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Tongaat Hulett has narrowly escaped liquidation after the group’s business rescue practitioners, the Industrial Development Corporation (IDC) and Vision Group reached an agreement to keep the embattled sugar producer afloat, potentially safeguarding more than 250,000 jobs in its operations and value chain.The deal brought some relief to an industry hard hit by a surge in imports from countries such as Eswatini, Brazil, India and Guatamala.The health promotion levy, an excise duty applied to sugary beverages to curb obesity and noncommunicable diseases such as diabetes, has worsened the crisis.With Illovo Sugar, the two are South Africa’s largest sugar producers.The agreement, announced on Wednesday, follows weeks of uncertainty after the 134-year-old sugar giant came close to liquidation following a filing in February by the business rescue practitioners. The application was postponed after the IDC, Tongaat’s largest creditor, injected R200m in postcommencement funding in April to sustain operations until end-June while stakeholders negotiated a longer-term solution.As part of the deal, the state-owned development financier will convert its R2.5bn claim into equity and extend postcommencement finance (PCF) to support Tongaat’s continued trading during implementation.“Tongaat Hulett looks forward to continued engagement with the DTIC [department of trade, industry & competition] and Itac [International Trade Administration Commission] on an effective regulatory environment,” Tongaat said.“This is a fast-moving emergency requiring decisive action. Imports must be curtailed and a supportive local trading environment created, or the gains from the rescue process will be eroded at the cost of jobs, grower livelihoods and the broader industry.”The IDC said in a statement the agreement will see the IDC take a “significant stake” in Vision’s operating companies across South Africa, Zimbabwe, Mozambique and Botswana, while “extending post-commencement funding” to September. “It also lays the groundwork for Tongaat Hulett’s exit from business rescue,” said the IDC.Strategic assetTrade, industry & competition minister Parks Tau said: “Tongaat is a strategic asset in South Africa’s agricultural and manufacturing sectors, supporting thousands of direct and indirect jobs and underpinning economic activity across KwaZulu-Natal and other parts of Southern Africa.” The high court in Durban, which was hearing the matter, on Wednesday stepped back, granting Tongaat’s joint business rescue practitioners leave to withdraw the company’s provisional liquidation application.Tongaat’s business rescue practitioners said they are satisfied that “sufficient progress has been made to withdraw the liquidation application and proceed with implementing the adopted business rescue plan”.Tongaat entered business rescue in 2022 amid severe financial distress. The rescue plan initially progressed after Vision Group, an investor consortium backed by tech billionaire Robert Gumede was appointed to lead the turnaround. However, that momentum later stalled almost two-and-half years into the process as Vision Group and the IDC clashed over funding timelines, refinancing terms and additional bailout conditions linked to the sugar producer’s recovery.“I am heartened that the final agreement helps secure the sugar industry, 250,000 jobs and growers’ investments, with black business stepping up to save a 134-year-old group operating across the Sadc [Southern African Development Community] region,” Gumede said. “Vision is confident it can turn the businesses around and looks forward to working with the South African Sugar Association (Sasa), growers, labour unions, clients and suppliers,” he said. Tongaat accounts for about 25% of South Africa’s sugar milling capacity and produces about 43% of the country’s sugar. The group sits at the centre of the sugar industry, which supports 65,000 direct jobs and sustains more than 1-million livelihoods. The company also sources cane from more than 15,000 small-scale and community growers.Under the agreement, Vision committed to fund the settlement of creditor claims, including Tongaat’s debt of about R517m to Sasa. The deal provides for new sale agreements transferring Tongaat’s South African operations, as well as its interests in subsidiaries in Zimbabwe, Botswana and Mozambique, to Vision.The South African Canegrowers Association, which represents more than 24,000 small-scale farmers and 1,200 large-scale commercial sugarcane growers welcomed the deal.Canegrowers chair Higgins Mdluli said that with Tongaat Hulett’s liquidation off the table, its mills and refinery can now operate without interruption.“More than 17,500 growers depend on Tongaat, which remains key to the economy and rural stability through its three sugar mills and the country’s largest standalone white sugar refinery, supporting over 1- million livelihoods.” Sasa executive director Sifiso Mhlaba said the organisation welcomes the withdrawal of the high court provisional liquidation application.Cosatu also welcomed the announcement of a rescue package to save Tongaat Hulett and jobs along the value chain. The deal comes as the sector moves into the second phase of its master plan, a framework crafted by the government, industry and labour to stabilise and secure the long-term sustainability of the local sugar cane value chain.In February, Tau gazetted major amendments to the Sasa constitution, aimed at strengthening the sector’s ability to manage export volumes, balance domestic demand and shore up long-term stability amid rising import pressures and ongoing restructuring in the industry. The reforms also elevated the South African Farmers Development Association into top-tier decision-making structures alongside the South African Canegrowers Association.
