In court, Tongaat acknowledged that it owed nearly R526m in Sasa payments under the Sugar Industry Agreement, payments which Durban High Court Judge Rashid Vahed ruled to be statutory. Picture: Bongani Mbatha/Independent Newspapers.
AGRI-PROCESSING giant Tongaat Hulett, currently under business rescue, has to pay R526 million it owes to South African sugar cane growers and other related stakeholders.
This is according to a judgment handed down by the Durban High Court this week, bringing the troubled firm in compliance with sugar industry regulations.
In January, Tongaat creditors voted in favour of a business rescue plan put forward by an investment consortium called Vision Investments in South Africa that would see unsecured creditors receive between 5 cents and 7 cents to the rand on their claims.
The plan by Vision also mandated Tongaat to pay its obligations under the South Africa Sugar Association (Sasa), including payments to various industry players that included cane growers and farmers.
In court, Tongaat acknowledged that it owed nearly R526m in Sasa payments under the Sugar Industry Agreement, payments which Durban High Court Judge Rashid Vahed ruled to be statutory.
Such payments have to be made even though Tongaat is under business rescue.
SA Canegrowers said in a statement yesterday: “These levies are an essential to the economic survival of sugarcane farmers and the tens of thousands of livelihoods that they support.
“The purpose of the SIA (sugar industry agreement) is to ensure that growers, millers and refiners each receive an equitable share of the proceeds from local sugar production.”
Earlier this week, Judge Vahed dismissed an application for leave to appeal the court’s earlier ruling against Tongaat in its bid to suspend its sugar industry payments obligations under business rescue.
“I am not satisfied on any score that the application for leave to appeal ought to be granted and it is accordingly dismissed with costs,” Judhe Vahed ruled.
In December, Judge Vahed initially ruled that the Companies Act which legislates business rescue proceedings did not override such industry payment obligations such as under the sugar industry agreement.
Said SA Canegrowers: “This means payments due under this agreement were required to be paid by the millers, such as Tongaat, even as it was in business rescue.”
The Minister of Trade, Industry and Competition, Ebrahim Patel, as well as Sasa, SA Canegrowers, the SA Sugar Export Corporation and SA Sugar Millers’ Association opposed the application by Tongaat.
The South African Farmers’ Development Association, RCL, Illovo, Gledhow Sugar Company, which is also in business rescue, Umfolozi Sugar Mill, and affected growers, also opposed the company’s appeal in court proceedings.
Although the business rescue practitioners in Tongaat may still petition the Supreme Court of Appeal or the Constitutional Court on the issue, SA Canegrowers said it remained “hopeful that the clarity of the Judge Vahed’s ruling may bring closure” to the matter.
“The overdue payments of Tongaat Hulett’s obligations are putting growers and livelihoods at risk.”
Tongaat Hulett was rocked by an accounting scandal that saw the company tailspin into a debt of R8.2 billion amid delays to publish its financials.
In January, shareholders adopted an amended business rescue plan which the business rescue practitioners are now preparing to implement.
The South African business of Tongaat alone carries about 85% of its total debt at R6.9bn while Mozambique accounts for 12%, with Zimbabwe making up for R255m or 3% of the total figure.
BUSINESS REPORT