LOCAL ECONOMY TO BENEFIT DIRECTLY FROM SAICCOR EXPANSION
Standing shoulder to shoulder with other giants of industry, Sappi was among local corporations that collectively committed to invest more than R130bn in the local economy. This show of faith was demonstrated at the Presidential Investment Summit held in October, where Sappi announced an investment of R7.7bn over the next five years.
The target for this investment is its Saiccor dissolving pulp mill in Umkomaas outside Durban. This plant is already a significant contributor to the group’s market-leading position, producing some 800m tons a year.
Sappi’s total output from all operations of 1.4m ton a year gives it about 16% of the world market for this versatile commodity, which is seen as a strong growth market for the group. Dissolving wood pulp is primarily converted into yarn and textiles, but is also growing in popularity for household, industrial and pharmaceutical applications.
The investment by Sappi – R2.7bn this year and next to increase production capacity, and R5bn over five years on maintenance, upgrades and optimisation – will go a long way to shoring up this position.
“SA is a very exciting place for us,” Sappi CEO Steve Binnie says. “We’ve been producing dissolving pulp for years, we have a reputation for consistent high quality product and we’re cost-competitive. And when SA is looking for opportunities to grow as a country, you want to grow where you have a competitive advantage.
“And in this space we do. We’re efficient at making the product, we have our own forests to source the raw material and we’re at the low end of the cost curve.”
The strategic importance of Saiccor’s success won’t be lost on government and treasury officials. Binnie says the company is the second largest exporter from Durban harbour, and accounts for 1% of SA’S total exports. Of this amount, 80% is supplied from the Saiccor mill.
The significance of the expansion project on the KZN regional economy is therefore immense. Binnie estimates it will add another R1bn value-add to the economy on top of the current contribution of R12bn a year.
It is within this context as a major player in the region that the company has dedicated considerable resources to its enterprise and supplier (ESD) programme. Saiccor’s engagement with local and small enterprises is managed through Sappi Khulisa, a programme that dates back to 1983 when it started out with three small-scale growers operating on eight hectares of land.
Today, the Tree Farming Scheme has more than 4 000 participants who collectively farm around 14 000ha of land. An additional 19 000ha from 60 land reform projects are under management of the scheme.
Binnie says the growers have earned just over R2bn to date, of which R387m was earned in 2018. The 280-odd contractors who provide services ranging from transport to cultivation and harvesting have earned R87m in the 2018 financial year.
These numbers will naturally grow as the mill’s additional 100 000 tons a year capacity comes on line.
The Sappi Khulisa scheme should easily be able to absorb new, small suppliers into its value chain. It has a long history of training these suppliers in various aspects of the industry and business management, with more than 1 000 people having passed through its training programmes.
Sappi says that the programme has also helped establish 100 small, medium and micro enterprises, and that it has created more than 1 700 rural jobs, of which 80% are women. Nearly 60% of its 4 000 growers are women.
In the short term, an estimated 5 000 contractor workers will be employed during construction of the Saiccor expansion. Many of these will be from local communities. And once completed, more than 100 new permanent positions will be added to the current tally of 1 200 jobs.
“As part of the project itself, we’re striving to give as much of the work as we can to the local community. Certainly, all the unskilled labour will be local and for the skilled labour we’ve set a target of 30%. So, we’re working with local communities to do that.
“Where we can, we also try to twin an emerging BEE company with an existing contractor so there can be a transfer of skills, knowledge and experience.”
The replacement of older machinery with new technology and increasing the production capacity will ensure the Saiccor mill remains competitive for the next 20 or more years. This should give great comfort to current and aspirant Sappi Khulisa participants who would benefit from the long-term sustainability of the mill.