The impending acquisition of Tongaat Hulett is set to boost local agriculture and small-scale farmers after the Vision Consortium secured conditional approval from the Competition Commission to buy the troubled SA sugar producer.
The commission’s endorsement of the acquisition by the consortium, led by Robert Gumede, comes with stringent conditions aimed at safeguarding the interests of local agriculture and historically disadvantaged people (HDPs).
As part of the conditions, Vision is expected to increase Tongaat’s sugar cane cultivation area over six years and prioritise procurement of sugar cane feedstock from HDPs for sugar and animal feed production within five years.
The company must also provide financial support along Tongaat’s agriculture value chain, establish broad-based trusts benefiting small-scale growers and employees, and allocate equity within the company to enhance employee and small-scale farmer participation.
Addressing concerns about potential job losses, the commission imposed a three-year prohibition on merger-related retrenchments, ensuring continuity for Tongaat’s workforce during the transition.
Once a cornerstone of the nation’s sugar industry, Tongaat is in dire financial straits after a R3.5bn accounting scandal came to light in 2022. The scandal led to the company losing about R12bn in market value before being suspended from the JSE.
Tongaat subsequently engaged in a debt-for-equity swap with Vision Consortium, whereby Vision acquired R8bn of the company’s debt from banks, Business Day previously reported. The transaction converted R4.1bn of debt into ownership stakes in Tongaat, with the remaining R3.6bn still owed to Vision, repayable from future profits.
Despite Tongaat’s current business rescue status, the commission remains optimistic the acquisition won’t unduly distort competition within the agricultural sector. Tongaat’s pivotal role in sugar production and its extensive property holdings through its Tongaat Property division underscore its strategic importance in SA’s agricultural landscape, the commission said.
“THL [Tongaat Hulett Ltd] is primarily an agriculture and agri-processing business with a focus on the sugar production and animal feed sectors. THL is one of the major players in the sugar production industry in SA. THL also has a property portfolio under its Tongaat Property division. The commission is of the view that the proposed transaction is unlikely to substantially lessen or prevent competition in any market,” the commission said.
Having secured the commission’s endorsement, Vision now awaits final approval from the Competition Tribunal.
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