Tongaat and its BRPs miss payment deadline to cane growers

Financially distressed JSE-listed sugar producer and property company Tongaat Hulett has missed a payment deadline to cane growers, placing the livelihoods of thousands of growers and workers at risk.

Tongaat’s lenders last week rejected the company’s proposed restructuring plan and to advance further funds to the company, resulting in Tongaat’s board announcing on Thursday it had decided to embark on voluntary business rescue proceedings.

SA Canegrowers chairperson Andrew Russell said today (Tuesday) Tongaat Hulett Limited and the business rescue practitioners have as of November 1 2022 officially missed the deadline by which to make payment to growers for sugarcane delivered in September.

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“This puts the livelihoods of thousands of growers and workers delivering cane to the Felixton, Amatikulu, and Maidstone mills in KwaZulu-Natal at risk.

“The number of jobs at risk is likely to increase as uncertainty rises about whether growers who delivered cane in October will be paid on time.

“An estimated R345 million will become due for payment at the end of November to cover these sugarcane deliveries,” he said.

Russell said the livelihoods at risk because of the non-payment for September 2022 include about 4 300 growers who delivered almost 600 000 tonnes of sugarcane to Tongaat Hulett Limited mills last month and were due to be paid more than R400 million by the end of October 2022.

He said more than 4 000 of these are small-scale growers who are especially vulnerable.

Russell stressed that the viability of the sugar industry is dependent on the survival of both large- and small-scale growers because the larger producers provide the bulk of the cane tonnage that is required to keep the mills running at 350 tonnes an hour and also cross subsidise small-scale growers through a variety of financial support mechanisms.

He said the non-payment also places the livelihoods of an estimated 14 642 permanent and seasonal farm workers employed by these growers at risk.

“This figure excludes contractors, haulier companies, input suppliers, mill workers and other service providers throughout the value chain who will also be impacted,” he said.

Russell said the impact of the current situation is far-reaching and will be devastating.

He said communities that will be affected by this are already suffer from high levels of unemployment and poverty and include the rural areas of Empangeni, Eshowe, Gingindlovu, Amatikulu, Darnall, KwaDukuza, Shakaskraal, Tongaat, Ndwedwe, Isinembe, Nyoni, Entumeni, Kwambonambi, Nseleni, Melmoth, and Heatonville, Jozini and the Makhathini Flats.

Russell said although the current situation is dire, the sugar industry can still recover.

“But for this to happen, it is essential that THL (Tongaat Hulett Limited) secure the funding necessary to maintain its operations,” he said.

Russell said SA Canegrowers is committed to working with Tongaat Hulett Limited, the business rescue practitioners, banks, government and other industry stakeholders to ensure that the current crisis can be reversed and to mitigate the impact on the workers and the rural economies that rely on the sugar industry for their livelihoods.

He said a meeting was held on Monday between the business rescue practitioners and representatives of the growers impacted by the decision of Tongaat’s board to enter into voluntary business rescue. The focus of a meeting between SA Canegrowers and the business rescue practitioners will be on finding a speedy solution to the current crisis and mitigating the impact on the affected workers and the rural economies.

Russell previously questioned how payments will be made for deliveries in October, November and December 2022, adding that the impact on growers is likely to worsen if the mills do not remain operational.

The decision by Tongaat’s board to place the company into voluntary business rescue was prompted by the decision of the company’s lenders to reject the debt restructuring plan and not to advance further funding to the company.

Tongaat’s business rescue proceedings also mean the company has lost access to its bank accounts.

SA Canegrowers anticipated last week that in the immediate term this meant it was unlikely that more than R401 million, which was due to be paid to growers at the end of this month, will be transferred on time.

Tongaat’s South African operations are drowning in a pool of debt, which is estimated to total more than R5 billion, with a new R600 million short-term borrowing facility obtained on 29 July 2022 to assist towards an approximately R1.5 billion working capital shortfall now due for repayment.

Shareholder activist Chris Logan and an industry insider both told Moneyweb last week that Tongaat going into business rescue will have massive socioeconomic consequences and that the company could not be allowed to fail because of these implications.

Trading in the shares of Tongaat Hulett has been suspended since 19 July 2022.