Tongaat Hulett’s creditors finally accept rescue plan

Tens of thousands of people reliant on the sugar industry for their living can rest easier after the Tongaat Hulett business rescue plan was finally accepted by a majority of creditors, 15 months after the producer entered business rescue. 

On Thursday, the business rescue practitioners (BRPs) announced that 98.51% of Tongaat’s creditors had voted in favour of adopting the Vision Parties rescue plan, which will see it being bought by a consortium of companies led by Robert Gumede, the founder of the Gijima Group.

Vision Parties comprises South Africa’s Terris Sugar, Guma (from Mauritius), Remoggo (from Zimbabwe) and Almoiz Industries, a sugar producer based in Lahore, Pakistan. 

In May 2020, Almoiz was accused by a Pakistan Sugar Inquiry Commission of involvement in the country’s “sugar mafia”, and of cheating farmers and the tax authorities. AmaBhungane reported in December 2023 that Vision Parties includes a financier who worked for three Kazakh oligarchs, Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov, known as “The Trio”. 

In November, Vision Parties and Mozambique conglomerate RGS, which belongs to the politically connected Gulamo family in Mozambique, were announced as new potential candidates after the BRPs dumped the preferred bidder — Kagera, a little-known company based in Tanzania – which they had settled on towards the end of July. 

On Tuesday, the BRPs announced that the RGS board had withdrawn its business rescue.

As such, only one horse was left in the race: Vision Parties.

Not all creditors exercised their right to vote on the Vision Parties plan, with 91.91% taking the opportunity to participate. 

Tongaat was forced to enter business rescue in October 2022, after lenders told the 130-year-old sugar producer that they were unable to support its restructuring plan or to provide the additional funding required, calling in the debt.

Tongaat had plunged into a crisis after executives were caught in a corruption scandal. 

In response to a damning PwC forensic investigation which revealed the company’s 2018 profits had been overstated by 239% and its assets by 34%, Tongaat announced a major turnaround on 23 September 2019.

Read more in Daily Maverick: Who is really behind the R2-billion Tongaat Hulett bid? 

It replaced its chairperson, Bahle Sibisi, with Louis von Zeuner and removed four other long-time board members, under whose watch the accounting irregularities took place.

At the time, shareholder activist Chris Logan welcomed the move, saying Tongaat was “cleaning out its old board” following a turbulent year in which trade was suspended on the JSE after its share price plummeted when the company announced in May and June that it would have to restate its financial results.

Seven people, including six former Tongaat executives, appeared in the Durban Specialised Commercial Crimes Court on 10 February 2022 on fraud and racketeering charges associated with the sale of the sugar producer’s land between 2015 and 2018. 

The suspects accused of backdating sale agreements include former CEO Peter Staude, CFO Murray Munro, managing director of Tongaat Hulett Developments Michael Deighton and ex-Tongaat Hulett Developments planning directors Rory Wilkinson, Kamasagrie Singh and Samantha Shukia. Gavin Kruger, the Deloitte audit partner on the Tongaat Hulett account, is the seventh accused. 

Based on these sales, Tongaat’s executives allegedly notched up performance bonuses worth millions of rands.

About the rescue plan, the BRPs, Metis Strategic Partners, said: “Today finally provides some certainty to stakeholders on the way forward. This is positive news for employees, the businesses across all geographies and THL’s stakeholders. 

“While there is still much to be done, we are celebrating the achievement of a key milestone. We would like to express our gratitude to employees, the lender group, the IDC, SASA (South African Sugar Association), creditors, Vision and the various stakeholders who have walked this journey with THL during the process.”

The BRPs will now proceed with the implementation of the rescue plan. Tongaat Hulett can only exit business rescue once the plan has been substantially implemented, which could take several months, the BRPs said in a statement, or if it is no longer financially distressed. 

The plan will see the consortium owning 97.3% of the company, while existing shareholders will retain a 2.7% stake in the business. Vision acquires R8-billion of the lender group debt while converting R4.1-billion of the claims into new equity in Tongaat Hulett. The remainder will be restructured on better terms for Tongaat.

Sasa, which won its court battle to recoup R1.5-billion in December last year, will be paid in full. 

Independent creditors, who are owed more than R1.1-billion, are set to receive just R75-million. DM