Tongaat rescue team gets nod to appeal ruling on Sasa debt

The Supreme Court of Appeal (SCA) has permitted Tongaat Hulett’s business rescue practitioners (BRPs) to appeal a prior court ruling that mandated the struggling sugar company to continue fulfilling its payment obligations to an industry body.

Tongaat entered business rescue in October 2022 after an investigation that revealed questionable accounting practices. The court-ordered process typically gives turnaround specialists time to find ways to rescue a financially distressed company while pausing payments on its debt obligations.

As such, the BRPs halted payments to the SA Sugar Association (Sasa), and then approached the high court for an order to ratify this decision.. It ruled that the business rescue process did not excuse Tongaat from paying Sasa, which is owed more than R500m.

Tongaat and the BRPs — Metis Strategic Advisors — appealed the judgment to the SCA and now have a month to submit their appeal.  

The sugar levy paid to Sasa is a component of a redistributive framework in the regulated sugar industry, ensuring that all farmers receive a uniform price per tonne of sugar and that larger mills support smaller producers through subsidies. 

SA Canegrowers chair Higgins Mdluli said: “SA Canegrowers had hoped the new owners of Tongaat, the Vision Consortium, would have honoured the outstanding levies and put the matter to rest. Prolonging this matter with further legal action puts the livelihoods of SA’s small-scale growers and the 1-million people the sugar industry supports at risk.”

SA Canegrowers represents 24,000 small-scale and 1,000 commercial growers.

Tongaat Hulett, which is 130 years old, employs about 2,500 South Africans and was once the main player in the nation’s sugar industry. This was before it got into severe financial trouble after the exposure of a R3.5bn accounting scandal in 2022. This scandal caused the company to lose about R12bn in market value before it was suspended from the JSE. 

In January, creditors gave the green light to Vision’s plan to save the company by purchasing its estimated R8bn debt and converting it into equity through a debt-for-equity swap. The Vision plan will see the consortium subscribe for shares, after which it will own 97.3% of the company and existing shareholders 2.7%.

The shareholder meeting to approve or reject the equity subscription offer will be held next week. If it is rejected by shareholders, the company’s assets will be sold off and it will be forced to delist.

Correction: August 2 2024
It was the BRPs that approached the court to confirm their decision not to pay the levies, not Sasa.

majavun@businesslive.co.za