1 December 2023
Lloyd Phillips
The chairperson of the South African Canegrowers’ Association says Wednesday’s (29 November) court order is crucial for the primary sugar cane value chain’s long-term survival.
Tongaat Hulett, its Sugar South Africa subsidiary and its three business rescue practitioners have failed in their legal bid to challenge the beleaguered companies’ financial obligations to the national sugar industry in terms of the Sugar Act and the 1994 Sugar Industry Agreement.
Although he will hand down his full judgement only next Monday, Judge Rashid Vahed of the Durban high court in KwaZulu-Natal, on Wednesday dismissed the Tongaat application with costs.
The application was directed at the South African Sugar Association (SASA), trade and industry minister Ebrahim Patel, other sugar industry organisations and companies, the country’s nearly 23 000 registered sugar cane growers and other parties affected by Tongaat’s business rescue.
Tongaat went into voluntary business rescue on 27 October 2022, plunging the primary sugar cane value chain into turmoil. This was exacerbated when Tongaat’s business rescue practitioners, Trevor Murgatroyd, Petrus van den Steen and Gerhard Albertyn, reportedly withheld payment of Sugar South Africa subsidiaries’ financial obligations to SASA.
In terms of the Sugar Act and the Sugar Industry Agreement, sugar millers have to pay levies and proceeds to SASA. The association uses the funds to pay for key facilities and functions, such as the South African Sugarcane Research Institute. The balance is redistributed between sugar cane growers and sugar millers.
SA Canegrowers’ Association chairperson, Andrew Russell, welcomed Vahed’s order after “the failure of the Tongaat Hulett and [the independently owned] Gledhow sugar mills to pay more than R1,5 billion due to SASA at the end of March 2023”.
He added: “As a consequence of these defaults, the final recoverable value price paid to sugarcane growers for their harvests in the 2022/23 season [ending 31 March 2023] dropped by more than R400 per ton, with significant financial implications for growers and compromising the sustainability of their operations.”
In challenging the legal basis for the amounts owed by Tongaat, said Russell, the business rescue practitioners argued that their process took precedence over “industry arrangements”. If their application had succeeded, it would have released Tongaat and Gledhow from their obligations to honour their financial commitments. In turn, this would have “fundamentally undermined” the structure of the highly organised sugar industry.
“SA Canegrowers will study the judgement [and] we look forward to future engagements with the business rescue practitioners to resolve this matter and secure the critical outstanding funding due to SASA, growers and other millers in order to help ensure the industry’s long-term survival and protect the livelihoods it supports,” said Russell.
Tongaat Hulett, the business rescue practitioners, SASA and the South African Farmers Development Association, which was cited as a respondent, told African Farming they would comment only after reviewing Vahed’s judgement.
