Tongaat Hulett, southern Africa’s biggest sugar producer which is in business rescue, said Friday shareholders would vote on bringing a “strategic equity partner” (SEP) into the group, Kagera Sugar.
The group’s business rescue practitioners (BRP’s) had advised on March 31 already that negotiations were underway for a equity partner. Although the percentage shareholding of Kagera was not disclosed, strategic equity shareholders usually take anything up to a 50% stake of the shares in a company.
Tongaat said Friday the potential deal also comprised the acquisition of Tongaat’s sugar division in South Africa, in Zimbabwe, Mozambique and Botswana.
Kagera Sugar is a sugar manufacturing company situated in Kagera, in the north-west of Tanzania. It is part of a group of companies that are the largest producers of sugar in the country and owns sugar assets in Tanzania, the Democratic Republic of Congo and sugar refineries in the Middle East.
Tongaat’s BRP’s commented: “We started the process with a list of more than 70 interested parties, which was narrowed down to eight that focused on acquiring the combined Tongaat Sugar Assets. After a rigorous process, we identified Kagera Sugar as the preferred candidate.”
They said Kagera was financially sound, with a solid track record.
“Its exposure to complementary sugar assets in Tanzania and the Democratic Republic of Congo offers relevant technical and operational knowledge to assist the turnaround of Tongaat’s South African sugar assets. In addition, the sugar refineries in Oman and Bahrain will provide access to world-class technologies and expertise to improve efficiencies.”
They said that continuing to operate Tongaat sugar assets as a combined multi-country group would also ensure continuity for the operations in Mozambique, Zimbabwe and Botswana.
It would provide the South African business with access to technical capability to improve and to retain jobs in KwaZulu-Natal and to protect the livelihoods of several stakeholders across Tongaat’s value chain, including that of the group’s many small-scale growers.
Kagera Sugar managing director Nassor Seif said in a statement the acquisition was in line with their overall strategy to expand operations throughout Africa, and a vision of becoming a leading sugar producer on the continent.
“We will extend the core values that have resulted in the success of our group companies to the new southern African operations to benefit employees, growers and ultimately the economy of the region. The group is committed to investing significantly in the operations to modernise the plants and expand them to increase production and efficiencies,” he said.
Tongaat Hulett entered business rescue in October 2022 after it did not have cash available to fund operations or to settle creditors or employees, and following large scale accounting irregularities perpetrated by its former management in the years before.
According to The Citizen online newspaper in Tanzania, in a report in January, the country has four sugar factories, Kagera Sugar, Kilombero Sugar, Mtibwa Sugar Estates and TPC Limited that produce some 370 000 tons of sugar annually against domestic demand of about 670 000 tons, and the country is working to become self sufficient in the near future by producing 700 000 tons of sugar by 2025.
For comparative purposes, South Africa produces about 2 million tons of sugar a year, much of which is exported into the South African Customs Union market.
The loss of its sugar operations will leave Tongaat with mainly its KwaZulu-Natal north coast property development interests. The company has developed more than 2 000 hectares of serviced land for residential, commercial, industrial, resort and mixed-use purposes.
At the end of May Tongaat’s BRPs said total cane grower claims before business rescue of R1 billion had been paid in full to assist with stability in the industry. All post business rescue supplies of some R400 million were also paid.
Payment for goods and services since the start of business rescue had amounted to R3bn. The group’s 2 500 employees also remained employed on the same terms and conditions as before business rescue, with monthly salaries and wages of R110 million paid since the start of the business rescue.
Off-crop capital expenditure of more than R400m between December 2022 and April 2023 had been the most comprehensive maintenance performed in many years, they said.
BUSINESS REPORT