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Mbabane - The closing of Sappi's Swaziland operations in January 2010 will have a major ripple effect on that country's economy.
The lack of direct foreign investment means the 600 workers affected will have scant new job opportunities when Sappi Usutu closes its doors.
Adverse market conditions are behind the Swaziland company's closure.
Jan Labuschagne, chief executive of Sappi's southern African operations, says the Swazi government has tried in vain to find a buyer for the Usutu plant.
According to the government, a takeover by the state is out of the question.
It was out of the question his government to take control of Sappi, Prime Minister Sibusiso Dlamini told a press conference.
The reality was that Sappi had for long been unsustainable in its current format.
He conceded that events at Sappi would have a broader impact and affect more than the company's employees alone.
Whatever happened at Sappi would affect the whole country.
Swaziland Railway estimated that it would lose some R7m a year as a result of the closure.
The Swaziland Electricity Board said the loss of the Sappi business would cost it R18m a year.
Although R750m had been invested in improvements to the factory, business had fallen off. Production of unbleached Kraft Pulp at the company's Bhunya operation had never reached the plant's full capacity of 190 000 metric tons.
From the 173 200 metric tons in 2005 production had instead dropped to 132 167 metric tons last year.
In 2008 concern arose when a fire wiped out more than 20 000ha of trees. This represented 40% of the company's sustainable fibre requirements.
The fire had moreover come at a time when orders were down owing to the global recession.
Swaziland's "plantation workers" trade union is furious about what it calls a "mockery of justice". The union's members will probably struggle to get new employment in Swaziland's shrinking manufacturing sector.
In recent years industrial activity has contributed less and less to the county's gross domestic product (GDP).
The central bank cites the continuing slow growth of direct foreign investment as one of the reasons why the country's growth is not improving.
Swaziland's GDP will undoubtedly receive a further setback from the closure of one of its oldest producers of value-added agricultural goods.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.