The SA Sugar Association (SASA) and RCL Foods want to interdict the Tongaat business rescue vote, in which creditors will choose a buyer for the firm, from going ahead on Friday.
This is because Tongaat has not paid R1.1bn in levies owed to the industry and the sugar producer lost its court bid last week to have those levies suspended under the business rescue process. Tongaat has been in business rescue since October 2022 and creditors, including banks, are supposed to choose a buyer for the business, ending a 14-month process.
A last-minute court decision that Tongaat had no legal basis to suspend paying the levies from October 28 to March could delay things further.
The sugar levy paid to SASA by farmers and millers, is part of a redistributive mechanism in a highly regulated industry that ensures all farmers get the same price per tonne of sugar and larger mills subsidise smaller players. It is part of the sugar industry agreement, which is a legally binding contract.
When indebted Tongaat did not pay the levies, farmers and other millers such as RCL paid in extra, but it appears SASA wants to recoup that money. RCL paid in about R234m more than it should have.
Tongaat had applied to the Durban High Court to order that levies could be withheld during business rescue in the same way money owing to creditors is not paid and dealt with later.
It lost the case last week.
On Monday, when giving his reasons for the decision, judge Rashid Vahed said the levies were part of the "usual cost of doing business" for which there was no moratorium and they were considered statutory or owing to a government-type body.
Other statutory obligations payable, such as tax, are not suspended during business rescue. However, the judgment did not specify whether it has to repay the R1.1.bn.
The SA Cane Growers, which represents more than 20,000 sugar farmers, said the lack of clarity meant "the matter has not been put to bed".
RCL Foods, which owns Selati sugar, and SASA, however want the money and believe the two potential buyers of Tongaat have not detailed in their bids how they will pay it.
RCL told Business Day that it "is working with SASA, is working with the BRPs to find a positive way forward to recover the outstanding money owed as per the high court judgment".
"The business rescue plans which have been published to date don’t allow for the full settlement of the outstanding R1.1bn commitment owed by Tongaat Hulett to SASA from the 2022/23 milling season.
"Unless a fair settlement is allowed for in the plans, SASA together with RCL Foods intends to interdict the voting on these business rescue plans."
Asked if it was interdicting the vote from going ahead, SASA executive director Trix Trikam said: "it is currently under consideration".
Business Day asked the business rescue practitioners Metis Strategic Advisors if they would consider appealing the judgment, or paying the outstanding levies or the updating business rescue plans that detail the bids. They would not comment. They would only say they are studying the judgment.
Of the two bidders for Tongaat, creditors will need to vote on which one offers them the best deal for their debt.
Mozambican agriculture and consumer group RGS promised to pay most of the debt owed to Sasa in four equal instalments over 12 months. It has offered the most generous business rescue plan to creditors and could easily win the vote to buy the firm.
Robert Gumede’s consortium, named Vision, does not offer much towards the levies owed to Sasa.
Gumede’s group said last month the consortium had signed a deal with banks to buy their debt worth R7.7bn and take their majority vote over who could buy Tongaat.
However, it does not appear that Gumede has concluded the deal to buy the lenders’ claims meaning he will not take over their majority vote and is not guaranteed to get the business.
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