NEW investors in South African agro-industrial giant, Tongaat Hulett Limited, have unveiled an expansive strategy to inject millions of dollars into power generation and ethanol production in Zimbabwe, signalling a significant diversification move for the company.
The announcement comes following the recent approval of the firm’s business rescuer plan (BRP) by creditors, marking a crucial step in Tongaat Hulett’s journey to stability.
The agro-industrial firm, deeply entrenched in sugarcane farming and milling across regional markets, including Zimbabwe, stands possibly as the country's second-largest employer after the government.
In an interview with businessdigest, Rob Bessinger, representing Vision Group, the consortium executing the BRP, emphasised the importance of bringing stability to Tongaat, a move deemed critical to preserving up to 15 000 jobs in the country.
As part of the BRP, Vision is set to acquire claims against Tongaat valued at ZAR8 billion (approximately US$419,92 million), with ZAR4,1 billion (US$215,21 million) converting into equity.
Bessinger highlighted the consortium’s determination to contribute to addressing Zimbabwe’s foreign currency crisis, a factor exacerbating the country’s longstanding economic challenges.
“We are also looking at diversifying and going into power generation,” Bessinger affirmed. “As we all know, power generation is key as we go on the journey we are going in Africa. This is probably the best way to put it as the push towards power generation is part of a broader and phased plan to upgrade the mills and diversify revenue streams.”
He outlined a phased plan to upgrade mills and diversify revenue streams, focusing on enhancing boiler systems to provide additional steam and bagasse — the fibrous material leftover from crushing sugarcane.
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The excess steam and bagasse will serve as feedstock for high-efficiency co-generation, a key element in the consortium’s strategy.
Bessinger emphasised the urgency to stabilise the business both operationally and financially, while concurrently upgrading boiler systems to high-pressure for improved efficiency.
“Vision’s most immediate concern is to stabilise the business, both operationally and financially,” Bessinger said.
“In parallel, we plan to start a process of upgrading boiler systems so that they provide additional steam as well as bagasse. This excess steam and bagasse will then serve as the feedstock for high-efficiency co-generation.”
He said collaborating with Pakistan’s Almoiz Group, known for its expertise in energy projects, Tongaat aimed to leverage their experience in high-efficiency co-generation systems for capacity-building in power exports.
Almoiz’s involvement is expected to play a pivotal role in enhancing Tongaat’s mills and driving the power generation programme.
“Almoiz operates three high-efficiency co-generation systems and their experience in building and operating such co-generation plants will be invaluable in building capacity for power exports,” Bessinger said. “We plan to significantly improve the efficiency of Tongaat’s mills by upgrading the boiler systems to high-pressure. This is an area where a Vision member, Almoiz, has extensive experience.”
The strategic partnership aims to replicate the efficiency demonstrated by Almoiz’s operations, setting the stage for Tongaat’s two-year plan to stabilise, restructure and embark on a diversified trajectory.
Tongaat’s ambitious investment plan underscores its commitment to sustainable growth, positioning the firm to play a pivotal role in Zimbabwe’s economic landscape while contributing to the broader African journey toward power generation and diversified revenue streams.
“It does not happen overnight, but we have to spend time on the plan for the next two years to stabilise and restructure to better efficiencies and once we do that then we start to diversify,” Bessinger said.
