Tongaat Hulett’s enterprise rescue practitioners (BRP) collectively with members of SA Canegrowers have agreed to a short-term association that may see disgruntled growers paid for cane delivered to the sugar producer’s mills.
According to an announcement launched by business physique SA Canegrowers, the payment association will prioritise small-scale growers who’re presently probably the most susceptible within the sugar processing provide chain.
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The rescue practitioners have agreed to settle excellent funds in addition to these due by the tip of November.
“Under the agreement, outstanding October payments to commercial growers for sugarcane delivered in September will be made by Friday, 11 November 2022,” SA Canegrowers stated.
“Payments due to small-scale growers at the end of November 2022 for sugarcane delivered in October will be paid in full, while suitable terms have been agreed for staggered payments to commercial growers.”
The BRP’s have additionally agreed to incorporate business service suppliers – which embody contractors, haulier firms, and enter suppliers – to the settlement. Their excellent funds shall be processed this week collectively with funds on account of industrial growers.
“Commercial growers agreed to waive their claim for interest due on delayed payments in recognition of the difficult position Tongaat Hulett finds itself in, and in the interests of other affected stakeholders.”
Tongaat’s troubles
The information of sugar business stakeholders coming to an settlement with Tongaat Hulett’s BRP’s comes after canegrowers raised issues in October that Tongaat’s failure to pay over R400 million owed to growers on time, might plunge your complete sugar-producing provide chain into turmoil, risking over 14 000 jobs.
Panic from the business arose after Tongaat introduced that will probably be present process a voluntary enterprise rescue course of, claiming monetary misery in its South African operations.
The agri-processing large’s debt is estimated to be above R5 billion. Having misplaced the assist of its lenders, Tongaat is now relying on recently-appointed enterprise rescue practitioners of Metis Strategic Advisors to save lots of the 130-year-old firm from itself.
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According to SA Canegrowers, enterprise between Tongaat and growers will solely resume after present excellent funds have been settled.
“Once the outstanding October payments are effected, growers will resume deliveries to the mills in Felixton, Maidstone, and Amatikulu, enabling Tongaat Hulett to resume operations at its mills and refinery, and to once again generate cashflow.”
Crisis removed from over
For business stakeholders, the disaster for the sugar business is much from over. Even with the signing of this settlement, canegrowers will not be assured that the corporate will survive enterprise rescue.
“It remains to be seen whether Tongaat Hulett will be able to secure the funding needed to complete the off-crop maintenance that is required for its mills to operate next season,” the business physique stated.
SA Canegrowers has subsequently continued to make requires intervention, asking important roleplayers, together with lenders, the Department of Trade, Industry and Competition, in addition to the Department of Agriculture, Land Reform, and Rural Development, to come back collectively to seek out options.
The physique has additional warned that Tongaat’s failure won’t solely undo years of reform ushered in by the Sugarcane Value Chain Masterplan however it would additionally reverse work carried out to guard the native sugar business from worldwide gamers and place in danger hundreds of thousands of livelihoods that rely on the native sugar business.
Listen to SAfm Market Update with Moneyweb’s interview with Dr Thomas Funke – CEO of SA Cane Growers, as he weighs in on the potential of job losses on account of Tongaat’s present monetary difficulties (or learn the transcript):