Tongaat Plans $19 Million Investment in Zimbabwe

By Ron Derby
Aug. 3 (Bloomberg) -- Tongaat Hulett Ltd., the sugar company part-owned by Anglo American Plc, plans to invest 150 million rand ($19 million) in Zimbabwe after the formation of a coalition government resolved a political standoff.
It’s “night to day when we compare what has been happening this year in Zimbabwe to the last 10 years,” Peter Staude, chief executive officer of the Tongaat, South Africa-based company, said today in a phone interview. The sugar producer will make the investment over three years to help meet a goal of doubling its output of the sweetener in Zimbabwe, he said.
Spending by the sugar company would help to reverse an outflow of foreign investment from Zimbabwe over the last decade. The country formed a coalition government in February, ending a 10-year political impasse. Steel industry leader ArcelorMittal’s South African unit reportedly is interested in taking over state-owned Zimbabwe Iron & Steel Co.
Tongaat, South Africa’s second-biggest sugar company, will produce about 298,000 metric tons of the sweetener in Zimbabwe this year, Staude said. That equates to about half of installed capacity of 600,000 tons, according to the CEO. Zimbabwe is among African countries that qualify for preferential access to the European Union at premium prices, he said.
Profit Jumps
The sugar company also reported a ninefold surge in first- half profit after including its Zimbabwean activities in results. Net income jumped to 2.42 billion rand from 266 million rand a year earlier, Tongaat said today in a stock-exchange statement. Sales gained 24 percent to 3.85 billion rand.
“Increased emphasis on renewable energy” will buoy international sugar prices, while shortages of land and water will also help support prices, said Staude.
Tongaat was unchanged at 98.50 rand in Johannesburg trading. The stock has jumped 55 percent this year, increasing the company’s market value to 10.2 billion rand. That’s almost equal to Illovo Sugar Ltd., the biggest South African sugar producer.
Zimbabwean President Robert Mugabe’s election victories against the MDC party led by Morgan Tsvangirai in 2000, 2002, 2005 and last year were described as marred by violence and irregularities by the U.S. and European Union. Anglo is among companies that have sold Zimbabwean assets, as are U.S. ketchup maker HJ Heinz Co. and U.K. platinum producer Lonmin Plc.
To contact the reporter on this story: Ron Derby in Johannesburg at rderby1@bloomberg.net