Sugar producer Tongaat Hulett, one of KwaZulu-Natal’s biggest employers, is likely to be sold to Tanzanian multimillionaire Nassor Seif, whose companies include a logistics firm, a car distributor, a trailer manufacturer, a tyre maker, sugar farms and a Middle-Eastern sugar processing company.
Business rescue practitioners Metis Strategic Advisors announced Kagera Sugar as the preferred buyer on Friday, after whittling down a list of 70 interested offers and initially settling on eight serious parties. The sugar firm is part of a Tanzanian group of companies known as the Super Group.
A consortium of local sugar farmers had also hoped to buy the SA division of Tongaat as it wished to have some control of a sugar processor that is integral to their livelihoods.
The business rescue advisers say they chose Kagera as it has both expertise turning around ailing companies and the capital needed for investment. Tongaat’s milling equipment is ageing and the company requires significant investment, due to underspending on maintenance and machinery in recent years.
There is great interest in the survival of Tongaat, as it mills about 25% of SA’s sugar crop and is essential to the KwaZulu-Natal rural economy and the livelihoods of 20,000 mostly small-scale farmers.
As a result of its importance to the provincial economy, the buyer must be scrutinised, said Chris Logan, chief investment officer at Opportune Investments.
Tongaat was placed in voluntary business rescue, a process aimed at averting bankruptcy, in October, as the company’s debt far exceeded the value of its assets. Creditors select the potential buyer in September when they also vote on a business rescue plan.
It is likely the Industrial Development Corporation (IDC) has had some say in the decision as the bank is closely involved in the business rescue process, having provided millions to keep Tongaat going.
It is hard to glean information about Kagera as it does not have a website and little is publicly available about Seif, who is also referred to as Seif Ali Seif.
According to Norfund, a Norwegian government-owned fund for investment in developing countries, Kagera is the third-largest sugar producer in Tanzania. Norfund provided it with a development loan in 2020 to expand its production capacity.
The Kagera loan was part of Norfund’s mandate to invest in the poorest countries, where there is constrained access to capital and a tough business environment.
Due to the dearth of information online, Business Day asked business rescue practitioners Metis Strategic Advisors’ public relations team for information on the new buyers. It said:
- Super Group has more than 30 years experience in sugar and agriculture in Africa, with a proven track record of turning around and rehabilitating businesses into stand-alone profit making firms concerns;
- The group owns various industrial businesses in East Africa. This includes Pipe Industries, a pipe manufacturer with headquarters in Dar es Salaam, Tanzania;
- The group owns two sugar estates in Tanzania (Kagera and Mtibwa) which contribute more than 45% to the Tanzanian sugar market, plus another sugar estate in Democratic Republic of Congo (Sucrerie du Kivu);
- Sucrerie du Kivu is a recently rehabilitated sugar mill and estate, which is expected to produce 50,000 tonnes of sugar per year in full-scale operations;
- The shareholders also own sugar refineries in Oman and Bahrain. They target producing 1.2-million tonnes per annum of refined sugar in Oman and 660,000 tonnes per annum of refined sugar in Bahrain;
- Kagera Sugar in Tanzania has an annual production of about 150,000 tonnes of sugar; and
- Mtibwa Sugar Estates in Tanzania has an annual production of 75,000 tonnes of sugar.
In 2022, a majority stake in Tongaat was almost sold in a complicated rights issue process to the Rudland family, who owns tobacco farms in Zimbabwe and whose assets in SA were seized by the SA Revenue Service (Sars) a year ago.
In court papers, Sars accused Simon Rudland, his business partner and his firm Gold Leaf Tobacco, of “tax evasion”, being “obstructive” and being part of the illicit cigarette trade. Pressure from shareholder activists led to a complaint at the takeover regulation panel on a technicality, which ultimately scuppered the Rudland deal.
This saga has led to great interest in who the new owners of Tongaat are. The business rescue practitioners said: “Kagera’s exposure to complementary sugar assets in Tanzania and the Democratic Republic of Congo offers relevant technical and operational knowledge to assist the turnaround of Tongaat’s SA sugar assets.
“In addition, the sugar refineries in Oman and Bahrain will provide access to world-class technologies and expertise to improve efficiencies.”
Metis had not wanted to break up the Tongaat assets. “Continuing to operate the Tongaat Sugar assets as a combined multicountry group will ensure continuity for the operations in Mozambique, Zimbabwe and Botswana.”
Kagera Sugar MD Seif said: “The acquisition is in line with the group’s overall strategy to expand its operations throughout Africa, and its vision of becoming a leading sugar producer on the continent.
“The group is committed to investing significantly in the operations to modernise the plants and expand them to increase production and efficiencies.”
Tongaat’s troubles began after fraudulent activities, discovered in 2018, showed a R12bn shortfall in the accounts.
Update: July 21 2023
This story has been updated with detail on Kagera from Tongaat Hulett’s business rescue practitioners.
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