With sugar producer Tongaat Hulett asserting that it’s going to enter a voluntary enterprise rescue course of, SA Canegrowers are involved that the corporate could not be capable of honour a payment of R401 million owed to growers for sugarcane delivered in September.
On Thursday, agri-processing big Tongaat revealed to the market that its South African operations are drowning in a pool of debt, estimated to be greater than R5 billion, and its lenders have grown bored with bailing the corporate out.
Read: Tongaat Hulett pressured into enterprise rescue
According to the KwaZulu-Natal-based firm, the choice to embark on enterprise rescue is the one solution to restore the enterprise’s well being, return worth to its shareholders and defend jobs, stakeholders and collectors.
However, for growers and farm staff the most important concern is whether or not or not they are going to be paid on time for companies rendered to the corporate.
The affiliation additional expressed issues that the delays in funds could have catastrophic penalties for a variety of small-scale growers who made their first deliveries in September, doubtlessly prompting unrest within the province.
“This move means that Tongaat Hulett has lost access to its bank accounts, which in the immediate term means that over R401 million that was due to be paid to growers at the end of October 2022 will likely not be transferred on time,” the affiliation mentioned in a press release on Friday.
“Questions also remain about how payments will be made for deliveries in October, November, and December 2022, which means the impact on growers is likely to worsen if the mills do not remain operational.”
“This situation could plunge thousands of growers and workers into destitution and raises the risk of unrest in KwaZulu-Natal’s rural cane-growing communities.”
No ensures
In a response to questions posed by Moneyweb, Metis Strategic Advisors, the agency appointed by Tongaat to deal with the rescue course of, couldn’t give any ensures that issues raised by SA Canegrowers have been unfounded.
In its response, Metis Strategic Advisors made no point out of the R401 million in funds that is because of be paid to growers for his or her September deliveries.
Instead, the corporate mentioned: “The BRPs have commenced their investigation into the affairs of the company in order to determine an appropriate way forward.”
“The practitioners now have management control of the company. However, they may delegate responsibilities to the management team and or Board to continue to exercise their pre-existing functions subject to the supervision and/or oversight of the BRPs.”
“In order for these two operations to move ahead under the business rescue process, the BRPs have started their formal processes with the business to take any critical decisions required, as provided for in terms of the Companies Act, to address the liquidity requirements,” the agency provides.
“The company and the BRPs are committed to finding solutions as they understand how challenging the current conditions are for creditors.”
The firm did nonetheless be aware that the enterprise rescue practitioners are scheduled to fulfill with worker representatives in addition to collectors on Tuesday, 8 November.
Tongaat’s woes
The as soon as celebrated 130-year-old firm has lately been embroiled in a variety of challenges, one in all which being an accounting scandal the place it’s alleged that earlier administration could have misrepresented the corporate’s financials.
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As a results of this, in addition to reported operational inefficiencies at a few of its vegetation, the group was sitting with a debt of over R11.7 billion on its stability sheet earlier than 2019 – a debt that it has since reduce down by R6.6 billion below new management. Tongaat additionally has a working capital shortfall of R1.5 billion.
According to a be aware to the market on Thursday, the group mentioned at the least 87% of its residual money owed is carried by the cashflows of the South African sugar operations, the property enterprise and dividends and operational help charges obtained from its non-South African sugar operations.
Things appeared to be trying up lately when the corporate started placing into movement a debt restructuring plan. In September, it had secured a R600 million short-term base facility from a South African lender.
At the time the group was additionally negotiating to safe an additional R750 million from the lender, nonetheless latest information exhibits that these negotiations didn’t bear fruit.
Read:
Tongaat Hulett makes progress with its debt restructuring
JSE suspends Tongaat Hulett for second time in three years
No session
SA Canegrowers says the sugar trade has clearly been conscious of Tongaat’s latest troubles. However, it takes concern with the truth that it was not consulted earlier than the corporate determined to take the enterprise rescue route.
“As the surrounding mills in the province lack the ability to take on Tongaat Hulett’s deliveries, the decision also has serious short- and long-term implications for the supply of sugar to the local market.”
“SA Canegrowers is also mindful of the potential ramifications of this move on the livelihoods of Tongaat Hulett mill workers and other workers throughout the sugarcane value chain,” the physique added.
The affiliation did nonetheless be aware that it’s going to do all it could to interact with the enterprise rescue course of, to make sure that growers are given what is because of them.
“In the meantime, urgent action is required to prevent the catastrophic social consequences that will arise if the immediate threat of non-payment materialises over the next few days.”
“We therefore urge all involved, including the business rescue practitioners, the Tongaat Hulett board and executive management, and financial institutions to do everything possible in the circumstances to ensure that payments are made with as little disruption as possible,” they added
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