DURBAN - Sugar producer Tongaat Hulett confirmed on Thursday that retrenchment letters had been issued to their employees as part of a restructuring process which will affect about 5000 employees.
Tongaat Hulett said yesterday that the exact number of those affected would only be known further down the line.
“In the face of significant business challenges, Tongaat Hulett can confirm that the company is looking to reduce its headcount as part of a broader restructuring of the business, and has issued Section 189 letters to employees,” said the company.
Permanent and temporary employees across Tongaat Hulett’s operations in six Southern African Development Community countries would be affected.
The aim of the review is to ensure that Tongaat has the right skills and experience to take advantage of its new operating strategy.
“The strategy seeks to address its debt burden, streamline operations and fundamentally change its business model.” The company said the restructuring had come after the Tongaat board in February mandated new chief executive Gavin Hudson and his team to conduct a full financial review to stabilise the business, together with a strategic review.
The firm said Hudson had found 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and that the business simply had not been able to adapt quickly enough to these changes with a business model outdated for a new economy.
“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 long term; operating strategically, sustainably, efficiently and profitably,” said Hudson.
He said it was critical to cut costs while increasing efficiencies, and the company would strengthen its corporate governance and leadership team.
The sugar industry is facing serious challenges. Earlier this year, the SA Canegrowers Association met with the Trade and Industry Portfolio Committee to raise concerns about the crisis in the sugar industry.
The association said at the time that drought in KwaZulu-Natal, plunging sugar prices, weak protection against cheap imports and the sugar tax implemented in April last year were some of the reasons the industry was in decline.
Independent economist Bonke Dumisa said sugar becoming cheaper in other countries was affecting sugar exports from South Africa.
Dumisa also said job losses could have a knock-on effect if employees living in compounds and company- provided accommodation lost their homes if they were retrenched.
“Hopefully, there are strategic decisions made to make sure those people are protected,” said Dumisa.
He said that while affected employees in managerial positions might find other employment, low-level workers, especially labourers, would find it difficult.
“I hope that Tongaat Hulett with its very long track record of taking care of its employees will try their best to make sure that they minimise the extent of the impact on their employees.”