SHORT-TERM FUNDING WELCOME BUT NOT ENOUGH TO ALLAY GROWERS’ LONG-TERM CONCERNS
The grower-led consortium, NewCo, aspiring to take over embattled Tongaat Hulett, has said while it appreciated the post-commencement finance windfall from the Industrial Development Corporation (IDC) to keep the mills running, this is not enough to save Tongaat Hulett and the livelihoods that rely on its operations.
The group which emerged late November proposing an expression of interest in acquiring the South African mills, refinery, animal feeds and brands of the milling company, said the IDC’s short-term relief still leaves too much uncertainty to allay growers’ concerns regarding the future survival of the mills and their businesses.
It said despite the clear need for long-term certainty, there has been no indication about the direction the BRPs are considering to address the miller’s problems in the longer term, nor has there been any response to the Expression of Interest submitted by NewCo in late November.
"Securing Tongaat Hulett’s future will require extensive work with significant investment. It is therefore critical that the BRPs engage the interested parties to facilitate the necessary arrangements to finalise a deal. NewCo urges the BRPs to begin these engagements urgently, as vital livelihoods on the North Coast of KwaZulu-Natal – and throughout the value chain – depend on the successful rescue of Tongaat Hulett’s South African operations," NewCo said in a statement.
Newco represents growers delivering more than five million tons of sugarcane to the Tongaat Hulett mills in the North Coast of KwaZulu-Natal which ensures the survival of these farming operations, the thousands of livelihoods they support, and socio-economic stability for the greater region.
The proposal is for the acquisition of assets including the operating mills at Maidstone, Amatikulu and Felixton, the mothballed factory at Darnall, the Huletts Refinery, Voermol animal feeds, and all associated brands and trademarks. If the acquisition is approved, the assets will be held by an unlisted limited liability company.
"The BRP’s success in securing this funding, while critical is not enough to save Tongaat Hulett and the livelihoods that rely on its operations. More than loans, Tongaat Hulett needs a plan to restore its operations to profitability, thereby making them sustainable in the long-term,“ NewCo said.
It said while the funding to complete the current season is good news for growers, the 2023 season begins in four months. Growers have carry-over cane in excess of 500,000 tons from this season that must be crushed next season to provide much needed operating cash flow, which means they need to know soon what the plans are for next season. Growers also need to finalise operational plans for future seasons.
Tongaat was placed in business rescue in October after its lenders failed to give their backing to a restructuring plan and the post commencement finance is the group's largest cash injection since it was placed into business rescue.
The Business Rescue Practitioners (BRPs) for Tongaat announced this week it had received an undisclosed sum from the Industrial Development Corporation (IDC) to help it complete its milling season and do maintenance.
NewCo represents one of the few viable opportunities to save more than 11,000 small-scale growers, more than 20,000 jobs in the cane growing sector alone, and a significantly greater number of indirect job losses in the region. It is also an opportunity for commercial growers and small-scale growers to align and optimise synergies for mutual viability and sustainability over the longer-term.
NewCo's leadership said it had taken the first profound steps in a long and complex process.
It said NewCo is committed to exploring every possible avenue to save the operations of Tongaat Hulett, protecting thousands of desperately needed livelihoods on the North Coast of KwaZulu-Natal. With the full support of the grower community and value chain stakeholders, the consortium is optimistic that government, banks, and other stakeholders will work with them to ensure the best possible outcome for growers, workers, and value chain partners in the local sugar industry.
"NewCo welcomes the announcement that the Business Rescue Practitioners (BRPs) at Tongaat Hulett have been able to secure sufficient working capital from the Industrial Development Corporation (IDC) to complete the current season and to carry out off-crop maintenance. This announcement is important to ensure that Tongaat Hulett’s supplying growers can count on the mills to meet their cane payments for the current crop, which is essential for the short-term survival of their operations and the thousands of livelihoods they support,“ it said.
Discussions are under way to secure 2023/24 working capital requirements through trade finance arrangements.
This will ensure the Tongaat Hulett mills continue to operate and process sugar supplied by growers in the surrounding areas.
BUSINESS REPORT