GAVIN HUDSON: Recapitalising Tongaat will protect more than half a million livelihoods

Since the accounting scandal that almost destroyed Tongaat Hulett, our company has seldom been far from the headlines.

We would rightly expect the company to attract this level of attention. Tongaat is a national icon, with a proud history spanning 130 years. It is a key role player in the regional agriculture ecosystem and one of the largest private sector employers in KwaZulu-Natal. In total, our business touches no fewer than half a million lives across SA, Zimbabwe, Mozambique and Botswana.

As a crucial role player in socioeconomic development in KwaZulu-Natal and key Southern Africa Development Community (Sadc) markets, I’m proud to say we have maintained our socioeconomic contributions during the last two years as a core part of our comprehensive turnaround strategy. Tongaat’s ability to continue to maintain these investments will be greatly affected by whether we can reduce our debt levels.

When I first joined Tongaat, I was taken aback by its systemic importance to food security and agriculture in the region. We have implemented food security projects in SA and Zimbabwe, and co-operatives established in Mozambique include the planting of a certain area of their land to food crops  to secure food supply for these communities.

Our significant commitments stretch across employment, small farmer development and rural development. Our partnership with The Jobs Fund in SA, to accelerate socioeconomic transformation in rural communities, has so far benefited 5,800 people and continues to do so.

This is why our strategy has focused on delivering a plan to make Tongaat investible and allowing it to maintain its socioeconomic effect across the region. Our ongoing efforts to recapitalise the business will go a long way towards preserving this commitment.

Fit for the future

Since the new management team joined three and a half years ago, we have shared a singular focus — to fight for the future of this great company. At a time when SA and our neighbouring countries in the Sadc markets are in desperate need of jobs and growth, we knew we had to save the business, make it fit for the future and ensure we protect its legacy.

This will be key as we continue to support our employees in KwaZulu-Natal, part of our 29,000-strong, group-wide workforce. Our group in turn supports over 500,000 dependants and community members across the Sadc.

Last November, Magister approached Tongaat Hulett to pledge up to a maximum of R2bn, acting as the underwriter for the recapitalisation of the business. However, we learnt at the end of last week that after an investigation by the Takeover Regulation Panel (TRP) — a unit of the department of trade, industry & competition — a ruling had been issued withdrawing a previous authorisation that was required for the rights offer to move ahead.

The panel’s investigation focused on whether a third party who bought shares in Tongaat Hulett after the announcement of the rights offer is related to, and therefore deemed to be a concert party of, Magister, the proposed underwriter. It concluded that the third party and Magister are concert parties.

It is important to note that Tongaat was not a party to the share acquisition, nor were adverse findings made against Tongaat in the TRP’s ruling. Tongaat is now considering the ruling to decide on our course of action. We will make a further announcement to our shareholders in due course. 

Steadfast, unwavering focus

The road to the recapitalisation has been littered with potholes, but our focus to save this company remains steadfast and unwavering. Tongaat remains committed to a recapitalisation. We are continuing to proactively engage with stakeholders, including our lenders and shareholders, regarding a sustainable funding solution for the group. We continue to enjoy their support, as they recognise the critical social effect Tongaat has in SA and across the Sadc region.

Tongaat remains firmly of the view that a capital raise is a better alternative to strategic asset disposals, particularly an accelerated disposal programme, which is unlikely to realise full value for the assets. A recapitalisation of up to R4bn-R5bn is the key step in securing the future for the group. Without the full recapitalisation, our ability to get our SA mills up to full operational capacity to crush all the cane in the fields — a large proportion of which is grown by over 15,000 black farmers and co-operative members in KwaZulu-Natal — will be negatively affected. 

In turn, this will provide cash flow to fund growth through diversification in the medium term, while also allowing our growers to realise the full value of their crops. Without a successful recapitalisation, the legacy we have worked so hard to build will be at risk, as well as our ability to extend the foundations of this legacy.

With a recapitalisation in place we know we can make Tongaat increasingly attractive to investors as we leverage our long legacy as a major agribusiness in the region, and maximise the value of our property portfolio. We can also protect livelihoods and deliver future value to all of our stakeholders.

We are now working to secure the support of our shareholders to draw a line under the restructuring process with a substantial injection of new funding. The board and management team continue to act with urgency and the highest standards of governance to secure the future of Tongaat Hulett.

• Hudson is CEO of Tongaat Hulett.