The Tongaat Hulett Limited business rescue practitioners have approached the high court for the provisional liquidation of the company following a collapse in discussions around funding for the acquisition of the company by the Vision consortium. The liquidation of Tongaat Hulett is a profound risk to the entire South African sugar sector and the million livelihoods that it supports. A liquidation will directly threaten the earning potential of thousands of small-scale and large-scale growers across KwaZulu-Natal and Mpumalanga. Tongaat’s sugar mills, refining facility and cane-growing operations are the economic anchor of entire rural regions.
SA Canegrowers, and the tens of thousands of growers we represent, continue to call on the government and Tongaat Hullet and to do everything possible to ensure that the future of Tongaat Hulett is secured.
If an unfunded liquidation proceeds, the growers supplying Tongaat’s three mills, as well as the entire industry, will face immediate non-payment for cane, levies and other legislated funding requirements. Operations at the mills will immediately cease and many growers in the Tongaat-serviced areas will immediately lose access to the only mechanism to process their sugarcane. Because sugarcane must be milled soon after harvesting to ensure a viable yield and due to the distance to other mills, it will leave vast amounts of this season’s sugarcane unmilled.
Liquidation may also mean 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, thereby all but ensuring the underlying asset value is diminished.
“The underlying value of the company rests in functional, operating assets – mills that are running, cane that is being processed, and a supply of refined sugar that flows to the market. 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.
“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.”
The critical importance of Tongaat Hulett’s operations to South Africa’s economy and the stability of rural communities is hard to overstate. Tongaat Hulett operates three sugar mills and is the country’s only refiner of white sugar, used in beverages, biscuits, and confectionary.
The potential liquidation of Tongaat also comes at a time when the local sugar industry is battling with unprecedented sugar imports displacing local sugar from retailers and food and beverage manufacturers.
“The South African sugar industry is already under immense pressure – from the surge of deep-sea imports displacing locally grown sugar, to the continuation of the Health Promotion Levy, a policy for which no credible evidence of effectiveness has been presented. 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,” said Mdluli.
SA Canegrowers stands ready to work with all stakeholders to safeguard milling capacity, protect growers, and secure the long-term sustainability of the industry.
ENDS
NOTE TO EDITORS:
Timeline of Tongaat Hulett business rescue process
27 October 2022 – Tongaat Hulett Limited and Tongaat Hulett Development Proprietary Limited formally entered voluntary business rescue in South Africa due to financial distress and an inability to meet debt obligations.
November 2022 – Business Rescue Practitioners, Metis Strategic Advisors requested extensions to publish a business rescue plan as required under law.
9 January 2024 – After RGS Holdings abandoned its competing rescue plan, Vision consortium’s plan remained as the remaining option before creditors.
11 January 2024 – Creditors approved the Vision business rescue plan; this involved Vision acquiring assets and assuming substantial debt subject to conditions.