Tongaat Hulett agreed to pay a R20m fine for misleading disclosures, a penalty that drew criticism from at least one investor for inflicting more pain on shareholders of the former blue-chip in the middle of recovering from a devastating accounting scandal.
The Financial Sector Conduct Authority (FSCA), the country’s top capital markets regulator, slapped the sugar producer with a R118.3m fine for publishing deceitful financial information over a six-year period, but the watchdog slashed the sum to R20m, acknowledging the company’s co-operation during the investigation and seeking to limit harm on investors.
But Chris Logan, chief investment officer at Opportune Investments, said the fine was still not fair to shareholders, who have watched in dismay as billions of their investments got wiped off on the back of revelations of dodgy bookkeeping practices under which revenues and valuations of assets were overstated.
The fine was like “bayoneting the wounded”, said Logan, and “further prejudices shareholders who have already been decimated by the shenanigans at Tongaat”.
Shares in Tongaat ended 3.47% lower at R5, bringing losses from the 2014 peak of about R134 to more than 97% and as weak operational performance over the years coincided with the scandal that forced the company to write down assets by R12bn, or 34%.
Logan’s comments could also shine an unforgiving spotlight on what action has been taken against former executives fingered in an investigation report by PwC as being behind the financial misconduct more than a year after Tongaat opened a criminal case against them.
The sugar company, which is also seeking to recover bonuses paid to former executives allegedly responsible for the scandal, said earlier in August that a decision by the National Prosecuting Authority (NPA) on charges against former executives could be made in the next three to six months.
The FSCA said Tongaat has committed “to continue co-operating fully with the FSCA in all future actions taken against any persons allegedly responsible for the wrongdoing”.
In July, Tongaat accepted a R7.5m fine, which was also reduced to R2.5m, from the JSE for the financial misconduct. A JSE investigation into individuals was continuing, the bourse operator said at the time.
For Tongaat Hulett CEO Gavin Hudson, the FSCA fine, which is small for a company with more than R17bn in annual revenues, closes another messy chapter in the scandal and allows him to focus on the operational revival of the company.
“We are happy that this period is now behind us,” he said. “We have made enormous progress to turn our company about and introduced rigorous new governance processes across Tongaat Hulett. We’re looking to the future with confidence.”
Hudson has drawn up a turnaround strategy that includes slashing the company’s R13bn debt by 60%, tapping shareholders for about R4bn and selling noncore assets/ With Tiisetso Motsoeneng
Update: August 24 2020
This article has been updated with additional information throughout.
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