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Tongaat Hulett’s BRP and industry go cap in hand to state to seek urgent financial help

Tongaat Hulett’s BRP and industry go cap in hand to state to seek urgent financial help

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Tongaat Hulett’s Business Rescue Practitioners (BRP) and the South African Cane Growers Association (Sacga) have resolved to go cap in hand to ask the government to salvage the company, which currently facing costs close to R1 billion for payments to farmers for the months of September and October.

Trevor Murgatroyd, Peter van den Steen and Gerhard Albertyn of Metis Strategic Advisors are the business rescue practitioners of Tongaat.

After a meeting with the them, Sacga announced that it had written to Agriculture, Land Reform and Rural Development Minister Thoko Didiza, Trade, Industry and Competition Minister Ebrahim Patel and President Cyril Ramaphosa, among others, to request urgent engagements on the necessity of government financial intervention to ensure that the 4 300 growers and 14 642 farmworkers affected by Tongaat Hulett’s business rescue can receive the payments they need to support their families.

“Given the magnitude of the challenge at hand, SA Canegrowers does not believe that the industry can withstand the present peril without financial assistance from government. This is why we have requested urgent meetings with the president, Minister Patel and Minister Didiza to discuss what funding government can make available, in order to ensure that the work done under the auspices of the Sugarcane Value Chain Masterplan over the past two years to position the sugar industry for the future has not been in vain," said Sacga chairperson Andrew Russell.

The engagement, though positive, also highlighted the magnitude of the task at hand, and the necessity of government intervention to ensure that the Tongaat Hulett’s supplying growers could survive while the business rescue process continued.

However, despite repeated requests for comment from Business Report, the Department of Agriculture has remained mum.

Sources have told Business Report that the government does not have the funds to assist a privately-owned entity and that it is up to the business sector to rescue the struggling entity. Such was recently demonstrated by the government’s mandate not to involve itself in Comair’s business rescue, despite it being in the public interest.

Asked about reports that Tongaat Hulett had closed its last mill yesterday, putting more workers out, Heide Geldenhuys, with the BRP team, said it was too early in the process for the BRPs to be able to comment appropriately on the potential impact on daily operations

She said the BRP was grinding down for the mandatory 10 days fact-finding process after which it would announce possible strategies.

“These are very complex circumstances and the BRPs are working hard to stabilise the situation, gather important information, meet with stakeholders, deal with critical issues, and the statutory duties required in terms of the Companies Act. To the extent possible and practical in the circumstances, contracts and undertakings will be respected and will be dealt with in accordance with the provisions of Chapter 6 of the Companies Act,” she said in a statement.

Tongaat Hulett announced last week that it had started voluntary business rescue proceedings for two operations in South Africa, Tongaat Hulett Limited and Tongaat Hulett Development Proprietary Limited, as it believed that business rescue was the most responsible step in the circumstances, after its local financier cut off the taps.

“Business rescue is a legal process governed by the Companies Act. The board believes business rescue should potentially result in a better return to stakeholders than a forced liquidation,” it said.

Tongaat in the statement said it had faced significant challenges following years of high and increasing debt levels, alleged financial misstatements and historic mismanagement under previous leadership.

It said it had made progress on its turnaround strategy since 2019, realising cost savings, improving available debt funding and reducing debt by more than R6.6 billion from a high of R11.7bn, but that it had a shortfall in working capital of about R1.5bn, largely driven through the impact of Covid-19 and the recent unrest in KwaZulu-Natal.

“This shortfall is necessary to fund the peak working capital requirements to complete the 2023 financial year,” it said.

According to Sacga, growers supplying sugar cane to the Felixton, Amatikulu and Maidstone mills in KwaZulu-Natal are currently due payments exceeding R400 million for cane delivered in September. At the end of November, a further R345m will become due for over 570 000 tons of cane delivered in October.

BUSINESS REPORT

Original Article

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