15 December 2023
By: Lloyd Phillips
Legal contestations involving supporters and opponents of the sugar giant’s latest business rescue efforts are by no means over.
An order by the Durban high court on Wednesday has further delayed any resolution to the business rescue proceedings for the Tongaat Hulett group and its sugar milling and animal feeds subsidiaries. The financially beleaguered corporate has been in voluntary business rescue since 27 October 2022.
African Farming has reported extensively on how Tongaat’s critical financial position and business rescue continue to have wide-ranging financial impacts throughout South Africa’s primary sugar cane value chain. These include:
- Contributing significantly to a R400 per ton decline in the final recoverable value price paid to about 23 000 sugar cane farmers for their harvests at the end of the 2022/23 milling season.
- Constraining the income of these farmers, most of whom are small-scale.
- Reducing South African Sugar Association (SASA) levies and proceeds by about R1,94 billion due to a reportedly unilateral decision by business rescue practitioners to withhold the money.
- Causing uncertainty about the future of the sugar giant’s operations, those of its affiliates, and the thousands of direct and indirect livelihoods that depend on them.
A slew of legal battles has emerged from parties supporting or opposing the business rescue process. For example, Tongaat’s business rescue practitioners are legally contesting a recent order by Judge Rashid Vahed who said Tongaat must pay the money owed to SASA.
Then there are the recent applications by SASA and a competing sugar miller, RCL Foods, to interdict voting on the latest and reportedly most promising bids for Tongaat. These bids by the Vision Parties multinational consortium and Mozambique’s RGS Group were due to be voted on by Tongaat, its business rescue practitioners and its creditors.
SASA believes that neither business rescue plan adequately prioritises payment of Tongaat’s liability to the association, while RCL Foods wants the business rescue plans declared unlawful. It says they must be amended before voting takes place.
In its decision on Wednesday, the Durban High Court ordered that:
- The voting meeting rescheduled to 14 December must be adjourned indefinitely but held no later than 11 January 2024.
- The business rescue plans in their current forms may not be voted on.
- An application by Tongaat and the business rescue practitioners for leave to appeal against Vahed’s judgment is postponed indefinitely.
- Interdict applications by SASA and RCL Foods are postponed indefinitely but the applicants are given leave to consult with the senior presiding judge before possibly enrolling their respective applications for further consideration.
- RGS’s application for its business rescue plan to be voted on first is postponed indefinitely. RGS is also given leave to consult with the senior presiding judge before possibly enrolling its application for further consideration.
- All questions about costs in all applications before the court are to stand over for later determination.
In response to the order, RCL Foods said: “RCL Foods and SASA will continue to work with the business rescue practitioners to ensure that the amended business rescue plans align with the high court judgment on the statutory payments outstanding to SASA.
“The application by Tongaat Hulett to appeal the high court judgment relating to the SASA obligation has been postponed subject to the outcome of the voting on the business rescue plans.”
Tongaat’s response said: “In accordance with section 151(2) of the Companies Act (71 of 2008), affected persons are hereby notified that further details regarding the date for the reconvening of the 151 meeting [to consider and vote on the two business rescue plans] will be distributed in due course”.
SASA declined to comment.
