While lawyers, bidders and business practitioners face off in boardrooms and courts over the impending liquidation of Tongaat Hulett, sugarcane farmers are losing sleep.
Growers in KwaZulu-Natal are concerned that retention payments owed by mills could be delayed or even lost if Tongaat Hulett goes into liquidation.
It emerged earlier this month that the sugar-processing giant’s strategic equity partners, Vision consortium, filed for provisional liquidation after a breakdown in funding talks with Industrial Development Corporation (IDC).
These developments have shaken the sugar sector, with estimates showing that an unfunded liquidation could affect 18,000 growers and threaten the livelihoods of more than a million people who depend on the sugar sector.
While the long-term future of the company remains the central concern in the industry, uncertainty over the disbursement of this season’s “retention fee” has emerged as one of growers’ most immediate fears.
A retention fee is money that milling companies withhold from farmers, about 10%, to account for fluctuations in the sugar price.
Pratish Sharma, a fourth-generation commercial farmer and director of the SA Canegrowers, warned that even a small withheld payment can decide whether many farmers survive the off-season.
“Growers are paid based on deliveries at a provisional price. If a milling company goes into liquidation, there is uncertainty about whether that 10% will be paid out. For many, that retention represents the farmer’s entire profit for the season.”
The timing makes the problem worse. The milling season usually ends in late November, with farmers receiving their final payment in December. After that, there is no income until the next season.
But the off-season is neither quiet nor cheap. Farmers must spend money on replanting, fertiliser, weed control and preparing land for the next season.
“By this time, most farms have used up their cash. Without the retention payment, many growers may not make it to April, when the payment would normally be finalised. For many, that 10% is the difference between getting through the off-season or facing real financial trouble.”
Mndeni Shozi, who farms about 40 hectares near Empangeni, 35ha of which is sugar cane, told Sunday Times the retention payment is crucial for his farm and his family.
“The retention fee is money that legally belongs to us, it is money that Tongaat Hulett owes growers,” Shozi said.
“We are deeply concerned about what will happen if the court orders liquidation tomorrow. Our fear is that the money could be tied up in the process instead of being paid out to us first. That uncertainty is causing real anxiety.”
He explained that farmers plan their budgets around the retention and often take on debt expecting the payment to come through by the end of March.
“Everyone we owe has trusted that payment ― lenders, suppliers, even shops. Without it, we will have no money to restart work. We won’t have funds to prepare the land, buy seeds or fertiliser, or start work again. That is when the real crisis begins. Businesses will fall behind. Farmers will struggle. Life on the farm will stop.”
Since the news of possible liquidation, Shozi said growers have been living under constant anxiety.
“Sleep is difficult. At first, many of us did not fully understand what liquidation meant. Now we do, and the fear is real. Everyone is asking: what will happen to us? We have no clear answers.”
Shozi also warned of wider repercussions for the economy.
“This is the largest agricultural company in the province. Thousands of people depend on it, especially for employment. On my farm alone, I employ 15 permanent workers, all from disadvantaged families, plus seasonal workers during the harvest.”
Vision consortium’s provisional liquidation application on Tongaat Hulett will be heard in court on Friday.
AmaZulu King Misuzulu KaZwelithini met the consortium’s leadership on Wednesday to discuss ways to save the company from liquidation, which has raised hope among the growers.
“We have heard that His Majesty has pledged to fight to ensure the company does not collapse. We are holding on to that hope while we wait to see what happens.”
Shozi urged government to intervene, not just focus on internal company issues.
“Management changes and strict monitoring can be implemented to restore stability. That would give growers confidence and hope.”
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