6 December 2023
Lloyd Phillips
Judging by their legal applications, two major stakeholders in South Africa’s primary sugar cane value chain believe business rescue practitioners are not playing fair.
Cold water has been thrown on any optimism about the announcement of two reportedly promising business rescue plans for beleaguered sugar giant Tongaat Hulett. This follows urgent legal applications in the Durban high court by the South African Sugar Association (SASA) and RCL Foods’ sugar and milling division.
According to an urgent notice by Tongaat and its business rescue practitioners on Wednesday, SASA and RCL hope to interdict a meeting scheduled for Friday between Tongaat, its business rescue practitioners and the company’s creditors. This meeting is reportedly to consider and vote on the preferred business rescue plans relating to the bid by The Vision Parties multinational consortium and the bid by Mozambique’s RGS Group.
The court applications, which are set to be heard on Thursday, follow a judgement by Judge Rashid Vahed of the Durban high court in which he dismissed the business rescue practitioners’ application for Tongaat to be exempted from paying about R1.94 billion it reportedly owes SASA in terms of the Sugar Act (9 of 1978) and the Sugar Industry Agreement (1994).
As previously reported by African Farming, Tongaat and the business rescue practitioners believe the company should not be liable for this payment because it has been in voluntary business rescue since October 27, 2022.
SASA administers the legally required financial contributions by sugar cane millers to fund industry facilities and functions, such as the South African Sugarcane Research Institute. The balance of these contributions is redistributed between sugar cane growers and sugar millers according to a mutually agreed ratio. Non-payment of these contributions harms the primary sugar cane value chain.
In SASA’s notice of motion and founding affidavit submitted to the high court, it “seeks to interdict a vote on Tongaat’s business rescue plans because they both unlawfully treat SASA’s claims as concurrent and unsecured. This classification is wrong and contravenes the Sugar Act, which imposes the SASA claims by statute upon Tongaat in its capacity as a sugar cane miller.
“It is SASA’s submission that such statutory claims are not capable of compromise and may not be deferred for payment and/or claims arising out of the costs of the business rescue proceedings.” SASA’s application cites other issues and concerns and highlights sections of Vahed’s judgment.In RCL Foods’ notice of motion and founding affidavit, the company seeks to have the two latest business rescue plans for Tongaat declared unlawful and set aside. RCL also wants to have Friday’s scheduled vote on these plans deferred “until no earlier than January 2024”, by which time it hopes the business rescue practitioners will have amended the plans in line with Vahed’s judgement.
