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ECONOMIC SUSTAINABILITY

Business Approach to Empowerment and Indigenisation

Transformation, equal opportunity and the creation of a diverse employee base remain key performance areas for the SADC geographical region where Tongaat Hulett operates. The company is committed to the development of successful rural communities in the regions that surround its operations and the business will continue to identify how best it can further partner with farmers, communities and governments, in order to achieve this objective. Tongaat Hulett believes that agriculture is the foundation of developing economies. The health of the agricultural sector depends on the sustainability of farming methods. Farming practices must therefore not only protect the long-term productivity of the land, but must also ensure profitable yields and the well-being of farmers and farm workers.

From a South African perspective, the fifth B-BBEE rating audit by AQRate was conducted in 2012, with Tongaat Hulett being categorised as a Level Three Contributor. The drop from Level Two is a result of the second set of five year targets becoming applicable on Employment Equity and Skills Development.

In Zimbabwe, Tongaat Hulett embarked on a comprehensive private farmer rehabilitation programme to increase sugar cane production substantially, with the objective being to rehabilitate 15 880 hectares of private farmer land. There are currently 670 active farmers, who employ some 5 500 people. By the time that phase 1 is completed, there will be 870 farmers employing just under 8 000 people.

B-BBEE Scorecard	Score
Element	2011	2012	2013
Equity Ownership	18,16%	17,34%	18,34%
Management & Control	8,43%	8,43%	8,81%
Employment Equity	11,54%	11,69%	9,15%
Skills Development	10,19%	12,14%	9,99%
Preferential Procurement	18,17%	15,58%	15,17%
Enterprise Development	15,00%	15,00%	15,00%
Socio Economic Development	5,00%	5,00%	5,00%
Total	86,49%	85,18%	81,46%
BEE Level Rating	2	2	3

Data within the table above is sourced from AQRate as per their B-BBEE verification process

In Mozambique, Xinavane estate has a total of 3 520 hectares under sugar cane, for small and medium scale farmers delivering cane to its factory for crushing. The areas are comprised of groups and/or associations of farmers. Prior to the recently completed private grower developments, there have been three long-standing associations with a total of 478 hectares under sugar cane that had been developed under Government-supported donor projects. The Mafambisse private farmer development programme has developed 380 hectares involving 14 farmers.

Preferential Procurement in South Africa

The objective of Preferential Procurement under the Department of Trade and Industry’s current Codes of Good Practice includes the promotion of BEE compliance by all entities and targets for procurement from Exempted Micro Enterprises (EME’s), Qualified Small Enterprises (QSE’s), black-owned and black women-owned enterprises. Furthermore, with enhanced recognition given for Preferential Procurement from value adding suppliers and enterprise development beneficiaries, the procurement of locally produced goods and services is actively supported, to assist in developing sustainable income streams for such new entities.

Tongaat Hulett is committed to supporting suppliers, improving their empowerment credentials and introducing Small to Medium Enterprises (SME’s), black-owned and black women-owned suppliers to the business. The preferential procurement score element was set at 15,17. In respect of the Procurement Scorecard for Tongaat Hulett, and based on the expenditure for the period ending 31 March 2012, out of a total available spend (defined as total procurement spend less spend on parastatals and the importation of goods not locally produced) of R7,650 billion, BEE procurement spend from all suppliers based on BEE procurement recognition levels as a percentage of total measured spend, was R6,044 billion (79 percent).

Spend with companies which are more than 50 percent black owned totaled R252 million, whilst spend with QSE’s or EME’s totaled R1,680 billion. Spend with companies which are more than 30 percent owned by black women was R79 million.

Socio-Economic Development

Socio-Economic Development within the context of Tongaat Hulett operations forms an integral part of the businesses activities, and is closely linked to the company’s overall objective of contributing to the creation of successful rural communities. The business has traditionally focused its SED spend (particularly in the case of Mozambique, South Africa and Zimbabwe) on improving the quality of life of communities that surround company operations and its employees. Tongaat Hulett is now in the process of shifting this focus, to its private farmers. This shift, which is ongoing, will ensure that private farmers receive the support required for them to be sustainable into the future, and includes actions related to unlocking land for sugar cane development and grant funding from Government. The reporting period highlighted the significant contribution that Tongaat Hulett continues to make towards the welfare of private farmers, rural communities that surround company operations and its employees in Zimbabwe, Swaziland and Mozambique. Consequently, some 86 percent of total SED spend was invested in these countries.

During the reporting period, R62,8 million was spent on health and welfare activities, which includes costs associated with the two company managed medical facilities, the Hippo Valley Medical Centre and the Colin Saunders Hospital in Triangle, Zimbabwe. These facilities provide both preventative and curative health services to the surrounding communities and, on average, some 200 000 patients are seen on an annual basis. Environmental health programmes to reduce the incidence of malaria and bilharzia through routine spraying campaigns were undertaken in the communities that surround company operations. The business continues to ensure that safe drinking water is available for local communities and the provision of refuse collection services is undertaken by Tongaat Hulett.

Numerous schools are located inand around the operations and some R9,6 million was spent on education, which included costs for repairs to schools, stationery and education support. The Zimbabwe operations provide support for 21 schools, with an enrolment of just under 12 000 pupils, the Swaziland operation supports two schools, while the Xinavane and Mafambisse operations provide support to the local schools that are in close proximity to company operations.

Tongaat Hulett regards its Socio-Economic Development initiatives as an important component to ensuring the sustainability of the private farmers that supply its operations. In addition, these initiatives continue to support the business’s objective of rural development in the communities that surround company operations. The total SED spend for the 12 months to 31 March 2013, including the cost of company sponsored occupational and primary health care services, was R142,7 million. This was above the company’s commitment to allocate one percent of annual headline earnings to SED on a company wide basis annually.

Land under cane

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