Maputo — The Mozambican government's Institute for the Management of State Holdings (IGEPE) is negotiating with various partners to obtain finance to prevent the paralysis of two of the country's sugar mills, according to the Minister of Industry and Trade, Ragendra de Sousa, cited in the Friday issue of the Maputo daily "Noticias".
The foreign investor in the sugar companies at Xinavane, in Maputo province, and Mafambisse in Sofala, the South African company Tongaat Hulett, is pulling out due to serious financial difficulties.
Sousa said the problems are the result of mismanagement. "We are aware of the situation and we are talking with the interested parties so that we don't stop producing sugar", he added. "Unfortunately, the person responsible for the mismanagement isn't even a Mozambican".
"IGEPE s negotiating the financial part", said the Minister, "and we are deeply involved in looking for new managers so that the industries do not stop".
Tongaat Hulett entered the Mozambican sugar market in 1998. It holds 85 per cent of the shares in the Mafambisse sugar company, and 88 per cent in the Xinavane company. The Mozambican government, through IGEPE, holds the rest of the shares.
Xinavane is the largest of Mozambique's four sugar companies, and in 2017 it was responsible for 50.4 per cent of all sugar produced in the country.
The export market for Mozambican sugar suffered a severe blow when the European Union reduced its purchased by 83 per cent, from 112,890 tonnes in 2016 to 18,300 tonnes in 2017. This was due to an EU decision to reduce imports of bulk, unrefined sugar.
The collapse of the sugar companies would be a serious blow, since they provide employment for 31,000 Mozambican workers.
Tongaat Hulett blames the depressed state of the sugar market for its problems. In South Africa, hundreds of Tongaat Hulett workers are reported to be taking voluntary redundancy packages, and last month the company requested the suspension of the listing of Tongaat Hulett shares on the Johannesburg Stock Exchange.
The same happened on the London stock exchange, essentially because the Tongaat Hulett board had admitted that its 2018 financial results are unreliable. The company's equity (the value of the business after liabilities) in its 2018 financial results had been overstated by between 3.5 billion and 4.5 billion rands (between 250 and 320 million US dollars).
This puts the company's auditors, Deloitte, in a delicate situation, and the South African Independent Regulatory Board for Auditors (IRBA) has begun an investigation into Deloitte's work.
The future for Tongaat Hulett could be bleak. Its current market capitalisation is 2.2 billion rands, while total liabilities amount to 14.6 billion rands.