/ 14 December 2023

Tongaat vote postponed amid claims process rigged to favour Gumede consortium

Tongaat Hulett Sugar Mill
File photo: Getty Images

The vote by creditors of sugar giant Tongaat Hulett has been postponed again, with bidder RGS Sugar claiming in court that the process was being delayed to give ANC funder Robert Gumede’s Vision group time to raise money to fund the deal.

The section 151 vote on rescue plans by Vision and RGS was meant to have taken place on Thursday 14 December, but will now happen on 11 January next year, in terms of an order issued in the Durban high court on Wednesday.

Tongaat entered voluntary business rescue in November last year, and the creditors’ vote has been postponed several times while negotiations between a group of banks it owes R8 billion, Vision and the Public Investment Corporation take place. 

The business rescue has received funding from the Industrial Development Corporation (IDC), which wants security from the successful bidder before it makes any further funding available.

The South African Sugar Association (Sasa) and RCL Foods had both gone to court for an interdict to have the business rescue plans declared unlawful because they did not make provision for R1.5  billion Tongaat Hulett owed in unpaid industry levies.

The levies are part of the Sugar Industry Agreement and subsidises smaller growers and other industry participants to give them an equitable share of the profits generated. 

Business rescue practitioners Metis had gone to court to try to avoid paying them, but failed, with the court ordering that the debt to Sasa and the industry needed to be honoured.

RGS had also approached the court for an order compelling Metis to hold the creditors’ vote, while Metis and Vision had both asked the court to delay the process until January.

In his order, Judge Rashid Vahed ruled that the creditors’ vote be postponed until no later than 11 January.

Vahed also ordered that the business rescue plans published by the two bidders would not be voted on at the meeting.

This will allow for amended plans to be presented by Vision and RGS when the meeting convenes.

The interdict applications by Sasa, RCL and RGS were all postponed indefinitely, with the proviso that any of the parties could have them placed back on the court roll at a future date.

In papers filed in court in their interdict application, RGS said it was seeking an order compelling the business rescue practitioners (BRPs) to allow the creditors’ meeting to proceed on Thursday — and for it to vote on its amended rescue plan.

RGS head of strategic development, Shashikant Mangali, said in an affidavit that they were ready for the vote to go ahead and that they had the funds to back up their bid.

Mangali said Metis’ support of “yet another adjournment” was “bizarre in circumstances where the RGS plan is fully funded and capable of adoption at the meeting on 14 December 2023, and immediate implementation”.

Metis’ proposal to postpone again was “irrational, unjustifiable and directly at odds with the contents of the affidavit filed by the IDC to intervene” in the application.

The IDC has funded the Tongaat business rescue, and has indicated in papers that it will provide further funding for the process, but provided that the vote go ahead and a rescue plan be adopted.

Mangali said there was no reason to adjourn the meeting to accommodate negotiations between Vision and Sasa because Vision had failed to secure the necessary funding to purchase the lender group’s debt.

“The Vision plan is therefore invalid and cannot be adopted,” Mangali said in his affidavit.

Vision had already failed twice to secure funding for the deal with the banks and there was no certainty that the company would be able to raise the money, even if another postponement was granted.

The business rescue practitioners were unlawfully promoting and favouring the Vision plan to accommodate the banks’ desire to “escape their exposure” to Tongaat Hulett and avoid risk in relation to the business resource process, he said.

Mangali said the RGS proposal was acceptable to both RCL and Sasa and that the amended rescue plan would not affect the other creditors and could be voted on at the creditors’ meeting with no further delays to the process.

The plan for a pre-meeting proxy vote was “ neither appropriate nor lawful” because creditors could not be asked to determine the sequence in which voting on the plans should take place, Mangali said.

Metis’ conduct had “created a reasonable impression that they are conducting the [Tongaat Hulett] business rescue solely for the benefit of the Vision parties and or the lender group,” Mangali said.

“There is little evidence that the BRPs are discharging their duties with [Tongaat Hulett]’s best interests as their paramount consideration,” he said.