lies in ethanol production.

South African company AGZAM announced plans to invest $251 million in a new sugar and ethanol facility earlier this year; the mill that is set to come online in 2013 should produce 28 million litres of ethanol per year in



USM CEO Dr Adrian Wynne

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SYSPRO in partnership with

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addition to 200,000 metric tons of sugar.

“Ethanol production has lots of possibilities for us,” says Dr Wynne. “This is certainly a longer-term issue, where we would be looking at possibly converting sugar streams into ethanol as a renewable energy source, particularly in the motor sector. I think that is still a long way down the track and it depends on where the oil price ends up. If it stays up at the sort of $150 per barrel levels, unlucky, but that starts making production of ethanol

extremely attractive. The general trend is that it will go up and down, but with an upward trend in the future, which will make ethanol production sustainable and attractive in the long-term.

“For ethanol production we would need intensive investment; it is a whole new thing in terms of fermentation tanks and the like. It would need significant investment,” he says.

In five years time, Dr Wynne would like to see Umfolozi exporting “a significant amount” of



electricity into the national grid and would also like to see the firm selling “the majority of our sugar” into the local market.

“Long-term, ethanol production is certainly on the cards,” he concludes.

The South African sugar industry makes an important contribution to the national economy, given its agricultural and industrial investments, foreign exchange earnings, its high employment, and its linkages with major suppliers, support industries and customers. eND

Panoramic view of USM Factory & Complex

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