The business rescue practitioners (BRPs) of Tongaat Hulett have reached an agreement with the Industrial Development Corporation of South Africa (IDC) and the Vision Group of companies to preserve Tongaat Hulett’s business rescue, maintain trading operations and support implementation of the approved business rescue plan.

This agreement will see the IDC become a significant shareholder in Vision companies across South Africa, Zimbabwe, Mozambique and Botswana, while extending post-commencement finance (PCF) support to Tongaat Hulett to the end of September.

Under the terms of the agreement, the IDC will extend its PCF support to enable Tongaat Hulett to continue trading while the transaction is implemented.

The parties have also agreed to restructure the IDC’s PCF into equity finance at the appropriate level, as part of the overall transaction framework to support a more sustainable capital structure on emergence from business rescue.

For Vision, the agreement reflects a long-term commitment to the South African and regional sugar industry.

Vision intends to invest in the recovery of Tongaat Hulett's operations, to support the growers and suppliers who form the backbone of the value chain, and to safeguard the livelihoods that depend on a strong and stable business.

Further, the agreement provides a basis for preserving an estimated 250 000 jobs across the sugar industry value chain and for concluding the steps required for Tongaat Hulett to exit business rescue.

Vision will provide the funding required to settle and address creditor claims, including the company's obligations to the South African Sugar Association, in support of the substantial implementation of the approved business rescue plan.

The parties will conclude new sale agreements for the transfer to Vision of Tongaat Hulett's South African operations, together with its interests in its subsidiaries in Zimbabwe, Botswana and Mozambique.

With the agreement secured, the BRPs will withdraw the liquidation application that was due to be heard in the High Court of South Africa, in Durban, on June 17.

The parties have chosen to keep Tongaat Hulett operating and to protect the value it holds for its employees, growers, suppliers, lenders and the many communities across the region that depend on it, they say.

The parties have committed to work together in good faith and with urgency to bring the transaction to completion. Their shared objective is to stabilise the business, support the broader sugar value chain and position the operations for long-term sustainability and recovery, they say in a joint statement.

“The agreement will save 250 000 jobs and the growers' investments, with black business stepping up to save a 134-year-old sugar group operating in the Southern African Development Community region. This is a significant milestone for Vision, which is the largest private employer in Zimbabwe and Mozambique,” says Vision chairperson Robert Gumede.

“Vision is confident of turning around the fortunes of the company and hopes the South African government will protect the jobs and industry from the dumping of foreign-produced sugar from Brazil and Thailand. Vision will cooperate with the South African Sugar Association, growers, labour unions, key clients and suppliers,” he says.

“The agreement reflects the IDC’s commitment to supporting an outcome that safeguards productive capacity, protects livelihoods across the sugar value chain and creates a credible platform for long-term recovery,” says IDC CEO Mmakgoshi Lekhethe.

“Our role, in line with our developmental mandate, is to preserve industrial capability, support jobs and enable sustainable economic participation in sectors that are important to South Africa and the region,” she says.

CANEGROWERS RESPOND
Meanwhile, industry organisation the South African Canegrowers Association welcomes the agreement, saying it provides funding to keep Tongaat Hulett operating in the short term and creates a pathway for the implementation of the business rescue plan, Vision’s ownership of Tongaat Hulett’s assets and its eventual exit from business rescue.

For growers, workers and communities that depend on Tongaat Hulett, this agreement averts the immediate threat of liquidation and protects jobs and livelihoods across the sugar value chain, the association says.

Tongaat Hulett is a key contributor to South Africa’s economy and to the stability of rural communities. Tongaat Hulett operates three sugar mills and is the country’s biggest standalone refiner of white sugar. For more than 130 years, the company has been a cornerstone of the national sugar value chain, which supports more than one-million livelihoods, the association points out.

“This agreement is a significant milestone in securing the future of the modern South African sugar industry. With the liquidation of Tongaat Hulett off the table, we hope that its mills and refinery can now focus on operating without interruption. More than 17 500 supplying sugarcane growers rely on Tongaat Hulett,” says SA Canegrowers chairperson Higgins Mdluli.

“We thank the government, the Department of Trade, Industry and Competition and the IDC for recognising the significance of the sugar industry to the national economy. Tongaat Hulett’s mills have continued to be operational, even as the liquidation hearing was looming, in part owing to bridging funding provided by the IDC,” he says.

SA Canegrowers will work with all parties involved to secure a stable and sustainable future for the South African sugar industry.

“As a unified industry, we can also address other immediate challenges facing us, especially the flood of imported sugar into South Africa.

“Unfairly subsidised sugar from countries such as Brazil and Thailand is currently displacing locally produced sugar from retailers and food and beverage manufacturers. This affects growers and local millers alike, including Tongaat Hulett,” Mdluli says.