Tongaat Hulett Limited’s business rescue practitioners have applied to the High Court of South Africa for provisional liquidation following the collapse of acquisition talks with the Vision consortium, a development that industry representatives warn could devastate the country’s entire sugar sector.
By Maile Matsimela, digital editor at African Farming
The joint business rescue practitioners (BRPs) announced they had “exhausted all reasonable endeavours” before approaching the KwaZulu-Natal High Court to discontinue business rescue proceedings and place the company into liquidation. The decision came after the business rescue plan became unimplementable when sale agreements with Vision lapsed on 7 February.
Tongaat entered business rescue in October 2022 following severe accounting irregularities and governance failures that destroyed approximately R12 billion in shareholder value. The adopted rescue plan, approved by creditors in January 2024, required Vision to acquire Tongaat’s South African operations and investments in Zimbabwe, Mozambique and Botswana.
Also read: Relief and more questions follow last-minute rescue for Tongaat Hulett
However, three critical conditions proved insurmountable: refinancing the Industrial Development Corporation’s (IDC) R2.3 billion post-commencement funding facility, funding a R517 million escrow account for the South African Sugar Association, and providing R75 million for concurrent creditors.
Funding Negotiations Breakdown
Despite months of negotiations, Vision and the IDC failed to reach binding funding arrangements. The BRPs stated that Vision “introduced new demands and conditions that were never contemplated in, nor capable of accommodation, under the adopted business rescue plan.”
When the sale agreements approached expiry, Vision offered an extension but imposed “new, material conditions” that the BRPs deemed unacceptable, saying they would expose Tongaat to “significant commercial risk” and potential contractual breaches.
The situation has been compounded by a sharp decline in domestic sugar sales due to cheap imported sugar entering the market in record volumes, further constraining the company’s cash generation.
Also read: Farmers are still coughing up for Tongaat
Industry-Wide Crisis Warning
SA Canegrowers, representing tens of thousands of sugar producers, has issued stark warnings about the liquidation’s potential impact on the broader industry. CEO Dr Thomas Funke emphasised that “the underlying value of the company rests in functional, operating assets” and warned that without operational continuity, “the entire South African sugar value chain will be severely destabilised.”
The organisation highlighted that an unfunded liquidation would immediately threaten:
- Non-payment for cane to growers supplying Tongaat’s three mills
- Cessation of milling operations, leaving growers without processing capacity
- Loss of the country’s only white sugar refining facility
- Immediate impact on 27 000 small-scale and 1 100 large-scale growers nationwide
Chairman Higgins Mdluli stressed that “Tongaat’s liquidation will affect all of South Africa’s growers,” noting that the company’s mills serve as economic anchors for entire rural regions across KwaZulu-Natal and Mpumalanga.
Perfect Storm for Sugar Industry
The potential liquidation comes as the South African sugar industry faces multiple pressures. SA Canegrowers pointed to unprecedented sugar imports displacing local production and the continuation of the Health Promotion Levy as additional challenges weakening the sector.
“In such a fragile environment, the loss of three of South Africa’s 12 remaining sugar mills will be a death knell for the industry,” Mdluli warned.
Tongaat operates three sugar mills and serves as the country’s only refiner of white sugar used in beverages, biscuits and confectionery, making its potential closure particularly significant for downstream industries.
Legal and Financial Implications
The situation has been further complicated by Vision’s letter of demand for approximately R11.7 billion, which the BRPs describe as having “profound implications for Tongaat’s solvency” and constituting “a material and immediate threat to the company’s continued existence.”
Also read: Tongaat Hulett gets a new owner
If the High Court grants the provisional liquidation order, the Master will appoint a provisional liquidator to oversee the winding-up process, engage with creditors and secure company assets.
The BRPs emphasised that the liquidation application relates only to Tongaat Hulett Limited in South Africa. Operations in Zimbabwe, Mozambique and Botswana continue trading normally under their respective structures.
Calls for Government Intervention
SA Canegrowers has called on government and all stakeholders to “do everything possible to ensure the future of Tongaat Hulett is secured,” emphasising the need to maintain milling operations regardless of eventual ownership outcomes.
The organisation stands ready to work with stakeholders to “safeguard milling capacity, protect growers and secure the long-term sustainability of the industry.”
The BRPs have committed to providing clear, timely updates as the court process unfolds, acknowledging the “significant uncertainty and distress” the development brings to employees, creditors, suppliers and surrounding communities whose livelihoods depend on the company’s operations.
Also read: ‘Pay back the money’, canegrowers urge Tongaat Hulett after CompCom recommendation
