Tongaat Hulett's stakeholders, including thousands of small scale sugar cane farmers, will be relieved that the Business Rescue Practitioners have been able to withdraw their provisional liquidation application.
Image: Simphiwe Mbokazi/Independent Newspapers
The future of a modern South African sugar industry and 250,000 jobs across the sector value chain were secured for now, after agreements were reached that allowed Tongaat Hulett’s provisional liquidation application to be withdrawn.
This was according to the SA Canegrowers, which was reacting to a Durban High Court decision early Wednesday to allow the joint Business Rescue Practitioners (BRPs) of Tongaat Hulett (THL) to withdraw the company's provisional liquidation application. The BRPs warned, however, that the future of the company remains under threat due to a massive increase in dumped sugar imports.
“With the liquidation of Tongaat Hulett off the table, we hope its mills and refinery can now focus on operating without interruption. More than 17,500 sugarcane growers rely on Tongaat,” said Higgins Mdluli, chairman of SA Canegrowers.
Tongaat Hulett operates three sugar mills and the country’s biggest refiner of white sugar. For more than 130 years, the company has been a cornerstone of the industry, which supports more than one million livelihoods.
The withdrawal of the provisional liquidation application by the BRPs follows progress being made between Vision Group, the black-owned company that won a bid to take over Tongaat after the business rescue process, the BRPs, and the Industrial Development Corporation (IDC) on a way forward to implement the adopted Business Rescue Plan.
Robert Gumede, on behalf of Vision, the second biggest employer in Zimbabwe and Mozambique after government employees, said the agreement will see the IDC become a significant shareholder in Vision operating companies across South Africa, Zimbabwe, Mozambique, and Botswana, while extending post-commencement finance support to the end of September 2026.
“It also provides a basis for preserving about 250,000 jobs across the sugar industry value chain and for concluding the steps required for Tongaat Hulett to exit business rescue,” said Gumede.
Vision will provide the funding required to settle and address creditor claims, including the company's obligations to the South African Sugar Association. 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.
IDC CEO Mmakgoshi Lekhethe said the agreement demonstrated the organisation's commitment to support an outcome that safeguards productive capacity, protects livelihoods across the sugar value chain, and creates a platform for long-term recovery.
The BRPs had launched the provisional liquidation application in October 2023 as a last resort, and in compliance with their statutory obligations, after the parties initially failed to reach an agreement on financing the company, and the BRPs believed, at the time, that there was no prospect of saving the company.
“The BRPs have consistently recognised the dire consequences that liquidation would have for employees, growers, suppliers, creditors, and the broader communities that depend on Tongaat Hulett and the sugar value chain,” the BRPs said on Wednesday.
They said two requirements had needed to be fulfilled for them to be in a position to consider withdrawing the application.
The first was securing sufficient liquidity to support Tongaat's ongoing operations; and the second was to conclude a transaction capable of achieving the adopted Vision Business Rescue Plan.
“Significant progress has now been made on both requirements,” the BRPs said.
Firstly, the IDC agreed to extend Tongaat Hulett’s R2.75 billion PCF (post-commencement finance) facility to September 2026, from the end of this month, providing continued liquidity to support the company's operations while the implementation of the business rescue transaction proceeds.
Secondly, the IDC, Vision, and THL concluded an agreement that includes arrangements relating to the refinancing of the PCF facility, treatment of the South African Sugar Association (SASA) obligation, the concurrent creditor distribution, and the conclusion of new sale agreements.
Mdluli said the agreement 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.
The BRPs also admitted they were “relieved and deeply grateful” that they were no longer required to pursue the liquidation application, an outcome “all stakeholders have worked to avoid.”
They said, however, that while the withdrawal of the liquidation application and extension of the PCF were positive developments, the underlying structural challenges in the local sugar industry were not resolved, including the growing influx of cheap imported sugar.
“Unless these challenges are urgently addressed, they will continue to pose a material risk not only to Tongaat Hulett’s recovery but to the long-term sustainability of the broader industry,” the BRPs said.
South Africa is experiencing record-high levels of imports, with an estimated 111,696 tons of deep-sea sugar imported or anticipated in the first three months of the current season alone.
“This is a fast-unfolding emergency that demands decisive action. If a South African sugar industry is to survive in the short term and thrive in the long term, imports must be curtailed immediately," the BRP's said.
Mdluli said Tongaat Hulett’s mills had continued to be operational, even as the liquidation hearing was looming, in part owing to bridging funding from the IDC.
“As a unified industry, we can also address other immediate challenges facing us. 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,” said Mdluli.
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