LAST Thursday, after managing the company’s business rescue process for nearly 40 months, Tongaat Hulett Limited’s business rescue practitioners approached the high court for the provisional liquidation of the company. The application was prompted by the collapse of discussions on funding for the Vision Consortium’s acquisition of the company, according to SA Canegrowers.
The non-profit organisation representing thousands of sugarcane farmers in the country said liquidation of Tongaat Hulett is a profound risk to the entire South African sugar sector and the million livelihoods that it supports. A liquidation will directly threaten the earning potential of thousands of small-scale and large-scale growers across KwaZulu-Natal and Mpumalanga.
SA Canegrowers said Tongaat’s sugar mills at Maidstone, Amatikulu and Felixton, as well as its refining facility at Rossburgh and its cane-growing operations are the economic anchor of entire rural regions. Tongaat is also the is the country’s only refiner of white sugar, used in beverages, biscuits, and confectionary.
In an interview with Alec Hogg of BizNews, David Woollam estimates that R4,5 billion worth of sugarcane, which has no value besides being crushed to sugar, will be at risk if Tongaat’s mills cannot receive it. Canegrowers, due to start sending cane for milling at the end of March, will be left without income.
“If an unfunded liquidation proceeds, the growers supplying Tongaat’s three mills, as well as the entire industry, will face immediate non-payment for cane, levies and other legislated funding requirements.
Operations at the mills will immediately cease, and many growers in the Tongaat-serviced areas will immediately lose access to the only mechanism to process their sugarcane. Because sugarcane must be milled soon after harvesting to ensure a viable yield and due to the distance to other mills, it will leave vast amounts of this season’s sugarcane unmilled,” SA Canegrowers said.
The canegrowers association added that liquidation may also prevent Tongaat from selling its existing stock of refined sugar to manufacturers and retailers, which would immediately stop critical cash flow to the company’s operations and thereby all but ensure the underlying asset value is diminished.
SA Canegrowers said it, and the tens of thousands of growers it represents, continues to call on the government and Tongaat Hulett to do everything possible to ensure that the future of Tongaat Hulett is secured.
Functioning assets
“The underlying value of the company rests in functional, operating assets – mills that are running, cane that is being processed, and a supply of refined sugar that flows to the market. If this operational continuity is not secured, the consequences will extend far beyond one company. The entire South African sugar value chain, starting with growers and flowing through to workers, transporters and downstream industries, will be severely destabilised,” said Dr Thomas Funke, CEO of SA Canegrowers.
“Ensuring continuity of milling operations at Tongaat and protecting grower income must be an urgent priority for the government and the business rescue practitioners of Tongaat, irrespective of the eventual ownership outcome,” said Higgins Mdluli, chairman of SA Canegrowers. “Tongaat’s liquidation will affect all of South Africa’s 27,000 small-scale and 1,100 large-scale growers.”
The potential liquidation of Tongaat also comes at a time when the local sugar industry is battling with unprecedented sugar imports displacing local sugar from retailers and food and beverage manufacturers.
“The South African sugar industry is already under immense pressure – from the surge of deep-sea imports displacing locally grown sugar, to the continuation of the Health Promotion Levy, a policy for which no credible evidence of effectiveness has been presented. In such a fragile environment, the loss of three of South Africa’s 12 remaining sugar mills will be a death knell for the industry,” said Mdluli.
SA Canegrowers said it stands ready to work with all stakeholders to safeguard milling capacity, protect growers, and secure the long-term sustainability of the industry.
