29-04-2025
Business Rescue puts Tongaat Hulett back on track
During this adversarial process the BRPs and Tongaat Hulett's senior leadership remain resolutely committed to implementing the Vision business rescue plan.
Image: Supplied
By Dave Howells
Tongaat Hulett is unquestionably one of South Africa's most vital sugar producers. Tongaat Hulett continues to operate effectively and is firmly on the road to recovery in anticipation of the successful implementation of its business rescue plan.
Business rescue is, by nature, a complex process that requires a careful balancing of competing interests while providing a lifeline to companies teetering on the brink of collapse. In the case of Tongaat Hulett, this lifeline has not only sustained the business and those who rely on it but also positioned the company to play a crucial role in securing the long-term sustainability of the sugar industry.
This achievement is even more remarkable considering the company's dire situation just three years ago, when it lost R12 billion in value due to alleged accounting fraud committed by former senior executives.
In consequence of the resultant financial distress occasioned by this alleged malfeasance, Tongaat Hulett entered business rescue in October 2022. The immensity of the challenge it then faced cannot be overstated: avoiding liquidation, stabilising operations, and, most importantly, protecting the thousands whose livelihood is and remains tied to its sugar and animal feed businesses.
While civil and criminal proceedings against the former executives continue to progress slowly, we are pleased that the business rescue process is now nearing its conclusion. This is despite ongoing efforts by third parties to derail the process through vexatious and unsuccessful court challenges, which have cost money and diverted focus from the core objective: saving Tongaat Hulett's operations.
The success achieved thus far is the result of collaboration between all stakeholders who are, and remain committed to developing and executing a viable business rescue plan that ensures long-term recovery.
To this end, several potential Strategic Equity Partners were invited to participate in a bidding process. Following extensive engagement and multiple rounds of due diligence, the business rescue practitioners (BRPs) published two separate business rescue plans one from each of two consortiums, namely Vision Parties and RGS, in December 2023, for creditor consideration.
However, late in the day before the scheduled meeting to vote on the two business rescue plans, RGS withdrew its proposed plan, leaving Vision's proposed plan as the only viable business rescue plan for creditors to consider.
On 11 January 2024, Tongaat Hulett's creditors adopted and approved the Vision business rescue plan in terms of section 151 of the Companies Act 71 of 2008, with an overwhelming 98.5% of the vote in favour.
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This alternative option was also approved and adopted by the majority of creditors at the 11 January 2024 meeting referred to above. This remains a core element of the Vision business rescue plan and is being carried out with confidence and in strict accordance with due process.
A critical part of the rescue effort has been securing funding to maintain operations. Thanks to substantial post-commencement support from the Industrial Development Corporation (IDC), Tongaat Hulett has successfully continued to run its mills in Maidstone, Amatikulu, and Felixton, as well as its refinery and animal feeds facilities. This has enabled continued employment, stable cane procurement from growers, and consistent production.
Over the past three years, Tongaat Hulett has allocated R1.425bn to essential off-crop maintenance, ensuring the reliability and efficiency of its sugar operations. In the 2024/2025 season alone, R460 million has been spent during the off-season to prepare the mills and refinery to receive cane when harvesting begins in a few weeks.
One of the more difficult, but necessary, decisions made during the rescue process was the temporary suspension of payments to the South African Sugar Association (SASA), in line with Section 136 of the Companies Act 71 of 2008. This decision was taken to preserve cash flow at a critical juncture and support the business's long-term survival.
To obtain legal clarity on whether charges imposed by (SASA) such as levies under the Sugar Industry Agreement may be suspended during business rescue, the BRPs approached the KwaZulu-Natal High Court for a declarator in this regard. The Court ruled that such charges may not be suspended, a decision the BRPs believe carries serious implications for future business rescue efforts across South Africa and for Tongaat Hulett.
Tongaat Hulett and the BRPs have appealed to the Supreme Court of Appeal (SCA) to seek clarification on the proper interpretation of Section 136(2)(a)(ii) of the Companies Act. While the appeal is pending, it is required that the disputed funds will be placed in escrow in accordance with the approved plan.
Currently, the business is well-positioned to continue its transition toward a stable and sustainable future under the eventual ownership of Vision. Once Tongaat's business is transferred to Vision in terms of the business rescue plan, we are confident that the turnaround and strategic repositioning of Tongaat Hulett's business will continue to ensure that Tongaat Hulett remains a vital economic contributor in KwaZulu-Natal and across South Africa.
Dave Howells is Managing Director of Tongaat Hulett Limited's South African Sugar business.
Image: Supplied
* Dave Howells is Managing Director of Tongaat Hulett Limited's South African Sugar business.
** The views expressed do not necessarily reflect the views of IOL or Independent Media.
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