FRIDAY’S scheduled meeting of Tongaat Hulett’s lenders to decide the future of South Africa’s biggest, but indebted sugar group was put on ice due to court applications against the company brought by the Sugar Association of South Africa (SASA) and rival foods group RCL.
RCL subsidiary RCL Food Sugar & Milling, and SASA launched the applications to prevent the meeting of Tongaat’s creditors to vote on two bids for Tongaat, one from RGS Group Holdings (which comprises mainly a family sugar and foods business from Mozambique) and Vision Investments (which is linked to businessman and ANC funder Robert Gumede) who wish to bring Tongaat out of business rescue.
This followed the rejection by the High Court last week of an application earlier this year by Tongaat’s business rescue practitioners (BRPs) not to have to pay statutory industry levies and financial obligations.
RCL has been affected financially because of the lower industry payments and the payments are made by industry participants to SASA.
On Friday, Tongaat said RGS, the Industrial Development Corporation (IDC) and Vision, as “affected persons” in the business rescue, had given notice to oppose the RCL and SASA applications.
Tongaat’s BRPs said in their response to the RCL and SASA applications that “the fact of the matter is that the procedures could have and should have been launched sooner than they were”, and were essentially an “abuse” of court process.
They said the creditors’ meeting could be adjourned by no later than December 14, as post-commencement finance was running out and they could not secure more.
The Industrial Development Corporation had already agreed to extend the post-commencement funding repayment to December 8. RCL’s and Sasa’s applications were postponed by the court until Tuesday.
“The IDC has consequently indicated that it will now not permit any further drawdown against the post-commencement financing until a business rescue plan has been adopted,” the BRPs said.
“I should add, even if extended, the R2.3bn post-commencement financing (provided to Tongaat at the beginning of 2023) is insufficient to meet (Tongaat’s) needs beyond January, at best,” the BRPs said.
They said that if the post-commencement finance dried up, it would be “catastrophic” for the business rescue process and Tongaat would have to be liquidated.
This would be to the prejudice of the creditors, shareholders, employees and sugar industry at large – the group produces some 50% of the country’s sugar.
The socio-economic impact would also be catastrophic, the BRPs said.
Fifteen small towns rely on income from Tongaat-related business, as do countless suppliers, farmers and much smaller emerging farmers, while the group also provides employment to many thousands of people in areas where there are little other employment opportunities.
Friday’s creditors meeting was adjourned until after the court hearing.