Tongaat Hulett’s lenders voted overwhelmingly in favour of the Vision Consortium’s bid to take southern Africa’s biggest sugar producer out of business rescue, ending a period of uncertainty for the more than 100-year-old company and its employees.
Thousands of livelihoods in KwaZulu-Natal depend on Tongaat Hulett both directly or indirectly and if the company had been forced into liquidation it would have had major socio-economic consequences.
One of three business rescue practitioners Trevor Murgatroyd said at the meeting the business rescue process had been difficult and challenging, and the vote was “a great milestone,” notwithstanding that there remained a great deal of “hard work ahead” for the company, and that this was likely to include more challenges.
Tongaat Hulett was placed in business rescue in October 2022 when it emerged that key former executives had allegedly manipulated accounts for years, and after new management failed to right the group after difficulties experienced through the Covid pandemic.
Only two questions were asked at the meeting yesterday by parties affiliated to RGS Group, a Mozambique-based consortium that withdrew a rival bid for Tongaat a day ahead of the scheduled creditors meeting, after RGS alleged that the business rescue practitioners were favouring the Vision Group.
The questions related to whether the Vision Group had provided any security to Industrial Development Corporation, and if there was any agreement between Vision and the Industrial Development Corporation (IDC) about the future funding of Tongaat.
The business rescue practitioners said they could not know if there was any agreement between Vision and the IDC, but there was no security arrangement between the company and the IDC.
The Vision consortium is tied to businessman Robert Gumede, with Mauritius-registered companies Terris, Guma, Remoggoa, and Almoiz, which is registered in the United Arab Emirates. Gumede is the founder of the IT firm Gijima Technologies.
Essentially Vision plans to buy out some R7.7 billion of lender claims against Tongaat and convert most of this (about R4.1bn) to equity, maintain the listing, enable existing shareholders to retain a minority stake, as well as ensure all payments owed were made to the South African Sugar Association in line with industry regulatory functions.
Had the lenders not accepted the Vision Group’s bid yesterday, Tongaat would have been required to go into liquidation, a move that would likely have resulted in many job losses across southern Africa, and in particular in KwaZulu-Natal, where, according to business rescue practitioners, the impact would have been in the form of a financial and humanitarian crisis.
The Vision group said in its bid it plans to continue to run the operations of Tongaat, and to negotiate for post commencement from the IDC through the duration of the business rescue process.
They also aim to continue the process of business improvement which, may include some degree of rationalisation of the cost base of the Tongaat, a process that “may include some employee retrenchments,” although none were contemplated at this stage.