LO­CAL ECON­OMY TO BEN­E­FIT DI­RECTLY FROM SAICCOR EX­PAN­SION

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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.

Sus­tain­abil­ity Peo­ple Project Grow Eastern Cape

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