Sappi’s sale of its Swaziland subsidiary, Usutu Forest Products, this week for R1 billion to a Swazi firm is a step towards controlling the damage wrought by the country’s expulsion from the African Growth and Opportunities Act (Agoa), the US trade initiative.
“The current [paper] mill site is intended to become an industrial factory park to add full value to timber on site whenever possible and produce a reliable supply of quality timber products for diverse international markets,” said Andrew le Roux, the executive director of Montigny Investments, announcing his firm’s acquisition of the forest and factory.
One of Swaziland’s first industrial initiatives, carved out of the hills south of Mbabane in 1949 by the British Commonwealth Development Company, the forest and mill were sold to Sappi in 1990. The operation closed in 2008 after fires destroyed large sections of the 67 000-hectare forest.
Southern Africa represents 24 percent of Sappi’s worldwide sales.
The sale to Montigny Investments included the company town, Bhunya, and a companion workers compound.
“We are very proud to announce that Usutu will be 100 percent Swazi owned for the first time since the inception of the company more than 60 years ago,” said Le Roux.
Although the sale was announced last July, financing details took time to resolve.
“There was widespread local and international interest and appetite for this opportunity and it took time to identify the best strategic partners and financiers,” said Le Roux.
The Usutu operation would allow Montigny Investments, which employs 3 000 workers, to double its workforce.
About 17 000 Swazi workers were expected to lose their jobs as factories, mostly in the textile industry, shut down following the country’s departure from Agoa. The firms were located in Swaziland so that their products could enter the US market duty-free via the trade initiative.
However, the government would not address workers rights and democratic reforms required for Agoa participation.
“Usutu will be boosting its product line with value-added products. If the buyers are South African or regional, there is a chance for success. The doors for international trade seem to be closing because trade benefits are being tied to governance issues not just in the US but the EU,” said Charles Dlamini, an Mbabane economist.
While some commentators viewed Sappi’s sale of Swaziland’s oldest non-mining company as a vote of no-confidence in the economy, Dlamini said Sappi had its own reasons for shedding its subsidiary, including a need for cash to reduce its debt load.
Sappi shares rose 0.20 percent to close at R44.40 on Friday.