At stake: Tongaat Hulett employs 40 000 people on its farms in KwaZulu-Natal (above) and Mpumalanga and 65 000 more in Botswana, Mozambique and Zimbabwe. (Delwyn Verasamy/M&G)
The Terris Consortium led by politically connected billionaire Robert Gumede has until 14 November to finalise a R2 billion loan from the Public Investment Corporation (PIC) if it is to pull off the purchase of embattled sugar giant Tongaat Hulett.
Gumede’s group has struck an agreement to buy Tongaat’s R8 billion debt from a group of 12 banks, subject to issuing of the loan from the PIC, which manages investments on behalf of the Government Employees Pension Fund and other state entities.
City Press reported over the weekend that Gumede, a long-standing ANC funder, had secured an agreement with the banks through Terris Sugar.
Terris Sugar is owned by the Terris Consortium made up of Gumede’s Guma Africa Group, Zimbabwe’s Remoggo, Almoiz Industries, owned by Pakistani Nauman Khan, and Amre Youness of Samancor.
They appear to have outmanoeuvred their competitors, Mozambican sugar company RGS and Tanzania’s Kagera Sugar, which in June were announced as the preferred strategic equity partner to purchase all of Tongaat’s sugar assets by Metis Strategic Advisors, the business rescue practitioners who are overseeing the Tongaat process. Despite the earlier announcement in favour of Kagera, Metis this week confirmed that they were aware of the bid by Gumede and were waiting for written confirmation from Terris and the group of banks before taking any further action.
Loans to politically connected individuals by the PIC came under the spotlight at the Mpati Commission, held in 2019, which was scathing of the state of corporate governance at the R2.5 trillion state-run fund.
Billions were lost through dubious loans to Lancaster 101, Steinhoff’s black economic empowerment partner headed by Jayendra Naidoo, and to the now-defunct VBS Mutual Bank, which funnelled money into the pockets of ANC leaders.
The commission made nearly 300 recommendations to deal with the “substantial impropriety” at the PIC, at which there had been a “disregard for due process” and a lack of proper financial controls, but it is not clear at this stage which of these have been implemented.
While the PIC, Tongaat and Terris declined to comment on the deal this week, a source close to the process said that it hung on Terris meeting the deadline set by the banks and the business rescue practitioners for written confirmation of the PIC loan.
This would allow the practitioners — who have been in control of the company since October last year — to present a finalised agreement at the Tongaat creditors’ vote, which has been postponed several times, most recently on 26 October.
It has now been set down for 24 November, with the deadline for the final vote set for 30 November, by which time Gumede’s group will be able to dictate the outcome of the crucial meeting as it will own the bulk of the debt.
The source said there had been “pressure” to get the deal through ahead of the creditors’ vote.
“They have been pushing to get the deal through before the 14th as the BRPs [business rescue practitioners] and the banks want proof of funding from the PIC,” they said.
“There is pressure to get the deal done before the creditors’ vote. If they do, Terris owns the majority of the debt and it will be able to dictate who gets paid what.
“The big question is, will they fund the deal? If they do, the PIC will effectively become the biggest shareholder in Tongaat — and in all the risk that comes with it.”
The cash-strapped sugar giant, which has assets throughout the Southern African Development Community member states, was placed under voluntary business rescue last year.
The company, which had delved into the property market, lost the bulk of its R23 billion value as a result of alleged inflation of profits in its land development division by a group of senior executives including former chief executive Peter Staude.
Staude and five others are charged with defrauding the 150-year-old company to the tune of R3.5 billion by inflating sales figures to secure multimillion rand incentive bonuses — and lucrative share options — based on their performance.
They will appear in the Durban high court for a pre-trial hearing on 18 December.
The company retrenched 10 000 workers in 2019 because of the collapse that followed the news of the fraud, but still employs about 65 000 people and growers across South Africa, Botswana, Mozambique and Zimbabwe.
In South Africa, it employs 40 000 people on its farms and in milling and processing operations in KwaZulu-Natal and Mpumalanga.
PIC spokesperson Adrian Lackay declined to comment on the deal with Terris and on whether Gumede was seen as a politically exposed individual.
“Tongaat Hulett is in business rescue and is yet to publish a business rescue plan,” Lackay said.
“Any interpretation of the PIC’s position as a shareholder of Tongaat Hulett outside of the business rescue process would be speculative until a business rescue plan is presented and agreed to by shareholders.”
A spokesperson for the Metis BRPs said they had not received written confirmation of the agreement between the banks and Terris.
“Whilst the 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 spokesperson said.
“The BRPs are awaiting formal confirmation of the completion of the transaction.”
The spokesperson said they were considering the potential effect of the agreement on the business rescue process. “Our initial views are that this development is likely to be positive for both affected persons and the company.”
Rob Bessinger, a spokesperson for Terris, declined to comment.
“We are not in a position to comment at this stage but will do so once we believe the timing is appropriate,” he said.