Organised business in KwaZulu-Natal says it will do everything possible to assist Tongaat Hulett in its decision to enter business rescue.
Durban Chamber of Commerce and Industry president Prasheen Maharaj said on Sunday the chamber believed the decision followed due consultation and was a well-thought-out process. “As organised business, we remain committed to working with Tongaat Hulett to help recover and restore their business operations.”
Rescue practitioners are expected to get to work in the coming week to chart a way forward after the Tongaat Hulett board announced on Thursday the sugar giant had entered voluntary business rescue.
Tongaat Hulett is one of the largest sugar producers in the country, supplying roughly one-third of all sugar and half the white sugar in the country. The sizeable market share means its failure to deliver will have lingering economic consequences for SA.
Thursday’s announcement comes in the wake of Tongaat Hulett’s significant financial challenges after years of high and increasing debt levels, compounded by alleged financial misstatements and historic mismanagement under previous leadership.
In a statement, the company said its new leadership team and board have worked tirelessly since 2019 on delivering a comprehensive turnaround strategy.
“Good progress was made on a variety of fronts, including realising cost savings and improving available funding. Debt, specifically, has been reduced by more than R6.6bn from a high of R11.7bn.
“Despite the good progress, there is a shortfall in the company’s working capital facilities of approximately R1.5bn, largely driven by the effect of Covid-19 and the recent unrest in KwaZulu-Natal. This shortfall is necessary to fund the peak working capital requirements to complete the 2023 financial year,” the statement said.
“The Durban Chamber of Commerce and Industry calls on all stakeholders to work together in the interest of the economy and the country. Co-operation and collaboration need to form part of the business rescue plan to ensure that Tongaat Hulett is rescued and survives the challenges it is facing,” said Maharaj.
He said the Sugar Master Plan is however vulnerable — SA could experience an influx of sugar imports leading to an estimated 700,000 job losses, making the local market less competitive.
The chamber is collaborating to keep the local economy afloat following the Covid-19 pandemic, the July 2021 riots and the April 2022 floods, which individually and collectively dealt crippling blows to the local economy.
Recently, the chamber with its private sector stakeholders joined forces with the eThekwini municipality and is ploughing billions of rand into rebuilding damaged infrastructure and boosting security in a bid to attract and retain outside investors.
Tongaat CEO Gavin Hudson said: “Although this is not the outcome we were hoping for, business rescue is not the end for Tongaat Hulett’s SA operations.
“Business rescue provides a legal framework that allows the business rescue practitioners to work with key stakeholders to find optimal solutions to our financial difficulties. Tongaat has a proud 130-year legacy and is a significant player in agriculture in SA,” said Hudson.
“We have dedicated people working very hard to find the best way forward, and the leadership team is committed to working closely with the business rescue practitioners to ensure a successful outcome to the restructuring of the company that protects those associated with Tongaat.”
The SA lender group has remained supportive of the company and has worked with management since 2019. To assist with the R1.5bn liquidity shortfall, the lenders advanced a new borrowing base facility of R600m on July 29, which was due for repayment on October 25.
The SA Canegrowers Association expressed concern about the effect the latest development will have on growers and their workers. “This move means Tongaat Hulett has lost access to its bank accounts, which in the immediate term means that over R401m that was due to be paid to growers at the end of October 2022 will likely not be transferred on time,” said Andrew Russell, SA Canegrowers chair.
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