Withdrawal of Tongaat Hulett liquidation signals renewed confidence in the sugar sector, say ANC and Saftu | Africa Front
Via Mail & Guardian
Withdrawal of Tongaat Hulett liquidation signals renewed confidence in the sugar sector, say ANC and Saftu
<p>If the Durban High Court had given the provisional liquidation of KwaZulu-Natal sugar giant Tongaat Hulett Limited (THL) the green light, it would have spelt catastrophe for the emerging sugar cane growers and disrupted the rural economy.</p>
<p>This is the view of the ANC and the South African Federation of Trade Unions (Saftu) in the aftermath of the eleventh hour withdrawal of the liquidation.</p>
<p>“The ANC welcomes the binding agreement concluded between the Industrial Development Corporation (IDC), the Business Rescue Practitioners (BRPS) of Tongaat Hulett and the Vision Group to safeguard approximately 250 000 jobs and stabilise one of South Africa’s most strategic agricultural industries. This landmark agreement represents a significant intervention to protect livelihoods, preserve productive capacity and strengthen confidence in the future of the sugar sector,” the ANC said in a statement.</p>
<p>The party said the safeguarding of jobs and the rescue of the THL from liquidation were consistent with the IDC’s developmental mandate. That included supporting industrial capacity, protecting employment and promoting broad-based black economic participation.</p>
<p>“We further welcome the participation of the Vision Group as a long-term investor. Its commitment to invest in operating, supporting growers and suppliers and restoring stability to the business signals renewed confidence in the sector and creates a platform for sustainable growth,” the party said.</p>
<p>The liquidation matter the BRPS filed on 12 February was expected to resume in the Durban High Court last week but two black serial entrepreneurs saved the day.</p>
<p>Robert Gumede, a South African-known, hands-on entrepreneur and philanthropist billionaire, together with Zimbabwean entrepreneur and dealmaker Ruto Moyo, ensured the possible liquidation was stopped in its tracks. </p>
<p>They penned a deal with IDC, the state-owned development finance institution. The duo controls Vision Sugar Group, the largest THL secured creditor.</p>
<p>The state entity is swopping its post-commencement finance loan for a significant equity stake in Vision Sugar Group’s operations across South Africa, Zimbabwe, Mozambique and Botswana, at 25% overall shareholding. The move ensured that the BRPS withdrew the matter and continued with the rescue process.</p>
<p>Saftu general-secretary Zwelinzima Vavi said the news of THL’s rescue augured well for the rural economy and the small-scale growers.</p>
<p>“The preservation of Tongaat Hulett is not merely saving the company but defending industrial capacity, potential jobs and preserving the entire value chain that remains a vital cog for food security, rural development and industrial and economic transformation,” Vavi said. </p>
<p>The deal between the IDC and Vision Sugar Group’s key partners forms part of broad-based black economic empowerment (broad-based BEE) and is compliant to both SA and Zim transformation policies. </p>
<p>Under the new arrangement, Gumede’s Guma Group and the IDC own 68% of Tongaat’s South African operations, while Moyo controls 64% of the Zimbabwean business. The remaining 40% stake in each country is held by Vision Group partners, including the IDC and Guma, while the Mozambican government also holds a 15% stake of Tongaat Hulett Mozambique. </p>
<p>The arrangement means the IDC now has interests in Zimbabwe, South Africa, Mozambique and Botswana. </p>
<p>Gumede and Moyo first got involved in a process to acquire THL Zimbabwe and Botswana in a deal worth $164m in 2019. The THL board accepted it. It was later cancelled after Zimbabwean businessman Simon Rudland underwrote a R4 billion rights offer that collapsed after the JSE panel discovered collusion. </p>
<p>This led to the company being placed in business rescue in October 2022. </p>
<p>Entrepreneur duo Gumede and Moyo then pounced to buy the rest of THL Group for $164m from the banks through the secured claims.</p>
<p>Gumede and Moyo executed a master class transaction using secured claims to place themselves in pole position to convert their loans and claims into equity since they control more than 75% of the creditors votes. No other party could either outbid or outvote Vision.</p>
<p>Gumede is known as a global serial entrepreneur with interests in a global integrated tourism and hospitality company Tourvest Group, the more than 30-year-old Gijima, owned 100% by the Gumede family, Guma Rail and other businesses across the continent.</p>
<p>Moyo, who has lived in South Africa for more than 30 years, is a former Coca-Cola group executive and founder of Shanduka, owned by Cyril Ramaphosa, McDonalds and Coca-Cola franchises in South Africa. Since leaving Shanduka, he has invested in OK Zim, DHL, agriculture and farming and financial services. </p>
<p>They are joined in Vision by entrepreneur Amre Younis, who is invested in SA Tourism, mining and agriculture, and Nauman Khan from Pakistan’s Almoiz, a family sugar group, Pepsi bottling and sugar energy. </p>
<p>The last-minute deal was made smoother by the IDC, which agreed to extend its post-commencement finance (PCF) support to enable Tongaat Hulett to continue trading while the transaction is implemented. </p>
<p>The parties also agreed to restructure the IDC’s PCF into equity at the appropriate level as part of the overall transaction framework and for Vision to convert 100% of its secured claim of about R12bn into equity, supporting a more sustainable capital structure on emergence from business rescue. In this way, allowing THL and future Vision Sugar SA to end up with a clean balance sheet. </p>
<p>Scores of growers rely on THL-owned sugar mills. Three of the mills — Amatigulu, Darnall and Maidstone — are on the North Coast of KZN. The growers use the mills to crush cane. The mills also serve as a vital employers for surrounding rural communities and are regarded as the heart of the rural economy.</p>
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