A consortium led by billionaire businessman Robert Gumede has written a letter to the Industrial Development Corporation (IDC) demanding answers after being overlooked in favour of a Tanzanian company in the battle to become Tongaat Hulett’s preferred strategic equity partner (SEP).
Tongaat Hulett has been under a business rescue process since 2019 after it accrued R7 billion in debt. The company’s business rescue practitioners have now named Kagera Sugar of Tanzania as the winning bidder in a deal believed to be worth over R3 billion.
This means they will sell their assets in South Africa, Zimbabwe, Botswana, and Mozambique to the SEP who will takeover the assets
Kagera is owned by Tanzanian billionaire Nassor Seif and his family.
The Terris consortium, which includes Gumede’s Guma operation in South Africa, Zimbabwean entity Remoggo, Almoiz of Pakistan and Terris Sugar, an investment company operating in the Cayman Islands, wrote to the IDC and business rescue practitioners, seeking answers about why they had not been selected.
Dan Marokane, the acting chief executive of Tongaat Hulett, said in a letter dated July 31, 2023, that the sale would entail the complete sale of the sugar division in SA and the investments in Zimbabwe, Mozambique, and Botswana.
"The selected SEP, Kagera, is a sugar manufacturing company situated in Kagera in the north-western part of Tanzania.
"It is part of a group of companies which are the largest producers of sugar in Tanzania and owns sugar assets in Tanzania, the Democratic Republic of Congo, and the Middle East," he said.
Marokane said they had evaluated 70 potential interested parties, which was brought down to eight that focused on acquiring the assets. Two went head-to-head in the final round: Kagera and Terris.
"After a rigorous process, we identified Kagera Sugar as the preferred candidate. The group is financially sound, with a solid track record. Its exposure to complementary sugar assets in Tanzania and the DRC offers relevant technical and operational knowledge to assist the turnaround of THL's South African sugar assets," he said.
Business rescue practitioners Peter van den Steen, Trevor Murgatroyd and Gerhard Albertyn are heading the process.
Business Times reported at the weekend that the deal was subject to Competition Commission approval.
The IDC has been accused by sources within the Terris Consortium of bankrolling Kagera in a deal believed to be close to R2 billion. They have complained of being unfairly disadvantaged in the process as they were not allowed to apply for similar funding.
But IDC spokesperson Tshepo Ramodibe denied this, and he also disputed that the Busi Mabuza-headed board had met over the weekend to discuss the Tongaat Hulett matter.
"The corporation has, as an interested party, been supportive of the business rescue proceedings. The BRPs embarked on an independent process to find a suitable SEP that would ensure that Tongaat Hulett remained a sustainable business and a key player in the sugar industry and the KZN economy.
“The Business Rescue Practitioner conducted a selection process and selected the strategic equity partner for THL," said Ramodibe.
The IDC said it had not provided any funding to Kagera yet, but confirmed it was in the process of evaluating a request for funding from the company.
"The IDC has not provided funding nor any guarantees to Kagera prior to the company’s selection as a preferred SEP. The IDC is currently evaluating a funding request from Kagera.
"The Business Rescue Practitioners are best placed to outline the next steps for the sale process," said Ramodibe.
Attempts to obtain comment from the BRP did not succeed, but they told the Business Times at the weekend that Kagera had been deemed the appropriate choice after a process that took several months "and involved a comprehensive vetting and scoring process".
They also said Kagera had in-depth sugar industry experience.
Back to Marokane, he said SA partners would get access to technical knowledge to improve and retain jobs in KwaZulu-Natal and to protect the livelihoods of many stakeholders across Tongaat's value chain, including those of the group's many small-scale growers.
But the BRPs, in a written note, said "no useful purpose ... will be served in responding" to Terris because "process letters set out the rules upfront, to which all bidders agreed to".
Business Report reported in July that the sale matter had yet to be put o a vote, while the BRPs have reportedly committed to updating the market regularly through the Joburg Stock Exchange News Service (SENS) announcements.
Seif said in a statement the THL 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.
IOL