Following shareholder approval of embattled sugar manufacturer Tongaat Hulett’s business rescue proposal, which involves the Vision Group acquiring Tongaat’s debt in exchange for equity, industry body SA Canegrowers awaits Vision’s confirmation that it will pay the industry levies that have been due for more than a year.
When Tongaat entered into business rescue in October 2022 it left the industry in a precarious state and caused great uncertainty for canegrowers who rely on the company’s mills on the North Coast of KwaZulu-Natal.
These hardships were exacerbated by the decision of the business rescue practitioners (BRPs) to challenge the legal validity of the financial obligations, which amount to more than R900-million, owed by Tongaat to the South African Sugar Association (SASA).
SA Canegrowers explains that the withdrawal by the RGS Group of its proposal for the acquisition of Tongaat dealt a further blow to the process just one day before the vote on the business rescue proposals. That offer had included a firm commitment to honour the obligations of Tongaat to pay the industry levies owed to SASA.
The Vision Group has yet to commit to payment of the outstanding levies before any appeals of the declaratory order have been exhausted, leaving open the possibility of further costly and time-consuming litigation.
Nevertheless, while this critical matter remains unresolved, SA Canegrowers is encouraged by the BRPs’ success in securing a partner to help save the mills operated by Tongaat. Tens of thousands of small-scale growers and workers depend on these mills, therefore maintaining their operations is critically important.
SA Canegrowers will closely follow developments in the coming weeks as the business rescue process hopefully nears its endpoint.
“Our priority remains the successful conclusion of the business rescue process that revives Tongaat and protects the livelihoods that depend on its operations,” SA Canegrowers states.
BUSINESS RESCUE PLAN
Vision has stated its commitment to keeping the Tongaat group together and has developed a strategy entailing five strategic pillars that will be implemented to create a sustainable business.
The BRPs will now proceed with the implementation of the adopted plan.
Tongaat can only exit business rescue once the plan has been substantially implemented, which could take several months or, alternatively, if it is no longer financially distressed.
The decision to terminate business rescue lies with the BRPs or alternatively the High Court on application.
The business rescue plan involves Vision acquiring lender group claims and security amounting to about R8-billion, of which R4.1-billion will be converted into new equity in Tongaat.
The deal allows Tongaat to maintain its listing on the JSE and for existing shareholders to retain a minority stake.
Tongaat’s financial distress started when key former executives had allegedly manipulated accounts for years.
Had the lenders not accepted the Vision bid, Tongaat would likely have been liquidated.