Strategic thinking, taking the long view, it’s in Tongaat Hulett’s DNA. CEO Staude’s too.
Peter Staude has long been one of my favourite JSE-listed company chief executives. Visionary is an overused word. Staude is one of the few corporate leaders I've met who deserves the description. In this discussion around the release today of the sugar, property development and starch group's interim results, you get some insight into the way his mind works. It's all about the big picture; the long-term; keeping perspective. An approach that ensures Tongaat Hulett keeps delivering. – AH
ALEC HOGG: We now pick up with another set of financial results – also interims: Tongaat Hulett has reported a slight decline in its interim earnings, a fall that came despite a six percent increase in its revenue to just under eight billion rand. Peter Staude, Chief Executive of Tongaat joins us on the line. Peter, these results are all about your land – Moreland – and in fact, if you want to be more specific: that R350 million deal that you did near King Shaka Airport.
PETER STAUDE: Yes, it was certainly a very good deal for us and for the whole region. The land around the airport is all earmarked for getting towards a place of an airotropolis and there are two organisations working on it – Trade Port and ourselves. We bring a different synergy to the whole topic. This was land that they really wanted and where they see a potential end-use quite soon. In our particular case, we would have probably taken ten or twenty years to develop that, so it was a good deal for both of us and it will create a bit more stimulus around the airport.
ALEC HOGG: Given the controversy that's erupting around the proposed Chinese development of AECI property at Modderfontein, it is now becoming more of a conversation piece in the business community about what you've done with your land that you had available. Also in fact developing it and particularly the set of financial results – we'll talk to that – as against others who see it as a quicker exit. What got you thinking right in the beginning, that it was more efficient to have your own development business?
PETER STAUDE: Essentially, certain things are probably in your DNA as a corporate or not, and often your DNA can be a positive and a negative simultaneously. Our DNA at Tongaat is very much one of winning marathons, so we always take a long-term view in conversations. We believe that if you work very hard in those marathons over a long period of time, you're often going to get into some sweet spots in part of your business. We've recognised a long time ago that sugar cane land around Durban will not stay there, so you'd have to find a mechanism to get new land and cane. This year alone we're getting eight thousand new hectares in KZN. At the same time, you want to manage a little bit, the process of how Durban expands into your cane land and you want to do it in such a way that it creates a value for all stakeholders, not just for your shareholders. It is often a very long-term process. If you take for example, Gateway outside Umhlanga, we recognised in the 70's already that Umhlanga needed a new town centre. When Old Mutual built Gateway, people thought they were crazy and now you look around that particular area… We just sold a piece of land there, which we essentially realised, per hectare is R34 million. Everybody's happy with the land that they bought, so these are our processes that we work through over a period of time and that's in our DNA. It's the same as when we talk about ethanol and electricity: they're long-term processes, but they're very critical for the sugar industry to diversify its revenue stream along the route. That would give you a sense of how we operate as a business.
ALEC HOGG: Another way that you are perhaps a bit of an outlier is in your results today you talk about 'government infrastructure investment unfolding rapidly'. Peter, there are not too many people in other companies who've had anything similar to say. Where do you get this insight from?
PETER STAUDE: I think essentially people are a little bit critical sometimes over our government. The government is unfolding the infrastructure all the time. When you look at our particular case if you go to Gateway, you will see they're working on that new interchange around there, so many of the roads are being established. When you go to the airport and you travel to our offices, you see a new road being built from what you call the Watson's Highway to the airport itself. There are new pipelines being put in place for the north of Durban for water supply and there are new effluent lines being built, so there is definitely an upgrade of the infrastructure taking place in South Africa. Obviously, when one can work together as a system and one can synergise a little bit, it helps with that process.
ALEC HOGG: There certainly is a lot of action going on in KwaZulu Natal we know, Peter, but elsewhere it seems to be a little less aggressive. Just to close off with, there's been a lot of discussion around the world now, about health issues. They're coming into the forefront. You're primarily a sugar company although you do have land and starch. Are these things that, from a long-term perspective, you're worrying about?
PETER STAUDE: Not really… I think, to see a world without salt and sugar or without sweeteners: your food would be quite boring. Along the route, you obviously don't want to overdo it, but the reality is that we've been using sugar and salt in our food for centuries. We just mustn't use too much.
ALEC HOGG: Peter Staude is the Chief Executive of Tongaat. I like that little bit of pithy advice there.