Tongaat Hulett: Why liquidation move threatens South Africa's sugar industry

SA Canegrowers says the proposed liquidation of Tongaat Hulett Limited South Africa places the entire sugarcane industry sector at risk of destabilisation.

The organisation was commenting after it was announced that Tongaat Hulett Limited's business rescue practitioners (BRPs) 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. Tongaat Hulett entered business rescue in October 2022.

In their statement, the BRPs said they did everything in their power to avoid, fully aware of the profound impact on employees, growers, suppliers, creditors, clients and the many families and communities whose livelihoods depend on the company.

“In the considered view of the BRPs, and based on objective grounds, there is no longer a reasonable prospect of implementing the adopted Business Rescue Plan or rescuing Tongaat as a going concern. This arises in material part from Vision and Industrial Development Corporation (IDC) not reaching agreement on binding funding arrangements and Vision’s continued pursuit of relief and write-offs which prevented final IDC approval.

“In these circumstances, and in compliance with their obligations under Section 141(2) of the Companies Act, the BRPs have no alternative but to apply to discontinue the business rescue proceedings and place Tongaat into provisional liquidation.”

SA Canegrowers said the liquidation, if approved by the court, is a profound risk to the entire South African sugar sector - all of South Africa’s 27,000 small-scale and 1,100 large-scale growers.

It said Tongaat’s sugar mills, refining facility and cane-growing operations are the economic anchor of entire rural regions and it called on the government and Tongaat Hulett to do everything possible to ensure that the future of the company is secured.

SA Canegrowers said 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.

It explained that 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.

“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.  

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