Auditing and financial services firm Deloitte will pay struggling Tongaat Hulett R260m, as it was the sugar producer’s auditor in the years before huge fraud at the company was revealed.
The payment will be made without Deloitte admitting any liability for the financial misstatements at Tongaat. In 2018 it came to light that its financial position was inflated by R12bn thanks to backdated land deals, overvalued sugar-cane inventory and hidden expenses.
Deloitte was Tongaat’s auditor for the financial years from end-March 2012 to end-March 2018, and the sugar producer announced early in 2022 it had asked a legal team to negotiate a settlement with Deloitte.
Deloitte also settled with global retail holding company Steinhoff, agreeing to pay “up to” R1.3bn to institutional investors and pension funds without admitting any liability, even though it was the auditor before SA’s largest corporate fraud was uncovered in 2017.
Debt had been moved off the balance sheet into unknown companies and Deloitte claimed to have been “deliberately misled” through “complex management fraud” at Steinhoff.
Deloitte Consulting also repaid Eskom R150m in fees in 2020 after the power utility started legal action against it for improperly securing two tenders between 2016 and 2017.
In 2018 alone, Tongaat’s profit had been overstated by 239% and its assets by 34%, according to the Financial Mail.
Tongaat Hulett, which has more than R6bn in debt, is in business rescue, a form of bankruptcy protection, and remains suspended from trade on the JSE for having failed to release financial statements within the allowed time. Some of its former executives now face charges of fraud for producing false and misleading statements.
It has been in business rescue since October. The Companies Act requires practitioners to deliver plans within 25 days of starting rescue operations, but they are able to apply for extensions, which are not unusual due to the complexity of restructuring businesses.
The business rescue practitioners need creditors to vote on Friday for a third extension for the Tongaat business rescue plan, this time to the end of June. They expect to have an investor by mid-June and are limited by current funders the Industrial Development Corporation (IDC) from restructuring certain parts of the business until then.
The practitioners said they were in “ongoing [talks] with various stakeholders regarding the development of the business rescue plan as the process was a complex one”.
“Due to the complexity and various possible outcomes, the practitioners are of the view that publishing a plan based on currently available information will result in [one] containing speculation and insufficient detail to enable creditors to make an informed decision.
“The practitioners believe that a meaningful and detailed business rescue plan for stakeholders to vote on is essential,” they said.
With Michelle Gumede
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.