Financially distressed JSE-listed sugar producer and property firm Tongaat Hulett has missed a payment deadline to cane growers, putting the livelihoods of hundreds of growers and staff in danger.
Tongaat’s lenders final week rejected the corporate’s proposed restructuring plan and to advance additional funds to the corporate, leading to Tongaat’s board asserting on Thursday it had determined to embark on voluntary enterprise rescue proceedings.
SA Canegrowers chairperson Andrew Russell mentioned at this time (Tuesday) Tongaat Hulett Limited and the enterprise rescue practitioners have as of November 1 2022 formally missed the deadline by which to make payment to growers for sugarcane delivered in September.
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“This places the livelihoods of hundreds of growers and staff delivering cane to the Felixton, Amatikulu, and Maidstone mills in KwaZulu-Natal in danger.
“The variety of jobs in danger is probably going to improve as uncertainty rises about whether or not growers who delivered cane in October might be paid on time.
“An estimated R345 million will become due for payment at the end of November to cover these sugarcane deliveries,” he mentioned.
Russell mentioned the livelihoods in danger due to the non-payment for September 2022 embody about 4 300 growers who delivered virtually 600 000 tonnes of sugarcane to Tongaat Hulett Limited mills final month and have been due to be paid greater than R400 million by the top of October 2022.
He mentioned greater than 4 000 of those are small-scale growers who’re particularly susceptible.
Russell burdened that the viability of the sugar business depends on the survival of each large- and small-scale growers as a result of the bigger producers present the majority of the cane tonnage that’s required to maintain the mills working at 350 tonnes an hour and additionally cross subsidise small-scale growers via quite a lot of monetary assist mechanisms.
He mentioned the non-payment additionally locations the livelihoods of an estimated 14 642 everlasting and seasonal farm staff employed by these growers in danger.
“This figure excludes contractors, haulier companies, input suppliers, mill workers and other service providers throughout the value chain who will also be impacted,” he mentioned.
Russell mentioned the affect of the present scenario is far-reaching and might be devastating.
He mentioned communities that might be affected by this are already undergo from excessive ranges of unemployment and poverty and embody the agricultural 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 mentioned though the present scenario is dire, the sugar business can nonetheless get well.
“But for this to happen, it is essential that THL (Tongaat Hulett Limited) secure the funding necessary to maintain its operations,” he mentioned.
Russell mentioned SA Canegrowers is dedicated to working with Tongaat Hulett Limited, the enterprise rescue practitioners, banks, authorities and different business stakeholders to be sure that the present disaster will be reversed and to mitigate the affect on the employees and the agricultural economies that depend on the sugar business for his or her livelihoods.
He mentioned a gathering was held on Monday between the enterprise rescue practitioners and representatives of the growers impacted by the choice of Tongaat’s board to enter into voluntary enterprise rescue. The focus of a gathering between SA Canegrowers and the enterprise rescue practitioners might be on discovering a speedy resolution to the present disaster and mitigating the affect on the affected staff and the agricultural economies.
Russell beforehand questioned how funds might be made for deliveries in October, November and December 2022, including that the affect on growers is probably going to worsen if the mills don’t stay operational.
The choice by Tongaat’s board to place the corporate into voluntary enterprise rescue was prompted by the choice of the corporate’s lenders to reject the debt restructuring plan and not to advance additional funding to the corporate.
Tongaat’s enterprise rescue proceedings additionally imply the corporate has misplaced entry to its financial institution accounts.
SA Canegrowers anticipated final week that within the instant time period this meant it was unlikely that greater than R401 million, which was due to be paid to growers on the finish of this month, might be transferred on time.
Tongaat’s South African operations are drowning in a pool of debt, which is estimated to whole greater than R5 billion, with a brand new R600 million short-term borrowing facility obtained on 29 July 2022 to help in direction of an roughly R1.5 billion working capital shortfall now due for reimbursement.
Shareholder activist Chris Logan and an business insider each informed Moneyweb final week that Tongaat going into enterprise rescue could have large socioeconomic penalties and that the corporate couldn’t be allowed to fail due to these implications.
Trading within the shares of Tongaat Hulett has been suspended since 19 July 2022.