Tongaat Hulett and the governance gap between reporting and reality

How does an organisation with established reporting systems, external audits and formally constituted governance structures unravel to this extent? The provisional liquidation of Tongaat Hulett (Tongaat) provides a stark answer. For decades, it operated as a significant player in agriculture and property sectors, embedded in regional economies and listed on the JSE. Its decline has been gradual, complex and at times, contested. Yet, the liquidation process forces a question that lingers long after the headlines fade: what were the boards seeing and what were they missing?

Tongaat did not collapse in a vacuum. Like many entities that encountered a similar fate, financial statements were published, board meetings convened and assurance processes executed. Reports were structured and professionally presented. Risk frameworks were documented. Audit opinions were issued. From the outside, there was an architecture of governance that appeared intact. Yet, subsequent investigations revealed accounting irregularities, asset overstatements and financial distortions that materially altered the company’s position once corrected.

The governance lesson here is uncomfortable. It challenges the assumption that institutional oversight automatically translates into organisational resilience.

At Tongaat, the board saw approved numbers and heard explanations that framed complexity as legitimate business structure. Less visible were the pressures embedded in those numbers, the sustainability of certain assumptions and the cumulative impact of aggressive accounting positions. Once restatements occurred, the magnitude of distortion became clear. By then, market confidence had already fractured.

This dynamic is amplified by how information travels within organisations. Boards govern at a distance. They do not generate the numbers but receive them through layers of aggregation and judgement. Data passes from operational source to board table via management selection, framing and interpretation. Executives determine what constitutes material board-level information. Control functions assess thresholds for escalation. Language is refined. Tone is moderated. What begins as operational strain can be reframed as a manageable variance. What appears as a systemic weakness may be described as an isolated issue under review. The danger arises when this filtering delays or dilutes signals that require timely board attention.

In the Tongaat case, warning signs existed long before liquidation. External scrutiny intensified. Questions were raised about asset valuations and revenue recognition. Restatements followed. Yet, the cumulative picture that eventually emerged suggests that critical information either did not reach the board with sufficient urgency or did not trigger sufficiently robust intervention when it did.

A comparative lens can be applied to the case of the South African Post Office (SAPO). Its trajectory differs in detail but not in governance pattern. SAPO did not present inflated profitability. Its distress was visible in persistent losses and liquidity pressure. Yet, routine reporting continued. Financial updates were tabled. Oversight committees functioned. Governance mechanisms remained in place even as operational capability eroded.

For years, the organisation experienced declining service standards, infrastructure deterioration and mounting liabilities. Each update to the board captured elements of strain, yet deterioration became normalised. Chronic losses were discussed within established governance forums. Plans were developed and interventions were proposed. What did not occur was sufficiently decisive organisational reform before insolvency pressures forced business rescue.

In both cases, information existed. The failure lay in the gap between reported performance and the deeper organisational condition, and in how those charged with governance responded to that gap.

Reliance on reporting frameworks creates a particular cognitive risk. Dashboards privilege measurable indicators, while risk registers categorise exposures against appetite statements. Assurance reports confirm whether controls are designed and operating as described. Without these essential tools, boards would operate blindly. Yet they rarely capture cultural strain, internal pressure dynamics or the sustainability of underlying assumptions.

When performance indicators appear orderly, fragility can hide in plain sight. A board pack can present clean numbers that comply with accounting standards while underlying business fundamentals deteriorate.

Both cases reveal that rescue frameworks are too often treated as the moment of failure. They are not. By the time an organisation enters business rescue or liquidation, governance weakness has been unfolding for years. The formal event is the endpoint of a gradual erosion in which warning signs were either softened, deferred or absorbed into routine reporting.

This raises difficult questions for boards.

How frequently do directors interrogate the assumptions underlying reported numbers rather than focusing only on the outputs? How often are escalation pathways tested to ensure that control functions can surface uncomfortable findings without dilution? Do boards actively examine what is absent from reporting as rigorously as what is present?

Another lesson concerns the distinction between compliance and resilience. Both Tongaat and SAPO operated within regulatory and governance frameworks. Compliance with process did not guarantee sustainability. Governance must, therefore, extend beyond verifying that procedures have been followed. It must probe whether the organisation remains fundamentally sound.

This requires intellectual independence from the reporting format itself. Directors must remain alert to the possibility that structure can create an illusion of control. The presence of detailed documentation should prompt inquiry, not complacency.

It also requires attention to how information is framed. Language matters. Describing a problem as “contained” carries a different weight than describing it as “escalating.” Characterising a loss as “temporary” shapes perception differently than acknowledging structural decline. Boards need to be attentive to narrative tone and to request alternative framings where appropriate.

None of this implies that boards should abandon trust in management. Effective governance depends on trust. Trust without verification is vulnerability. The responsibility of directors is not to assume distortion but to test the integrity of information flows consistently.

The provisional liquidation of Tongaat is a stark reminder that visible compliance does not equate to underlying robustness. The failure of SAPO demonstrates that structured oversight can coexist with operational decay if escalation systems are weak or intervention is delayed.

The governance challenge is therefore clear. Boards must ensure that routine reporting does not become a comfort blanket that obscures structural fragility. They must create pathways where difficult information travels early and directly. They must interrogate not only performance outcomes but the sustainability of the assumptions that generate them.

Business rescue and liquidation attract public attention. The real work of governance occurs long before those moments. It unfolds in how information is filtered, how risk is framed and how early warning signs are treated.

If there is a single lesson from these two organisations, it is this: reporting can reassure even as reality unravels. The task of governance is to detect that divergence while there is still time to act.

* Nqobani Mzizi is a Professional Accountant (SA), Cert.Dir (IoDSA) and an Academic.

** The views expressed do not necessarily reflect the views of IOL or Independent Media.

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