Cash-strapped Tongaat Hulett (THL) has suffered a setback after the high court in Durban denied it leave to appeal against its November judgment that it pay levies due to the SA Sugar Association (Sasa).
The court on Monday found THL had fallen short in articulating reasons why it believed a different court would arrive at a different conclusion.
“There is one entity that claims that the matter is of importance to the industry, that is the applicants, and it is worthy of observation that the applicants’ contentions as to public importance are coextensive with their personal interests in maintaining that the main judgment was wrong on the merits. That cannot be a matter of compelling public importance for the sugar industry,” judge Rashid Vahed ruled.
“The sugar industry, being every ‘player’ other than THL, appears entirely satisfied with the outcome. The interest of the BRPs [business rescue practitioners] is confined to that capacity (that the entity sought to be rescued) and is not in any way connected to the world of business rescue generally. I am not satisfied on any score that the application for leave to appeal ought to be granted,” he said.
Vahed in November dismissed THL’s application to suspend the miller’s payment obligations arising out of the sugar industry agreement.
The effect of this was that BRPs at Tongaat Hulett and Gledhow cannot suspend the obligation to pay what was due to the SA Sugar Association (Sasa) at the end of March 2023, which was not paid at the time due to the business rescue practitioners’ contention that the business rescue process took precedence over industry arrangements.
THL is the oldest sugar milling company in SA and the mainstay of the country’s sugar industry. It is estimated that the company’s trading activities contributed about R11bn to the GDP of the country in 2021, producing 25%-27% of the volume of sugar produced domestically per year.
Fraud committed by the group’s former executives, who are facing criminal charges brought the company to its knees. By the time it entered business rescue, it had about 1,000 creditors, with cumulative claims amounting to about R10.4bn.
The money that is due to Sasa is more than R500m.
The sugar levy paid to Sasa is part of a redistributive mechanism in a complex, regulated industry that ensures all farmers get the same price per tonne of sugar and larger mills subsidise smaller players.
Vahed said one of the reasons for declining leave to appeal was that the effect of his original findings were that obligations that were imposed by statute could not be suspended.
“Wrapped up in that suggestion was also the suggestion that the effect of my finding is subversive of business rescue and that inevitably it would have led to liquidation. I have found that the payment of the obligations due to Sasa is simply the cost of doing business and without more that must be considered to be a fact of life within the sugar industry,” Vahed said.
“However, if the spectre of continued payment of those dues had led to liquidation then the charges we are concerned with in this matter would not have arisen because THL would not have continued in business as it has for the period of business rescue. That is not subversive of business rescue but, instead, subversive of a “business rescue” where the costs of doing business are not paid.”
Robert Gumede’s consortium, Vision, earlier this year acquired THL’s debt for an undisclosed sum by buying banks’ claims amounting to R8bn. The deal is a debt-for-equity swap, meaning the banks’ debt is now owed by Vision.
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