Tongaat Hulett says its Zimbabwean operations – Hippo Valley Estates and Triangle Limited – have entered a more stable phase, although flooding in Mozambique and increased sugar imports continue to hamper the group’s recovery across the region.
The group’s finance director, Robert Aitken, said the improved position in Zimbabwe was in line with efforts by the new controlling shareholder, Vision Group, to restore stability across Tongaat’s regional operations.
Speaking on the sidelines of Hippo Valley Estates’ recent annual general meeting, Aitken said both Hippo Valley and Triangle were showing signs of greater operational stability.
“You will see from the results here with Hippo Valley and similar with our other Zimbabwe business Triangle that we have got a lot more stability in that place,” he said.
Tongaat’s Zimbabwe units operate as separate legal entities with their own management and financial structures, despite the financial difficulties affecting the group’s South African parent.
The Zimbabwean operations have therefore remained largely insulated from the business rescue proceedings involving Tongaat in South Africa.
Tongaat remains under business rescue after an agreement reached between the Industrial Development Corporation and the Vision Consortium prevented the company’s liquidation.
Vision, which took over lenders’ claims of up to R8 billion through a partial debt-for-equity arrangement, has said it intends to preserve and develop Tongaat’s operations in Zimbabwe, Mozambique and Botswana.
In Zimbabwe, favourable water levels and adequate irrigation capacity at Hippo Valley are expected to support sugar production for at least the next three years, reducing the potential impact of adverse weather conditions, including forecasts of a Super El Niño this year.
The operating environment has also benefited from greater currency stability and other economic reforms implemented in Zimbabwe.
Mozambique, however, has faced a more difficult start to the year after severe flooding disrupted the group’s operations.
“Unfortunately, Mozambique has been set back by those large floods that they had at the beginning of this year. So, they have been really affected,” Aitken said.
Tongaat operates two sugar estates and mills in Mozambique, which together have annual production capacity of about 340 000 tonnes.
Zimbabwe remains the group’s largest sugar-producing market in the region, with Triangle and Hippo Valley having combined annual production capacity of about 640 000 tonnes.