Swazi Paper Mills Ltd

completed

Swazi Paper Mills was established in 1986 to produce and supply 1-ply tissue paper to the South Africa market. The company''s two initial tissue paper machines were later increased to four. In 1990 Swazi Paper Mills installed a kraft paper machine to produce fluting and test liner paper for the South Africa corrugated box converting industry. A second kraft paper machine (KPM2), which produced only test liner paper, was installed in 1995 with financial assistance from IFC. The tissue paper machines were sold in 1998 following the Sharma family''s decision to withdraw from the tissue paper business in South Africa and to concentrate instead on producing fluting and test liner paper. Nampak, a large South African paper producer, bought the tissue paper machines and entered into an operating agreement with Swazi Paper Mills. The Sharma family subsequently established Unicell Paper Mills to expand its kraft paper business. The project is part of the Sharma family''s strategy to create critical mass and to optimize production and supply of fluting and liner paper to the South African market. The project involves the upgrading of KPM2 to increase production capacity and to equip the machine to produce fluting paper, and will enable the sponsor to produce all fluting paper at Swazi Paper Mills and all test liner paper at Unicell Paper Mills, with resultant economies of scale. The project will generate foreign currency and secure about 500 jobs in a country with high unemployment. IFC will provide long-term financing which is not otherwise available. Local commercial banks are constrained by their capitalization levels, whilst South African banks are reluctant to engage in cross-border long-term financing.