A six-year service level agreement between Tongaat Hulett and the Small Enterprise Finance Agency (sefa), which draws to a close this month, has benefitted 68 growers and contractors, with 652 jobs created in KwaZulu-Natal.
The service level agreement, which was signed in 2014 between Tongaat and sefa, was based on a capital commitment of R50-million by sefa in the form of concessionary loan finance to Tongaat Hulett’s black growers and contractors.
Tongaat Hulett Sugar Corporate Affairs Director Nkonzo Mhlongo said: “Tongaat Hulett adopted a hands-on approach to implementing the agreement. We worked with loan applicants to help collate the necessary documentation to ensure they had the best chance of success when applications were submitted to the Credit Committee.”
Mhlongo said that apart from the assistance given to growers and the new jobs created, the long-term nature of the loans had resulted in a total of 998 jobs being maintained by this universe of growers and contractors involved in the scheme.
“This is most heartening, and we are delighted to have been able to contribute to the creation and maintenance of these jobs, as well as working with and supporting emerging growers and contractors,” she said.
Over the term of the facility, a total of R39,5-million was disbursed to black growers and contractors. This was largely due to the fact that some of the repaid funds were lent to other applicants. The first year of the agreement saw the highest number of loans approved and paid out, totaling R20 million which is 53% of the total amount of loans disbursed. Loans slowed down in 2015/16 and 2016/17 due to the two-year drought that affected KZN.
The loans were used to accelerate the farm expansion programme by the growers, as well as to buy much-needed equipment including irrigation equipment.
Jack Govender is one of the growers that was advanced funding under the agreement between Tongaat Hulett and sefa. Govender is an owner of the Clifton Farm cc under the Amatikulu mill area. From a young age, he enjoyed growing plants and reaping the fruits thereafter. Govender is not only a sugarcane farmer, he also operates as a harvesting contractor and a haulier responsible for 34 000 tons of sugarcane.
Govender said he was introduced to sefa in 2017/18 through Tongaat Hulett and was attracted to the facility because the approval process was much quicker compared to other banks.
“I was expected to submit financials and furnish historical information on the farm performance. R800 000 was advanced on first application and another R800 000 was advanced on second application. My loan was approved on condition that I continued to deliver sugarcane rateably (in equal proportions) to my nearest mill; made repayment arrangements and allowed sefa management to conduct periodic farm visits as part of their monitoring and evaluation programme.”
Govender said that the advanced loans were used to purchase equipment including a tractor and a crawler to assist with the land preparation on the 320-hectare farm. It was also used to progress the maintenance of the roots and the growing shoot to allow the plants to recover and produce a fresh crop on approximately 300 hectares which ensured a healthy crop. Through sefa, a total of 25 jobs were created and the farm’s production increased.
Rodney Mbuyazi is another grower who secured loan finance through sefa in 2014/15. Mbuyazi is a land reform grower that acquired his irrigated farm in 2007 through the PLAS programme. The name of his 120-hectare property is Concur Farm, and it is located in the Heatonville area under the King Cetshwayo district municipality. A total of 70 hectares is dedicated towards sugarcane development and the balance of the farm is used to promote animal production.
Mbuyazi said that operational constraints prompted him to apply for the loan.
“Concur Farm is located in an irrigated area but there was no irrigation on the farm itself. I had tried to secure finance through the normal banks but after submitting many documents, my applications had been rejected. sefa’s loan application process was simpler. Tongaat Hulett already had a working relationship with sefa.”
Mbuyazi said Tongaat management had read the sefa’s application forms and they were able to explain the information in a manner that allowed him to make a decision to progress with the application process.
An amount of R899 000 was advanced to Mbuyazi to install the irrigation piping, plant new areas and maintain the roots and the growing shoot to allow the plants to recover and produce a fresh crop. Through sefa funding, Mbuyazi was able to create employment opportunities during the installation of the pipes where 20 local people were employed. Following the advancement of the loan, Tongaat Hulett management continued to provide mentorship support. Mbuyazi is still servicing his loan.
Khumbulani Mthethwa is also one of the 68 growers that secured loan finance in 2014/15. Mthethwa owns two farms: a 271 hectare farm and a 119 hectare farm under Mvelenhle Farming. Both farms are located under Ilembe district municipality within the Amatikulu mill area. Besides farming for his own account, Mthethwa is also a harvesting contractor harvesting approximately 270 000 tons of sugarcane for a total of 30 cooperatives in the communal areas.
Mthethwa bought his 271 hectare farm in 2011 with the assistance of Standard Bank soon after the 2010 drought. Due to climatic conditions at the time, most banks were reluctant to provide additional finance and farmers were struggling to keep their heads above water. Mthethwa continued to work on his farm for the next three years despite challenging conditions, while approaching a wide range of institutions requesting support.
“In 2014, I secured 50% grant funding from the Black Business Supplier Development Programme managed by the Department of Small Business Development within the Department of Trade, Industry and Competition (DTIC). I had to raise an additional 50% in order to fulfil the grant funding conditions.
“It was during this time that I was introduced to sefa, which was offering prime minus 2.15% whereas the normal banking institutions were offering prime plus 2%. I secured R1.6 million through sefa,” said Mthethwa.
As part of the application process, Mthethwa had been expected to submit a business plan, tax clearance and information confirming that he would be able to deliver sugarcane rateably to his nearest mill. The funds were used to purchase tractors, trailers and other farming implements for the 271 hectare farm.
With various sources of funding, including from the Department of Rural Development and Land Reform grant funding through the Recapitalisation and Development Programme (RECAP), Mthethwa was able to employ between 80 – 120 seasonals and he has since been able to retain 15 permanent staff members. The RECAP funding had been approved in 2013 late in the season, after the planting season. It was therefore used in 2014.
“The repayment period had been 3 years. However, this period was subsequently extended as I had been hard hit by the 2014/15 drought said Mthethwa. The extension would not have been possible without the involvement of Tongaat Hulett. TH management appreciates the complex environment within which growers operate. Management was therefore able to unpack the impact of drought. As such was repayment period had been extended until the end of 2017,” he said.
