The business rescue practitioners tasked with resuscitating debt-laden Tongaat Hulett have vowed to make the outstanding R400m payment to thousands of cane growers, according to the SA Farmers Development Association (Safda).
The SA Canegrowers Association has requested urgent engagements with the president and the ministries of trade and agriculture to map out possible government financial intervention in the situation threatening the livelihoods of thousands of sugarcane growers and workers delivering cane to a number of Tongaat Hulett mills in KwaZulu-Natal.
The developments come after a planned meeting with the associations on Wednesday where the Tongaat business rescue team comprising Trevor Murgatroyd, Petrus van den Steen and Gerhard Albertyn engaged stakeholders who are said to be owed payments exceeding R400m for September cane deliveries.
Speaking to Business Day on Wednesday after the meeting Safda chair Siyabonga Madlala said the meeting with the practitioners was fruitful as “they’ve given an undertaking that they have confirmation the banks will fund the payment to growers”.
“They are at the stage where they just need to sign the relevant documents, so they’ve got approval from the bank that they will pay the outstanding amounts that were due by the end of October,” Madlala said.
More than 4,300 growers and 14,642 farm workers have been affected by Tongaat’s business rescue which began on October 27.
According to SA Canegrowers, an estimated R345m will become due at the end of November for October deliveries. In a statement the association said though the engagement with Tongaat’s business rescue practitioners was positive, it also highlighted the magnitude of the task at hand, and the need for government intervention to ensure that the Tongaat Hulett’s growers can survive while the business rescue process continues.
“This is why we have requested urgent meetings with the president, minister Patel, and minister Didiza to discuss what funding government can make available,” the association said.
“In order to ensure that the work done under the auspices of the sugarcane value chain master plan over the past two years to position the sugar industry for the future has not been in vain.”
A shutdown of the 130-year-old company would see nearly 15,000 permanent and seasonal farm workers out of jobs, devastating an already ailing economy characterised by stubbornly high unemployment.
In the fallout from SA’s largest corporate scandal, after Steinhoff, Tongaat has been battling since 2018 with a ballooning debt pile despite being granted multiple extensions by supportive lenders before the taps ran dry last month.
The KwaZulu-Natal-based sugar giant, with operations in Mozambique, Zimbabwe and Botswana, needs R1.5bn to repay current debt and finance its working capital.
Turnaround specialist Piers Marsden was appointed chief restructuring officer in June and presented the long-awaited restructuring plan to lenders in August before it was approved by the board in mid-October.
The proposition envisioned a sell-off of all sugar operations outside SA, the introduction of a five-year debt instrument, securing a sponsor to support the capital reinvestment required in local operations and progressing the respective legal action arising from the accounting misstatements and irregularities.
However, those plans were suddenly brought to a halt a few days later with lenders saying they are unable to support the restructuring plan.
By implication, this meant that the additional funding required would not be provided and the repayment date for the borrowing base facility would not be extended.
In a notice that Tongaat Hulett released late last week, it told shareholders it appears to be “reasonably unlikely that the company will be able to pay all of its debts as they fall due and payable within the immediately ensuing six months”.
Tongaat attributed its latest problems to a R369m loss of sugar at a refinery, a depressed property market, the withdrawal of support by a credit insurer and significant cost increases
in commodities and raw materials as a result of Russia’s Ukraine invasion.
The business rescue practitioners said they were concentrating on “immediate actions” to stabilise the situation while communicating with stakeholders, including farmers, as the legal rehabilitation of the financially distressed company gets under way.
“These are very complex circumstances and the business rescue practitioners are working hard to stabilise the situation, gather important information, meet stakeholders, deal with critical issues and the statutory duties required in terms of the Companies Act,” they said.
While Tongaat has confirmed it is handing over to the business rescue practitioners it said last Thursday there are existing shareholders and potential new equity holders who are willing to support the recapitalisation subject to the existing operating footprint being retained. This is a condition the company will have to consider carefully as it goes against the grain of Marsden’s plan to downscale and dispose of non-SA sugar operations.
Tongaat said its investors had indicated, that they would be open “in principle” to advance post-commencement funding subject to certain conditions. Those include the lenders being comfortable with the business rescue practitioners and the chief restructuring officer being retained. “There remains a reasonable prospect of rescuing the company,” it said.
Note: November 3 2022
An earlier version of this story referenced documents released by Tongaat Hulett on Tuesday, while some of those documents had been released last Thursday.
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