KZN grain distillery 'the largest in southern Africa'

2008/08/06

A group of 12 farmers in the Vryheid, Newcastle and Ermelo areas is setting up the largest grain distillery in southern Africa - Drakensberg Distilleries, producing yellow maize-derived whisky, all for export. Housed in leased buildings at the currently-derelict Ingagane power station, 10km from Newcastle, KwaZulu-Natal, the plant should be fully commissioned by August.

Thereafter it will be built up to a capacity to produce 360,000 litres of absolute alcohol per month, based on an efficiency-in-production rate of 80%. At that level of production, the distillery will be larger than the Distell distillery which produces Harrier whisky in SA (which, like all other quality whiskies in the world, is blended with other whiskies).

Building on the Drakensberg Distilleries' plant commenced with the farmer-shareholders' decision to go ahead in May 2006. Today the plant, largely made from second-hand equipment, has an insurance replacement value of over R80m. The project arose from a study group formed by over 30 farmers in the area some years ago. The most surprising aspect about the project is its large size. Normally farmer value-adding projects start small - most such projects today are probably small biodiesel units.

The size of the Drakensberg Distilleries project was prompted by the large size of distilling equipment that was available for purchase from the Industrial Development Corp. (IDC) following the failure of an IDC-financed French distillery project at the power station. That project was abandoned in 2001 primarily because maize input costs rose too high.

Coincidentally it was announced in July this year that the Ingagane power station, which was decommissioned in 1990, would be put out to tender by Eskom for revamping and re-commissioning. This will be a huge task given the advanced dilapidation of the power station. Adee Bosman, an accountant and farmer who was appointed general manager of Drakensberg Distilleries in mid-2007, says his company has long term leases on large buildings on a section of the power station premises and it will be unaffected by Ingagane's resurrection.

Bosman says the farmer study group did intensive research into options related to their maize production. The research covered, for instance, potable alcohol prices and the alternative value-added products which could be produced, like fuel ethanol and gel. Intensive research has been a major foundation of the project, says Bosman. The investors decided against producing fuel alcohol because of government delay in announcing the regime related to it, as well as the higher alcohol percentage levels required for fuel alcohol, and the lower potential profit margins (than in potable alcohol production).

Major factors which encouraged the decision to go ahead with the distillery project were:
• The availability of the IDC distilling equipment, which was bought at "market-related prices for second-hand equipment", he says. The equipment was originally imported second-hand from France.

• The building and facilities at the power station.

• The existing supply of pure Drakensberg water from the Chelmsford Dam, 30km away, gravity-piped to the power station.

Bosman, who is the son of Lourie Bosman, president of AgriSA agricultural union, says that the purity of the water and the fact that the distillation potstills are copper result in a fuller taste for the Drakensberg Distilleries alcohol. The extensive knowledge of the company’s two production engineers - Johan Smit and Thibaut Hontanx - is also responsible for the high quality of the alcohol, he says. The company's French market agents have said this and subsequent batches are of excellent quality, says Bosman. The company already has sale agreements in place for a large portion of its production.

Construction of the distillery began in January 2007. The project has been co-ordinated by the farmer group and its appointed managers. It has entailed a huge amount of learning for them. Bosman says that the shareholder-directors are updated on progress of the project every few weeks. The company does not have the plans and details of the French project, but Hontanx is a French production engineer from the original project. He did not return to France having married a local. At full production, the plant will employ about 45 people, of which management will comprise about five. The shareholders employ about 235 permanent labourers and 1,000 additional seasonal labourers.

All the fabrication and pipe work was done by a local company, 3C Construction of Newcastle. The project's many large stainless steel tanks were bought second-hand from a number of sources in SA. Traditionally whisky is made from maize or barley. All whisky however must, following production, be aged for at least three years. Therefore the production of a facility like that of Drakensberg Distilleries is sold to aging facilities, which are often also blenders. In November 2007, the plant processed its first batch of 18t of maize, which has since been aged at the plant for sampling purposes.

The company is benefiting from a worldwide shortage of potable (and fuel) alcohol, and rising prices. Bosman says that the whisky price (denominated internationally in US dollars) has been rising for the past few years and has, for instance, increased by about 25% since December 2007.

All of Drakensberg Distilleries' customers are in Europe and China, and it is currently negotiating with customers in Poland, Taiwan and Latvia. It may also negotiate some involvement in a bottling facility in Poland.

Bosman says that to set up an aging facility in SA would cost hundreds of millions of rands and is not a likely investment for the group at this stage. However, the long-term mission of the company is to age its own whisky in oak barrels.

The process and distilling

Maize from the company's shareholder-producers is received and stored in a silo fabricated and installed for the project. The maize is drawn off into a hammer mill where it is fine-milled; it is then cooked at about 120ºC with direct steam injection from the company's own coal-fired boiler. In the cooking process, the starch converts the complex sugars into fermentable sugars. The sugar levels and quality are tested in the company's own laboratory. The solution is then cooled down in a heat exchanger using refrigerated water, and then fed into fermentation tanks; there it is fermented for 49 hours.

The distillation process involves the distilling off in stages of the "heads and tails" alcohol fractions in order to get to the "heart" of the whisky. The flavouring of the whisky alcohol is partially determined by the presence of fusel oils, which have a strongly disagreeable smell and taste. The quality of whisky is determined by how much of these heads and tails is taken off - poor quality whisky has more of them. The heart of the plant - the distillation unit - is the huge copper potstills and two rectifying columns and strippers (for the heads and tails) purchased from the IDC. The Drakensberg Distillery whisky will generally be treble-distilled. The effluent, called WDGS (wet distillers grain with solubles), is dried in drum dryers to produce DDGS (dried distillers grain with solubles), which is sold for feed to cattle feedlots, dairies, pig and poultry farmers. "Everything is used in the plant - even the ash from the coal will go to make bricks," says Bosman.

The distilling process is a batch production process whereas the drying process is a continuous process. Every batch of whisky production is tested, identified, and its characteristics recorded using a gas chromatograph; it is later retested by the client. For dilution of the final product, according to the client's requirement, a reverse osmosis plant with a capacity to purify 300 litres per hour of water was imported. In one distilling tank, wood chips can also be added to adjust the taste according to clients' requirements.

The plant includes:
• A 6.5t/hour boiler.
• A 60t maize silo.
• Four cooking tanks (16,000 to 20,000 litres).
• Eight fermentation tanks (45,000 to 70,000 litres).
• Six 6,500-litre copper potstills.
• An evaporator system for the drying process.
• Two 16,000 litre per day Mussi rectifying columns and strippers.

Risk and reward

On the project's risk and reward, Bosman says that the main risk is Eskom power failures. Electricity is used in over 70 pumps in the facility, and in the milling section, the water cooling and treatment plant, etc. A 250kVA back-up generator has been ordered.

Drakensberg Distilleries (Pty) Ltd is an independent, unaffiliated company. The 12 shareholders are all active commercial farmers. The collective farming activities of the shareholders consist of maize (5,000ha), soy (3,400ha), forestry (5,000ha), cattle (7,500 head), sheep (3,400 head) and game (2,650ha). The return for the group of investors is the meeting of their primary objective in value-adding: to find a stable market for the purchase of their maize. Bosman says that the gross return will be about treble what they would normally receive for maize, and the net return will be double (after deduction of all costs, including capital costs). He says that there will be more than enough supply of maize feedstock from the shareholders. The project is run on a completely arm's-length, commercial basis, with shareholders agreements for supply of certain quantities of maize at stipulated prices, no matter what the market prices for yellow maize.

Bosman says the group is open to suggestions for investments and other developments for the project. -Teigue Payne source: www.agriworldsa.com