Illovo Sugar Malawi Plc, one of the country’s largest companies, has secured shareholder approval to borrow $45 million from its majority shareholder, Sucoma Holdings Limited, in a move designed to address its growing foreign exchange debt burden and ease the impact of Malawi’s dollar shortages.
The approval came during an Extraordinary General Meeting (EGM) held on Tuesday in Blantyre, where shareholders voted overwhelmingly in favour of the resolution. According to Illovo’s Board Chairman, Mr. Jimmy Lipunga, the loan will be used to pay off part of the company’s accumulated debt of about $72 million, much of which is owed to foreign-based suppliers, including sister companies under the Associated British Foods (ABF) Group.
Lipunga explained that the decision was necessary to protect Illovo from further financial stress caused by the scarcity of foreign currency in Malawi, which has made it difficult for the sugar producer to service its international obligations. He noted that Malawi’s worsening forex situation had forced the company to accumulate debt over a period of four years, leading to higher interest costs.
“We decided to restructure our working capital with the goal of reducing the burden of US dollar-denominated debts and interest. This option gives us breathing space without diluting shareholders’ value, which would have been the case if we converted the debt into equity,” Lipunga told shareholders at the meeting.
The EGM circular revealed that Illovo owes related parties and fellow subsidiaries of ABF Plc, including ABF Sugar Pty, Illovo Sugar Johannesburg, and Illovo Group Marketing Services, an equivalent of $72 million or 1.3 billion rand. The debt arose after these subsidiaries purchased essential machinery, equipment, and services on Illovo Malawi’s behalf when the company was unable to source enough foreign exchange.
The newly authorised $45 million loan from Sucoma will provide immediate foreign exchange liquidity and allow Illovo to settle a large portion of the intercompany debts, easing pressure on its balance sheet. In addition, the company has the option of accessing an extra $15 million if the need arises.
Lipunga also expressed hope that the Reserve Bank of Malawi (RBM) would consider loosening some of its strict forex management measures to allow companies like Illovo to operate more smoothly. “We are optimistic that with the right support and reforms, our operations will stabilise,” he added.
The decision received strong backing from minority shareholders. Mr. Frank Harawa, who spoke on their behalf, praised Illovo’s management for adopting what he described as an innovative solution to the forex crisis. “It’s commendable that management is thinking outside the box in how to settle its debts in US dollars. This shows commitment to safeguarding both operations and shareholder value,” Harawa said.
Illovo Sugar Malawi is majority-owned by Sucoma Holdings Limited with a 75.98 percent stake. Other shareholders include Old Mutual Life with 10.87 percent, while public and institutional investors control 13.15 percent. The company is one of Malawi’s biggest employers, with over 10,000 workers spread across its sugar estates and mills in Chikwawa and Nkhotakota, and at its corporate office in Limbe.
Despite its dominance in the sugar industry, Illovo has faced increasing challenges in recent years. Foreign currency shortages, high operating costs, and the impacts of climate change, including floods and tropical cyclones, have negatively affected sugarcane production and milling. The forex scarcity has also limited the company’s ability to import machinery, inputs, and raw materials needed for smooth production.
Industry analysts note that the fresh loan arrangement could help Illovo strengthen its financial position in the short term, though the long-term solution will depend on how Malawi addresses its chronic foreign exchange crisis.
The sugar giant remains a critical player in Malawi’s economy, contributing significantly to employment, tax revenues, and agricultural development. Observers believe the approved loan is a timely intervention that could keep the company stable and ensure continued production despite the tough economic environment.
