SUSTAINABILITY

economic: building rural economies

Sustainability 12

how we help to build sustainable agricultural and rural economies

Sustainability 13

Economic Case Study

7 December 2016

Supporting development in Africa

Supporting development in Africa

Objective

Illovo operates in six countries in southern Africa. It is the continent’s largest sugar producer and a significant manufacturer of downstream products. Illovo owns 270 square miles of agricultural land under cane, when combined with the 703 square miles owned by private growers, supply over 1.7 million tonnes of sugar annually to Illovo’s 11 cane sugar plants.

What we did

Illovo produces a range of co-products ‘downstream’ in the sugar making process, including furfural, an important renewable chemical feedstock, and ethyl alcohol. The majority of these co-products are made at plants in South Africa and Tanzania that are sold into high-value niche markets internationally. Illovo’s plants also utilise milled cane stalks (bagasse) as a bio-renewable fuel to co-generate enough electricity to meet around 90% of their own power requirements and, in power-deficit countries such as Swaziland, they sell surplus power into the national grid.

Our business in Mazabuka, Zambia, exemplifies the huge scale of Illovo group’s operations and the important role it plays in economic development. Located within 108 square miles of agricultural land is the continent’s largest cane sugar plant, providing employment within the factory and also in marketing and administration functions. But it doesn’t stop there. Villages have been built for staff housing; hospital and clinic services are provided on-site for 6,500 employees and their family members, together with schools, community centres and churches; and the business also provides electricity, drinking water and refuse removal services.

Illovo’s key markets are consumers and industrial customers in its own countries of operation as well as in neighbouring regional African markets, employing an extensive network of distribution and logistics channels. Illovo’s continuing strategy of securing increased growth opportunities, in local and regional sugar outlets, reduces its exposure to lower-priced EU markets. This is evidenced by this year’s commissioning of Zambia Sugar’s most recent expansion project which more than doubles annual refined sugar production capacity to around 100,000 tonnes.

Results

As a major private investor in Africa, Illovo operates and markets its products in countries that face considerable challenges in the form of poverty, unemployment, inequality and disease – the United Nations classifies Malawi, Mozambique, Zambia and Tanzania as being among the world’s least developed countries. By providing significant employment, accommodation, healthcare, educational assistance and basic services to rural communities, the group has a significant positive impact on these economies.

In an extensive and independent socio-economic impact study released in 2014, it was shown that Illovo contributed an estimated ZAR 18.5bn (£894.6 million) in 2012/13 to African economies, including direct, indirect and induced economic impacts.

Illovo works closely with local indigenous famers through its established cane grower development programmes. These programmes improve the indigenous farmer participation in the respective country’s mainstream economies and to benefit both the farmers and the company by improving cane yields and quality, enabling the sugar cane growers to boost their income while ensuring sustainable sugar cane supply to the sugar mills. The types of support provided to the sugar cane growers include:

Type of sugar cane grower support

Description

Seed cane incentives

Funds for planting on new, uncultivated land.

Transport subsidies

Supplementary payments to growers located more than 50-60 km from Illovo’s mills.

Small-scale grower development costs

Supplementary payments to small growers for purchasing fuel and other inputs that compensate for lack of bargaining power.

Other supplementary payment

Amounts paid to outgrowers to guarantee a steady supply of cane to Illovo’s mills.

Cane ripener subsidies

Subsidies for chemical ripeners which accelerate cane maturity and increase sucrose content.

Training schemes

Extension service, training and mentorship schemes for outgrowers, including technical assistance and business management support.

Guaranteed purchases

Illovo signs cane supply agreements with grower associations and smallholder schemes, through which it guarantees the price and quantity of sugar cane which it buys.

Access to inputs

Illovo provides seed, fertilisers and other inputs to smallholders to allow them to benefit from bulk discounts.

Access to finance

Illovo helps smallholders gain access to finance, including coordinating with local banks and in some cases providing loans directly to farmers. It has assisted with identifying and supporting donor funding opportunities.

Access to infrastructure

Growers often benefit from infrastructure funded by Illovo, including roads and irrigation.  They may also have access to schools and hospitals opened by Illovo, usually for free.

Support small scale growers with their own food security

Growers grow food crops on farms adjacent to cane and access water for irrigation.  In some cases the growing of maize by Illovo also complements governments’ food security initiatives.

In 2015/16 Illovo spent R66 million (£3.19 million) on grower schemes across the group, representing a mutually beneficial collaborative effort which not only improves the ability of the farmers to grow their own cane, but also contributes to Illovo’s raw material supply.

Notes to editors:

More information on Illovo’s work can be found at: https://www.illovosugar.co.za/Socio-Economic-Impact

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