South African investors look to create $1B sugar monopoly

A consortium of South African investors, recently involved in the rescue of debt-ridden agricultural firm Tongaat Hulett, is reportedly aiming to acquire rival Illovo Sugar, sources close to the situation reveal. This potential acquisition would unite control over Africa's sugar, ethanol, and bioenergy sectors under one African-owned conglomerate.

The initiative has already reached Associated British Foods, the London-based parent company of Illovo. Vision Sugar, led by South African billionaire Robert Gumede and Zimbabwean dealmaker Rute Moyo, have begun discussions with ABF Chief Executive George Weston about a potential deal, according to a source familiar with the matter.

Estimates suggest Illovo Sugar's enterprise value ranges from $800 million to $1.1 billion. If this deal materializes, it would encompass Illovo's extensive network of sugar plantations spanning South Africa, Zambia, Malawi, Eswatini, Tanzania, and Mozambique, setting the stage for one of the largest agricultural buyouts on the continent in over a decade.

ABF declined to comment, while Illovo's representatives did not respond to requests for information. The union of Tongaat and Illovo across Southern Africa would essentially create a near-regional monopoly. In South Africa, the combined entity would command more than half of the country's sugar milling capacity, leaving Remgro-backed RCL Foods as the sole significant domestic competitor, potentially raising concerns with competition authorities.

Beyond South Africa's borders, the merged operation would grant Vision virtual market dominance in primary sugar production throughout East and Southern Africa. Gumede's bid for Illovo is also viewed as an energy strategy. The entrepreneur intends to utilize Illovo and Tongaat refineries to generate electricity, utilizing bio-ethanol production and converting sugarcane fiber leftovers.

For ABF, an outright sale would signify a complete withdrawal from African sugar, releasing capital to refocus on its primary European food divisions and flagship retail chain, Primark.