The sugar and property giant is the largest employer on the lower North Coast and one of the largest in the province.
An estimated 5 000 workers are set to lose their jobs as South African agriculture and property giant Tongaat Hulett restructures its business, North Coast Courier reports.
The beleaguered company would not confirm the actual number of retrenchments, but informed sources said the workforce totalling 30 000 would be cut by about 16 per cent, or 5 000 jobs.
The company is the largest employer on the lower North Coast and one of the largest in the province.
Recently appointed CEO Gavin Hudson initiated a comprehensive assessment of Tongaat’s finances by accounting firm Price Waterhouse Coopers amid reports of financial anomalies which saw the company’s value drop to the lowest level in two decades.
The share price has fallen from around R80 last August to R20.16 this week.
The company’s problems have been blamed on its rapid entry into the land conversion and development sector.
Since the start of this year, the property market has stagnated in terms of demand and investment which has dented revenues for the company.
The 126-year-old sugar company has also faced significant business challenges and according to a statement released to the media this week its new operating strategy hopes to address its debt burden, streamline its operations and fundamentally change its business model.
Tongaat’s spokesperson, Melanie Clarkson, said this comes after the Tongaat board in February mandated Hudson and his team to conduct a full financial review to stabilise the business.
Hudson said that the company’s operating environment had changed almost beyond recognition and that the business simply had not been able to adapt quickly enough to these changes with a business model outdated for a new economy. This, in turn, meant a comprehensive rethink of the company’s business strategy in the immediate future.
An estimated 5 000 people will be left without work. Photo: Stock image.
“We have a burning platform and an opportunity to renew our business model. Returning the business to where it should be in the medium to longer term – operating strategically, sustainably, efficiently and profitably – will require a fundamental restructuring of the business. We will concentrate on our strengths, and closely review or move away from business practices where we are not strong.
“Critically, we need to cut our costs while increasing our efficiencies. We have moved to zero-based budgeting to focus on the things we really need to operate optimally and are in the process of streamlining our operations to be more efficient,” said Hudson.
Apart from reducing its headcount, the company will also be strengthening its corporate governance and leadership team.
Industry experts have claimed that Tongaat has been investing too much money into the sugar business while generous remunerations to its top executives have not helped its cause.
Last year’s CEO, Peter Staude, took home R16,7 million including a R6.6 million bonus.
Sugar experts have also claimed that Tongaat only produced 1.17mt of sugar last year, nearly the same level it was producing in 2012.
The deluge of sugar imports including distorted subsidies that have encouraged other countries to produce too much sugar has seen SA sugar prices fall.
According to the International Sugar Association, sugar prices have fallen from nearly US$0.24 /lb in October 2016 to 0.13/lb today.
Local producers get US$0.16/lb.
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