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May 31, 2002

Sugar group consolidates African assets

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© Reuse this South Africa's largest sugar producer the Illovo Sugar group, has completed its rehabilitation of the Maragra sugar mill and agricultural estates in Mozambique, a programme which began when the company acquired a 50% stake in 1997.

The programme also includes the restoration of the damage to the agricultural estate in Mozambique following the floods of February 2000. In addition to the complete rehabilitation of the agricultural estates and the sugar factory, supporting infrastructure has also been redeveloped, including roads, administrative buildings, housing villages, and other social infrastructure.

This has been to the benefit of not only the sugar-producing operation, but also to the surrounding communities which have undergone significant upliftment since the rehabilitation programme began.

The group operates in South Africa and countries including Swaziland, Malawi, Zambia, Mozambique, Tanzania and the US. It produces about two-million tons at 15 sugar factories and has extensive cane estates, which produce more than five-million tons of sugar-cane a year. In general, the group has spent the past 18-months consolidating its operations, ensuring that it is achieving the best return from its existing assets. In Tanzania, the group's operation at Kilomboro has just competed its rehabilitation programme with the production of 73 000 t of sugar, a substantial increase from the less than 30 000 t that were produced before Illovo became involved in the operation in 1998.

Production this year is expected to increase to almost 100 000 t. Swaziland's production for the 2001/2 season was about 180 000 t, while Malawi produced 215 000 t, Zambia 200 000 t, Mozambique 15 000 t, and South Africa recorded a 1 111 000 t production.

In the US, the group is producing sugar from beet at the Monitor Sugar Company, which produced 162 000 t of sugar last season. The factory operates a successful molasses desugarisation plant, which exhausts any remaining sugar content from the molasses, a by-product of the sugar-manufacturing process, thereby enhancing the yearly output of sugar. The operation does not grow its own beets, but signs up local growers every year to provide the mill with its requirements. Monitor produces refined sugar mainly for the local markets in Michigan, with 75% of output directed towards the industrial market and the remainder sold to consumer markets.

The group supplies sugar and downstream products to a considerable range of domestic, regional and export markets in more than 90 countries across the globe. The Southern African Customs Union (SACU) market is important for both the group's South African and Swaziland operations. In the 2001/2 season, South African industry sales into SACU amounted to about 1,6-million tons, of which 81% was refined and 19% was brown.

Of this total, South Africa supplied 1,3-million tons including sugar produced by Illovo, Swaziland 300 000 t and Zimbabwe, and others 74 000 t.

The immediate outcome of the recently concluded Southern African Development Community (SADC) sugar co-operation agreement will be to allow market access into SACU by each SADC net surplus producer on a non-reciprocal basis. This will be based on actual SACU market growth which, in the first year, is expected to be 45 000 t of sugar. In addition, duty-free access into the SACU sugar market for 20 000 t of sugar a year will be available to the non-SACU SADC surplus sugar-producing member states. The total access available to non-SACU members is estimated to be approximately 29 000 t in the 2001/2 season. In the US, Monitor Sugar supplied its entire production to the domestic market. In Malawi and Zambia, Illovo is the primary supplier of sugar to the domestic market with significant sales of sugar to local markets in Swaziland, Tanzania and Mozambique.

In relation to sugar exports, the group has access to preferential markets in Europe and the US, which are supplied by producers with export quotas to these countries at a marked premium to the world free-market price. Downstream production includes furfuryl, furfuryl alcohol, diacetyl, acetoin and 2.3-Pentanedione produced at the Sezela complex, and ethyl alcohol at Merebank and Glendale. Lactulose is also produced at the Merebank plant. While the group's range of downstream products is primarily aimed at export markets, the Merebank and Glendale distilleries remained material suppliers of ethyl alcohol to the South African liquor, pharmaceutical and industrial chemical industries. Relatively small volumes of furfural and its derivatives were also sold domestically. The by-products of the Monitor Sugar factory, which include beet pulp, betaine and concentrated molasses solids, were sold domestically and, in the case of beet pulp, into Canada.

It is focused on its core activities of cane growing, sugar manufacturing and the production of downstream products, and any new service, projects, or technologies are aimed at the group being a global, world-class, low-cost sugar and downstream products company.
Edited by: nkolola halwindi
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