Embattled sugar giant Tongaat Hulett (THL), which has been in business rescue since 2022, may finally be on the skids.
At a townhall meeting on Wednesday morning, CEO Gavin Dalgleish informed staff that business rescue practitioners (BRPs) had filed a court application to provisionally liquidate the company.
However, later in the morning, staff were told “the [trade, industry and competition] minister [Parks Tau]” was intervening, an insider said.
In a slide during his presentation ― seen by Sunday Times ― Dalgleish said: “We know that this will be deeply distressing and difficult to receive, and how profoundly it affects you, your families, growers, suppliers, communities and all who depend on the continuation of Tongaat’s operations.”
He said BRPs had filed an application to discontinue business rescue proceedings and to place Tongaat Hulett’s South African operations into provisional liquidation. Those affected would be all employees, Sugar South Africa and the corporate office operations, he said, adding that “the impact extends to growers, suppliers, customers and all stakeholders within our value chain”.
Tongaat Hulett Developments would remain in business rescue, he said.
The critical importance of the continuation of Tongaat’s operations to the local sugar industry, both economically and socially, meant high-level interventions began immediately to avoid possible liquidation. The government, including the department of trade, industry and competition are now directly involved
— SA Canegrowers
But sources said staff were later informed of new developments, and that the minister is “trying to sort something out”.
THL and the BRPs did not respond to queries.
Tau’s spokesperson Kaamil Alli said the minister would not comment at this time. “There will be communication in due course,” he said.
In a letter to stakeholders, SA Canegrowers said the sale of THL’s South African business to the Vision Group has reached a “critical point”. Funding negotiations involving the Industrial Development Corporation (IDC) have not been successful and the sale agreement has “collapsed”.
SA Canegrowers said there is no intention to see the business simply shut its doors, and even in the event of liquidation “the most favourable path would be a funded liquidation where operations continue in order to preserve asset value.
“The critical importance of the continuation of Tongaat’s operations to the local sugar industry, both economically and socially, meant high-level interventions began immediately to avoid possible liquidation. The government, including the department of trade, industry and competition are now directly involved.”
Investor and Tongaat shareholder Dave Woollam said in December there were contradictory documents “floating around, some threatening liquidation and others allaying fears of it.
“We have marched on for a month and now it appears we are playing the same tune. And that is illustrative that they are entrenched in denial. It sounds to me like they are playing a pretty dangerous game of chicken.”
Tongaat’s greatest challenge has been the heavy burden of excessive debt it accumulated and not viability of the underlying businesses. Unfortunately the passage of time together with uncertainty, fighting and the lack of collaboration of all stakeholders has spilled over to those businesses that are now also weakened
— Dave Woollam, investor and Tongaat shareholder
Another shareholder, who did not wish to be named, said he believed part of the issue is the recent ruling by the Supreme Court of Appeal, which ordered that the distressed company is still liable to pay statutory industry payments to the South African Sugar Association (Sassa). This means Sassa is not an ordinary creditor that has to stand in line.
THL owed about R525m and nobody wanted to pick up the tab, the shareholder said.
The BRPs have applied for leave to appeal this ruling in the Constitutional Court.
According to BRP reports, the Vision Group has already settled THL’s estimated R8bn debts with the banks, though sources said it has not put up any of its own money to do this.
Also in the mix ― and what appears to be the cause of the latest crisis ― are the reportedly R5bn IDC loans, which have to be “refinanced and migrated” from THL to Vision, according to the business rescue plan.
In January the BRPs reported this was a requirement of the business rescue plan and “though these negotiations are taking longer than originally anticipated, Vision and IDC are continuing the process to resolve the outstanding matters as soon as possible”.
Woollam said he did not see what the minister could do in the short term, other than influence the funding negotiations between the IDC and Vision.
“Tongaat’s greatest challenge has been the heavy burden of excessive debt it accumulated and not viability of the underlying businesses. Unfortunately the passage of time — together with uncertainty, fighting and the lack of collaboration of all stakeholders — has spilled over to those businesses that are now also weakened,” he said.
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