JOHANNESBURG - Beleaguered sugar producer Tongaat Hulett on Friday shocked the markets with the latest multi-billion-rand scandal to rock corporate South Africa.
The group in a statement said its 2018 results could face a potential hit of up to R4.5billion following a review of its accounting practices.
“Once the forensic investigation and report findings are complete and the final accounting treatments are resolved by the company, the auditors will then complete the outstanding audit processes; and the board is committed to finalising the financial statements as soon as reasonably possible,” Tongaat said.
“Current timelines indicate that the company’s audited consolidated financial statements for the year ended March 31, 2019, which will include the restated prior financial information, should be released by October 2019.”
The group said its strategic and financial review had revealed “past practices which are of significant concern”, and these practices appeared to have resulted in its financial statements for the year ended March 2018, not reflecting the underlying business performance accurately.
Asief Mohamed, chief investment officer at Aeon Investment Management, said corporate governance and corporate management were always highly rated in South Africa, but cracks are starting to appear.
“Investors and opinion makers were oblivious to the fact that excess profits were made on the basis that 90percent of the population could not compete with 10percent of the privileged population,” Mohamed said.
“The over-statement of profits at Tongaat and Steinhoff, for a long time, has exposed the weakness of the old boy network of corporate governance in South Africa with the help and protection of the Institute of Directors of South Africa.”
Recently appointed chief executive Gavin Hudson initiated a comprehensive assessment of Tongaat’s finances by accounting firm PricewaterhouseCoopers amid reports of financial anomalies that saw the company’s value drop sharply.
The group’s share price plunged a further 7.73percent to R16.70 on Friday. The company’s stock has plummeted nearly 70percent year to date.
Shareholder activist Theo Botha said more scrutiny should be placed on corporate governance. “We are able to critic corruption in state-owned enterprises, but little action is done to corporate malfeasance. We are yet to see tangible consequences for example of the Steinhoff saga,” Botha said.
Tongaat in March sent the market into a tailspin when it said that “certain practices have come to light following the ongoing strategic and financial review of the company”. And that it might have to asses the impact on previously reported financial information.
The accounting regularities have already claimed the scalp of Jenitha John, who has been a member of Tongaat’s board since 2007 and chaired its audit and compliance committee.