Intervention: Trade, Industry and Competition Minister Parks Tau, left, and his deputy Zuko Godlimpi believe a sustainable solution can be found to
prevent Tongaat Hulett from being liquidated, thus preventing a devastating ripple effect across the economy. Photos: Supplied
Trade, Industry and Competition Minister Parks Tau and his deputy, Zuko Godlimpi, are pushing to rescue giant sugar producer Tongaat Hulett after the Durban High Court postponed a hearing on an application for its provisional liquidation last week.
South Africa’s leading sugar producer was placed under business rescue in October 2022. However, last month the practitioners said the plan to save the company, involving the Vision Group, had “become unimplementable”, raising the prospect of thousands of job losses.
SA Canegrowers said Tongaat Hulett was also the only milling company available to 18 000 small-scale growers who had no other economically viable option.
The plan had been approved and adopted by the requisite majority of creditors in early 2024 but in a notice on 12 February this year, the business rescue practitioners said the plan had fallen through.
The Durban high court postponed the hearing on the business rescuers’ application for liquidation in order to allow for those opposing the move to file affidavits, among them SA Canegrowers, the Industrial Development Corporation and the department of trade, industry and competition.
The department said Tongaat Hulett was a systemically important player in South Africa’s sugar value chain and its liquidation “would have far-reaching and devastating consequences for the sugar sector, particularly in KwaZulu-Natal, where the industry underpins thousands of jobs, small-scale farming livelihoods, rural economies and related downstream industries”.
“The government remains firmly of the view that liquidation should be a measure of last resort, particularly where there are reasonable prospects of rescuing a strategically important enterprise in a manner that protects jobs, sustains productive capacity and preserves value for the broader economy,” it said recently.
It said it believed Tongaat Hulett could be stabilised and restructured through a sustainable solution that balanced the interests of workers, growers, communities and creditors.
This week, accompanied by his deputy Godlimpi and the department’s director-general Simphiwe Hamilton, Tau held discussions with all stakeholders on how to avert Tongaat Hulett’s liquidation.
The meeting was “very constructive”, department spokesperson Kaamil Alli said.
“While discussions centred on Tongaat Hulett, broader industry-related matters were covered,” Alli said. “The outcomes of the meeting provided an effective way forward, addressing concerns raised by industry, leading to the future sustainability of the business.
“The minister and the deputy will continue to engage industry as issues relating to Tongaat unfold.”
Asked whether the department’s intervention could include a government financial injection to save Tongaat Hulett, Alli said he could not discuss specifics at this stage.
Vision boss Robert Gumede applauded the government’s intervention efforts.
Engagement: The stakeholder meeting with the government addressed industry concerns and considered the sustainability of Tongaat Hulett.
“We commend the government for recognising the strategic importance of Tongaat Hulett to the broader sugar industry, rural livelihoods, affecting small-scale growers, thousands of workers and families who depend on the company across KwaZulu-Natal and other regions,” Gumede said.
“Tongaat is not merely a business, it is an agricultural anchor, a major employer and a critical contributor to regional economic stability. The challenges the company faces require collaborative, transparent and decisive action from all stakeholders.”
He said the Vision Group had consistently maintained that the preservation and long-term sustainability of Tongaat Hulett “must remain the central objective”.
“We, therefore, welcome the government’s intervention as an important step toward stabilising the situation and restoring confidence in the company’s future. Vision believes in partnership with governments and regulators, where the THL businesses operate and is looking forward to achieving the same in South Africa,” Gumede said.
“The (court) hearing postponement creates a window of opportunity for all the parties and the broader stakeholder community, to map out and agree on a plan of action that saves Tongaat Hulett and the sugar industry.”
The company continues to operate under the supervision of the business rescue practitioners, pending the outcome of the court hearing.
In a statement, the practitioners said that based on the support, creditors had expressed that they and company management were confident that funding would be available for the next salary run due on
25 March “while engagements continue to secure longer-term stability”.
“At the time the application was filed, the extent of opposition and intervention was not known. In recent days, a number of notices of intention to oppose and intervene, together with intervening and opposing affidavits, have been received, resulting in a substantial body of new material requiring consideration by all parties,” they said.
SA Canegrowers chief executive Thomas Funke, who was among those who met Tau and Godlimpi, said stakeholders impressed on them the urgency of the crises facing the sugar industry and how “an urgent resolution to both will be the only way to ensure the protection of sugar cane growers, their workers and the rural economies of KwaZulu-Natal and Mpumalanga”.
“The Tongaat Hulett mills and refinery are critical assets in the South African sugar cane value chain. It is essential that they remain open and operational,” Funke said.
SA Canegrowers, which represents South Africa’s 27 000 small-scale growers and 1 100 large-scale growers, has written to President Cyril Ramaphosa and the ministers of finance, trade, industry and competition; agriculture; and public works and infrastructure, calling for “urgent, coordinated intervention to help stabilise the … sugar industry”.
Funke said sugar cane growers and the broader sugar industry were not only significant employers and drivers of rural economic activity; they could serve as a catalyst for new investment, job creation and long-term growth in emerging greenfields industries such as biofuels “with the right, coordinated government policy framework”.
“But the sugar industry is confronted by a convergence of debilitating pressures: the potential liquidation of Tongaat Hulett Limited and the uncertainty surrounding its milling operations,” he said. “We are also faced with the unprecedented surge in imported sugar and the continued impact of the health promotion levy. Tongaat Hulett’s liquidation is not merely about the survival of a single corporate entity but the systemic importance of the company’s milling operations to the broader South African sugar value chain and economy.”
The sugar industry has long bemoaned the 11% sugar tax introduced in April 2018, which the government argues is aimed at curbing obesity.
Industry groups say it has hurt the livelihoods of tens of thousands of sugar cane growers, and has not significantly reduced either obesity or diabetes.
Funke reiterated that of South Africa’s 28 000 large and small-scale sugar cane growers, Tongaat Hulett was the only milling company available to 18 000 growers.
“If these Tongaat Hulett’s operations fail or enter unfunded liquidation without structured intervention, the consequences will not be contained within a balance sheet,” Funke said, warning that the majority of South Africa’s growers faced an immediate loss of market access.
“Their estimated 40 000 directly employed workers will face unemployment and the surrounding rural communities will immediately be vulnerable to economic and social unrest. However, it does not stop there … Millers and growers share revenue from sugar sales through the Sugar Industry Agreement framework.”
Allowing Tongaat Hulett’s operational footprint to collapse would accelerate South Africa’s dependence on sugar imports, increasing long-term exposure to volatile global prices and exchange rate risk.
“Global sugar prices and the exchange rate may favour importers but the volatile nature of these markets means that South Africa would be exposed to an uncontrollable inflationary risk.” Funke said.
“What may appear to be a contained corporate failure would, in reality, trigger dire cascading economic consequences across KwaZulu-Natal and Mpumalanga, affecting the national food and beverage system.”
SA Canegrowers chairperson Higgins Mdluli said the cost of stabilising and preserving operations at Tongaat Hulett was materially lower than the long-term social, fiscal and industrial cost of rebuilding a collapsed value chain.