9 January 2024
By: Lloyd Phillips
A new year has dawned and it’s coming down to the wire for the future of Tongaat Hulett and its Sugar South Africa and Voermol subsidiaries.
A meeting of Tongaat Hulett’s business rescue practitioners, creditors, possible buyers and other affected parties has been scheduled for January 10. They will vote on whether to accept amendments to the business rescue plans for the company based on proposals previously submitted by the RGS Group and the Vision Parties. The two entities are competing to acquire the financially ailing company.
The amendments to the business rescue plans and the 11 January deadline for the meeting to vote on them were ordered in mid-December by Judge Rashid Vahed of the Durban high court in KwaZulu-Natal.
African Farming has regularly reported on Tongaat’s financial struggles which culminated in the company going into voluntary business rescue on 27 October 2022. Several bidders have tried and failed to acquire part or all of Tongaat and the business rescue process has featured a welter of litigation. The company could be liquidated if its creditors do not accept the RGS or Vision proposals.
Key opponents of the two proposals, before they were amended on Vahed’s orders, were the South African Sugar Association (SASA) and another big sugarcane milling company, RCL Foods. They demanded that the plans be amended to prioritise Tongaat’s legislatively mandated payment of approximately R1,6 billion in outstanding industry levies and proceeds to SASA for the benefit of the national primary sugarcane value chain.
While SASA has not yet responded to African Farming’s request for comment on the amended business rescue plans, RCL expressed concerns about Vision’s amendments.
“The Vision plan assumes that SASA will not be paid for at least three years. In contrast, the RGS plan provides for immediate settlement of the SASA claim amount while not leaving any other affected party worse off,” RCL said.
“We hold the firm view that it is not justifiable to force sugarcane growers and millers to bear the cost of Tongaat’s business rescue through delayed payment [as proposed in Vision’s plan].”
RCL said that while Tongaat’s future viability is “critical”, it is vital that the business rescue process does not undermine the primary sugarcane value chain, especially thousands of small-scale growers who are most susceptible to shocks to their income.
A statement by Tongaat and its business rescue practitioners said that if Wednesday’s meeting approves the amendments to one or both proposed business rescue plans, a vote will be called to select the preferred plan. If neither plan achieves final acceptance, “the provisions of section 153 of the Companies Act (71 of 2008) shall come into application”.
This section of the Act makes provision for further amendments to business rescue plans. However, if the plans are still rejected there is a possibility that the business rescue practitioners may file a notice of termination of the proceedings and Tongaat could be liquidated.
Dr Thomas Funke, the CEO of the South African Cane Growers Association, said liquidation would be “catastrophic”. Any halt to essential cashflow to growers supplying sugarcane to Tongaat would have “dire consequences”, he said.
“Because our industry is deeply interconnected, the failure of the business rescue process would put pressure on the remaining millers who are already facing operational and other pressures. Given the jobs and livelihoods on the line, particularly in rural economies where alternative employment is not easily available, such a failure simply cannot be allowed to materialise.”To access the latest official documents on Tongaat’s business rescue process, click here.
