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Robert Gumede consortium set to take over Tongaat Hulett – report

Tongaat-Hulett

A consortium led by businessman Robert Gumede is set to take control over struggling sugar company Tongaat Hulett, ending its business rescue proceedings and potentially saving thousands of jobs.

This is according to reports from City Press, which reported that Gumede’s Terris Consortium bought out 12 banks with a combined claim of R8 billion against Tongaat Hulett.

The publication reported that Terris Sugar, owned by Terris Consortium, is run by various well-known business moguls.

They include Zimbabwean Rutenhuro Moyo of Remoggo, Amre Youness of Samancor, Pakistani Nauman Khan of Almoiz Industries and Pepsi Bottling, and Gumede’s Guma Africa Group.

City Press reported that Terris Sugar signed the deal on Friday, 3 November. This effectively closed Tongaat’s business rescue process, which the company entered into in October 2022.

However, Tongaat Hulett told Daily Investor that, whilst its business rescue practitioners (BRPs) have received verbal confirmation of this transaction, the BRPs have not yet received a formal notification from either the Banking Lender Group or Terris.

“The BRPs are considering the potential impact on the business rescue process. Our initial views are that this development is likely to be positive for both affected persons and the company,” the company said.

“The BRPs are awaiting formal confirmation of the completion of the transaction and will communicate the way forward in due course and through the correct forums.”

The consortium’s takeover would likely save thousands of jobs in South Africa, Zimbabwe, Mozambique, and Botswana.

Tongaat was founded in 1892 and operates four mills in South Africa with an installed capacity to produce more than 1 million tons of sugar annually. In 2021, the company reported employing 22,927 people

In 2019, Tongaat was involved in an accounting scandal. Some of its executives were caught in a multi-billion reporting scandal in which accounts were misstated, incorrect profits were declared, and huge bonuses were awarded.

The company was placed in administration in October 2022 after failing to recover from this accounting scandal, which exposed a mountain of debt.

In addition to the heavy interest rates on its outstanding loans, the company’s ability to make money was hindered because inadequate plant maintenance led to a slowdown in sugar production in South Africa, Bloomberg reported in 2022. 

The decision to enter business rescue was taken after creditors rejected a restructuring plan that would have given the company leeway on some of its outstanding loans and access to R1.5 billion needed to keep operations going.

Tongaat had repaid about half of the R12 billion of debt that emanated from the 2019 scandal.

The company suspended trading on the JSE in July 2022.

Following the deal, the Terris Consortium owns Tongaat’s sugarcane plantations, mills, refineries and undeveloped land in the four countries and inherits the company’s large workforce.

“They will move the company from business rescue and lift the suspension on the trade of shares once the business rescue practitioners present and hold a vote on the Terris Sugar scheme,” an insider told City Press.

According to City Press, Terris Sugar now holds over 80% of creditors’ votes, and any bidding company only requires 75% of the votes to succeed. It will still inject the R3.6 billion required for the company’s assets.

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