Tongaat Hulett Developments: Creating a brighter future

Source: Construction Digital

Date :01/09/2008 14:38:13

Managing the land assets of one of South Africa’s biggest agriprocessing businesses is a tough task, especially if the group’s goal is to encourage economic growth.

Written by Ian Armitage and Produced by Nicholas Davies

JSE- and LSE-listed Tongaat Hulett is an agriprocessing business, which includes the integrated components of land management, property development and agriculture.

Formed in 1982, it has regularly demonstrated the ability to transform itself and capitalise on opportunities in changing business environments.

The firm has considerable expertise in sugar and starch production, as well as in downstream agricultural products, bio-fuel production and electricity co-generation.

You might be wondering why it has such a broad portfolio. Well, quite simply, it has recognised competition for alternative land usages is increasing rapidly and wants to ensure it is able to optimise the value of all the land it owns.

Indeed, Tongaat Hulett balances the operational requirement for cane supplies to its sugar operations with the transition to property development and is now well positioned to benefit from the changing world of agriculture/agriprocessing and the increasing demand for land.

“It is our job to manage those land assets and assist in property development,” says Bongani Gumede (pictured), Director of Tongaat Hulett Developments (THDev), the group’s land and property development arm. “We are, in fact, an operation of Tongaat Hulett and should not be conceived as a stand alone business.”

THDev’s goal is to ‘continue creating the most sought after quality of life environments in Southern Africa’. It does this, according to Gumede, through creating sustainable developments of international standing – a noble quest indeed.

“We aim to drive development and economic growth and want to create the quality of life we believe southern Africans deserve,” he says. “That means we want to develop employment opportunities through our land development, and generally boost the quality of life.”

It comes as little surprise that its values encompass honesty, integrity, commitment, respect and trust. “We deliver on our promises,” says Gumede. “We are primarily a land-use optimising organisation and want people to get the most out of each of our developments.

THDev, it seems, is a dynamic, growing, results orientated business, which is committed to building a brighter future.

INCREASING INVOLVEMENT

Following its restructuring, Tongaat Hulett is increasing its involvement in agriculture – a sector which is growing as a result of more equitable trade regimes and the emerging renewable energy landscape.

“Opportunities lie in the continued growth and demand for property,” says Gumede. “As a result, not withstanding the slump in the property sector, we still enjoy a good business.”

At present, the business environment for THDev is somewhat difficult, although not critical. Gumede describes it as a period of “winter”, saying the collapse of the US real estate market and its ripple effects on the banking sector “have impacted the inflationary environment generally”. This, in turn, is putting more pressure on disposable income and as a result property developers are looking at consolidation rather than growth. Even Africa it seems is being affected by the US subprime crisis.

“We are a business that thrives on growth, rather than consolidation, so we are seeing less sales as people consolidate what they have,” explains Gumede. “But we are still in a strong market because of our diversified portfolios. We are seeing a slump in residential real estate but we are still seeing a strong demand for commercial and industrial land.

It is impacting us in one portfolio, rather than across the board.”

TRANSFORM AND REACT

So, what’s the secret to Tongaat’s longevity and continued success? “I think it comes down to our ability to transform and react,” says Gumede. “We cover everything from sugar and starch to land management, property development and agriculture. Not too many organisations have that type of profile and foothold anywhere in the world. As a result we are able to realise value right the way through the chain, rather than in one segment of the chain.”

Tongaat Hulett has unquestionably established itself as a leading large-scale agriprocessing business, with its base firmly established in southern Africa. “Demand for food products is increasing worldwide, renewable energy has introduced a new dimension to agriculture and agricultural trade regimes are changing, with Africa and the European Union moving closer as a trade bloc,” says Gumede. “Naturally, the group is excited by these developments and our challenge is to keep up with that and continue to find opportunities for expansion and growth.”

A NEW VISION

There is no doubt that the most significant event of the last year is the firm’s transformation from a conglomerate to an integrated agriprocessing company. “We are now listed on both the JSE and LSE and have been able to allocate 25 percent equity to blacks,” explains Gumede. “The biggest beneficiaries of our new structure are definitely our employees, and that is helping to ensure the company becomes more attractive.

“The other beneficiaries are the communities around areas where we are doing business,” he continues. “We offer communities around our agricultural operations, which are largely poorer communities, equity participation, and are committed to the uplifting of communities surrounding our land developments. It is very well received and a valuable economic participation for them.”

Tongaat Hulett views transformation as vital and does all it can to ensure the success of local communities. “Tongaat Hulett has given so much, and we will continue to partner with these communities to create even more value,” adds Gumede.

Lets wish them every success in the future and good luck in completing several ongoing projects in South Africa and Zimbabwe.