SOUTH AFRICA – Tongaat Hulett, its South Africa sugar subsidiary, and its three business rescue practitioners faced a major setback as the Durban High Court dismissed their legal challenge to contest financial obligations to the national sugar industry.  

The ruling, delivered by Judge Rashid Vahed, rejects Tongaat’s bid to challenge its commitments under the Sugar Act and the 1994 Sugar Industry Agreement.  

Although the comprehensive judgment is scheduled for release next Monday, the decision comes with additional costs for the embattled companies. 

The legal application targeted the South African Sugar Association (SASA), Trade and Industry Minister Ebrahim Patel, other sugar industry entities, and the approximately 23,000 registered sugarcane growers affected by Tongaat’s business rescue, which commenced on October 27, 2022. 

The subsequent withholding of payments by Tongaat’s business rescue practitioners exacerbated anxiety within the sugar cane value chain. 

The Sugar Act and the Sugar Industry Agreement mandate that sugar millers, including Tongaat, pay levies and proceeds to SASA, which utilizes the funds for crucial facilities and functions, including the South African Sugarcane Research Institute. The balance is then redistributed among sugar cane growers and millers. 

Andrew Russell, Chairperson of the SA Canegrowers’ Association, expressed satisfaction with Judge Vahed’s order, highlighting the significance of the failed Tongaat payment of more than R1.5 billion (US$79.5M) due to SASA in March 2023.  

“The defaults adversely affect the final recoverable value price paid to sugarcane growers, decreasing by over R400 (US$21.09) per ton for the 2022/23 season and posing financial challenges for growers,” he said. 

The business rescue practitioners argued that their process took precedence over “industry arrangements,” attempting to release Tongaat and Gledhow from financial commitments. Had their application succeeded, it could have undermined the structured nature of the sugar industry. 

SA Canegrowers’ Association chairperson, Andrew Russell said, “SA Canegrowers now awaits the detailed judgment and anticipates future engagements with the business rescue practitioners to address outstanding funding issues for SASA, growers, and other millers.”  

He stressed the importance of resolving these matters to ensure the industry’s long-term survival and protect the livelihoods it sustains. 

While Tongaat Hulett, business rescue practitioners, SASA, and the South African Farmers Development Association reserve their comments pending a thorough review of Judge Vahed’s judgment, the legal battle underscores the challenges facing the South African sugar industry and its critical need for financial stability. 

Tongaat Hulett Limited rescue plan 

Meanwhile, as the news unfold, Ingonyama Holdings, a business wing and subsidiary of KwaZulu’s Ingonyama Trust, has teamed up with Mozambican conglomerate RGS Group Holdings to acquire a controlling stake in cash strapped Tongaat Hulett Limited. 

Following the publication of THL’s business rescue plan in May 2023 and the subsequent adjournment of the section 151 meeting of creditors, the business rescue practitioners have been working closely with interested and affected parties towards securing a new strategic equity partner. 

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