Sappi halts R2.7bn expansion project due to coronavirus outbreak

It declares force majeure on its Vulindlela project at Saiccor mill.

Sappi, the world’s largest manufacturer of dissolving wood pulp, has halted its R2.7 billion expansion project at its Saiccor Mill in KwaZulu-Natal because of the coronavirus outbreak.

Sappi said the project was 65 percent complete and “materially on track”.

The project was undergoing a controlled shutdown, the company said, adding that the project would restart based on government guidance.

South Africa will be on nationwide lockdown from Friday until mid-April as part of efforts to curb local transmission of the virus. 

The company has informed suppliers and contractors of its decision to cease work, and the expansion project is undergoing a controlled shutdown. 

Sappi declared force majeure, which is a legal defence that allows it to avoid liability for failing to meet contractual obligations due to an unexpected event.

Sappi said in 2018 the overall project referred to as Vulindlela included a R2.7 billion investment in new capacity at Saiccor and a planned R5 billion investment over five years in various improvement initiatives and upgrade projects. At the peak of the project, there would be between 2,500 and 2,800 contractors on site at any one time.

Future cash flows would be aligned to the revised project timelines.