Update: Since the publication of this article, an agreement to delay the liquidation proceedings to June has been reached. Read the update here.
The liquidation proceedings of Tongaat Hulett are set to begin in the KwaZulu-Natal High Court, with the sugar industry and government officials looking to save the iconic company.
In February, it was confirmed that Tongaat Hulett would enter liquidation proceedings after business rescue practitioners failed to find a way to save the 134-year-old company.
The practitioners approached the KwaZulu-Natal High Court to terminate business rescue and place the group into provisional liquidation. This comes after a sale to the Vision Consortium failed.
The company’s history dates back to 1892.
The company was placed in business rescue in October 2022 due to accounting irregularities, financial misstatements and governance failures under former management.
Not only did the company lose R12 billion in shareholder value and access to funding, but worsening market conditions also played a decisive role.
Domestic sales also dropped sharply as large volumes of low-priced imported sugar entered South Africa.
SA Canegrowers said that the High Court’s ruling will be a watershed moment for two-thirds of South Africa’s sugarcane growers.
It said that over 18,000 growers, many of whom are small-scale growers, have no other options for processing their sugarcane outside Tongaat’s mills.
If the company entered into an unfunded liquidation, its farms would become economically unviable, resulting in the loss of thousands of rural jobs.
The year’s milling season has already opened for sugarcane growers in other regions, but growers who are served by Tongaat Hulett mills are still waiting to hear when the mills will reopen.
Opposition to the move
The liquidation of Tongaat will face opposition in the High Court from SA Canegrowers, the Industrial Development Corporation (IDC), and Minister of Trade, Parks Tau.
The IDC provided over R2.3 billion in funding during the business rescue process to Tongaat, but had disagreements with Vision over further funding arrangements.
“The liquidation of Tongaat Hulett affects the entire sugar industry, and it is a direct threat to tens of thousands of rural jobs and livelihoods,” said Higgins Mdluli, chairman of SA Canegrowers.
“Safeguarding these communities must come first. The cost of preserving these operations is far lower than the long-term economic and social damage of allowing a viable milling business to collapse.”
The group added that Tongaat is a major contributor to the South African economy and to the stability of rural communities.
The iconic company operates three sugar mills and is the nation’s only standalone white sugar refiner. It is thus a cornerstone of the national sugar value chain.
The company supports over 1 million livelihoods, including small-scale and large-scale growers, mill workers, transporters, and food and beverage manufacturers.
SA Canegrowers said that if Tongaat were to liquidate, it would force larger commercial beverage and snack manufacturers to rely solely on imported white sugar.
This would further expose the local economy to the instability of global sugar prices and severely threaten the viability of the entire local sugar industry.
While Tongaat Hulett has not yet entered formal liquidation, SA Canegrowers said it will try to prevent it in its entirety; however, it would still be open to a funded liquidation.
The funded liquidation would need to be negotiated but would ensure the mills remain operational and are not left unoccupied, which opens the risk of vandalism.
This article has been updated.
