SA Canegrowers raises red flag as Tongaat Hulett files for liquidation

Tongaat Hulett has filed for provisional liquidation at the KwaZulu-Natal High Court after winning bidder, Vision Group, failed to agree financing terms with the Industrial Development Corporation (IDC), with SA Canegrowers saying the folding up of the agro-processing giant will affect cane growers, millers and the entire sugar industry value chain.

Business rescue practitioners in Tongaat Hulett on Thursday said the company had now filed for provisional liquidation, saying the Business Rescue Plan adopted by shareholders, creditors and other stakeholders last year was “no longer being implementable as a result of the lapsing of the Sale Agreements” with Vision.

“The adopted Business Rescue Plan, proposed by Vision and approved by creditors in January 2024, was premised on a debt to equity exchange, failing which an asset sale transaction,” said the business rescue practitioners in a statement.

Under the transaction, Vision and Tongaat had agreed on the refinancing of the Industrial Development Corporation’s post-commencement funding facility of R2.3 billion into a structure assumed by Vision, funding of an escrow account in the amount of R517 million in respect of the South African Sugar Association (SASA) and provision of R75m for distribution to concurrent creditors.

Vision was seeking funding from the IDC to fulfil implementation of the Business Rescue Plan, especially components related to refinancing of the post commencement facility and satisfaction in relation to the amounts due to SASA.

Nonetheless, Vision and the IDC were unable to conclude binding funding arrangements, especially after Vision Group introduced new demands “that were never contemplated in, nor capable of accommodation” under the adopted Business Rescue Plan.

“These included funding requirements beyond the financing of the IDC PCF facility and the SASA escrow amount,” said Tongaat Hulett.

In January, Business Report reported that Vision Group had tabled regulatory demands to the South African governments such as the staying of SASA payments.

Business Report has gathered that relations between Vision Group and Tongaat Hulett as well as the IDC have soured over the past few weeks. This was confirmed by Tongaat Hulett which said it had received a letter of demand from Vision for approximately R11.7 billion, stated to be immediately due and payable.

It said this demand had “implications for Tongaat’s solvency and constitutes a material and immediate threat to the company’s continued” existence. And with Vision and IDC failing to agree on binding funding arrangements, the business rescue practitioners filed for liquidation.

SA Canegrowers said on Thursday that the “liquidation of Tongaat Hulett is a profound risk to the entire South African sugar sector and the million livelihoods that it supports” as it threatens “the earning potential of thousands of small-scale and large-scale growers” across KwaZulu-Natal and Mpumalanga. Moreover, Tongaat’s sugar mills, refining facility and cane-growing operations are an economic anchor for rural regions in the two provinces.

“If this operational continuity is not secured, the consequences will extend far beyond one company. The entire South African sugar value chain, starting with growers and flowing through to workers, transporters and downstream industries, will be severely destabilised,” said Dr Thomas Funke, CEO of SA Canegrowers. 

Liquidation also means that Tongaat will be prevented from selling their existing stock of refined sugar to manufacturers and retailers, which immediately stops critical cash flow to the company’s operations.

“Ensuring continuity of milling operations at Tongaat and protecting grower income must be an urgent priority for the government and the business rescue practitioners of Tongaat, irrespective of the eventual ownership outcome,” said Higgins Mdluli, chairman of SA Canegrowers.

“Tongaat’s liquidation will affect all of South Africa’s 27,000 small-scale and 1,100 large-scale growers,” added Mdluli.

BUSINESS REPORT