In a show of regional force, two black serial entrepreneurs , one a global hands -on entrepreneur and phylanthropist billionaire South African and the other Zimbabwean entrepreneur and highly experienced deal-maker, have teamed up to save beleaguered sugar giant Tongaat Hulett Limited (THL).
Although THL is not out of the woods yet, the withdrawal of the liquidation application could not have been sweeter for South African businessman Robert Gumede and his Zimbabwean counterpart, Rute Moyo.
So too for the Industrial Development Corporation (IDC), the state-owned development finance institution. Gumede and Moyo control Vision Sugar Group, THL’s largest secured creditor. The newly signed deal between the IDC and Vision Sugar Group’s key partners forms part of broad-based black economic empowerment (BEE) and is compliant to both SA and Zim transformation policies.
The state entity is swapping its post-commencement finance loan for a significant equity stake in Vision Sugar Group’s operations across South Africa, Zimbabwe, Mozambique and Botswana at 25% overall shareholding.
Under the new arrangement, Gumede’s Guma Group and the IDC own 68% of Tongaat’s South African operations, while Moyo controls 64% of the Zimbabwean business. The remaining 40% stake in each country is held by Vision Group partners including the IDC and Guma, while the Mozambican government also holds a 15% stake of Tongaat Hulett Mozambique.
The arrangement means the IDC now has interests in Zimbabwe, South Africa, Mozambique and Botswana.
Notably, in Zimbabwe, where the company is fully run by Africans, the business remained profitable despite challenges in South Africa. In the financial year ending in March, the company generated more than $60 million in profit. It also generates about R1 billion annually.
Both global entrepreneurs, Gumede and Moyo first got involved in 2019 in a process to acquire THL Zimbabwe and Botswana in a deal worth $164m, which was accepted by THL Board but had to be cancelled when Zimbabwean businessman Simon Rudland made an offer and underwrote a R4b rights offer which finally collapsed after the JSE panel discovered collusion.
This led to the company being placed in Business Rescue in October 2022.
The entrepreneur duo of Gumede and Moyo then pounced to buy the rest of THL Group for the same $164m ( R3.6b ) from the banks through the secured claims .
Gumede and Moyo executed a master class transaction using secured claims to place themselves in pole position to convert their loans and claims into equity since they control over 75% of the creditors votes. No other party could outbid nor outvote Vision.
Gumede is known as a global serial entrepreneur with interests in a global integrated tourism and hospitality company Tourvest Group the over 30 years old Gijima owned 100% by the Gumede family, Guma Rail and other businesses across the continent.
Moyo, who has lived in South Africa for over 30 years, is a former Coca Cola group executive and founder of Shanduka, owned by Cyril Ramaphosa, McDonalds and Coca Cola franchises in South Africa. Since leaving Shanduka he has invested in OK Zim, DHL, agriculture and farming and financial services.
They are joined in Vision by entrepreneur Amre Younis who is invested in SA Tourism , mining and agriculture, and Nauman Khan from Pakistan’s Almoiz, a family sugar group, Pepsi bottling and sugar energy.
On Wednesday, the THL business rescue practitioners (BRPs), charged with saving the entity from collapse, successfully withdrew a high-stakes application filed on 12 February in the Durban high court to place the company under provisional liquidation.
The move brought to an end a cloud of uncertainty that had been hovering over the 134-year-old sugar producer based in KwaZulu-Natal.
The last-minute deal was made smoother by the IDC, which agreed to extend its post-commencement finance (PCF) support to enable Tongaat Hulett to continue trading while the transaction is implemented.
The parties also agreed to restructure the IDC’s PCF into equity at the appropriate level as part of the overall transaction framework and Vision converting 100% of its secured claim of about R12 billion into equity, supporting a more sustainable capital structure on emergence from business rescue thus THL and future Vision Sugar SA to end up with a clean balance sheet .
THL’s woes were triggered by alleged financial misconduct by company executives. A forensic investigation by PricewaterhouseCoopers (PwC), commissioned in 2019, revealed a series of manipulations in the company’s financial statements.
The findings included allegations that senior executives embarked on a clandestine practice of overstating profits and asset values. Other irregularities uncovered included land-sale profits that had been improperly recorded and the premature recognition of revenue.
The report concluded that the manipulation of accounts and inflation of figures were apparently intended to justify higher bonuses for company executives.
Murray Munro, the former THL chief financial officer and CEO Peter Staude were cited as key architects of the misconduct.
The four ex-Tongaat Executives are facing fraud charges in an ongoing criminal case that is moving at a snail pace leaving serious questions to the National Prosecuting Authority.
The financial troubles and accounting scandal dealt a heavy blow to THL, which lost about R12 billion in value and accumulated debt exceeding R11 billion. The debt burden was the final nail in the coffin, forcing the sugar producer into voluntary business rescue in October 2022.
The business rescue process was crucial to ensure that more than 250 000 jobs that rely on the sugar sector value chain were protected. This included safeguarding the livelihoods of more than 15 000 small-scale growers, predominantly black farmers, who depend on THL-owned mills to crush their cane.
THL’s collapse would also have had a devastating effect on rural towns that depend on the sugar sector for economic survival. The provincial economy would likewise have suffered significantly.
Vision Sugar Group stepped in during January 2024 when its Vision BR plan was approved in a bid to save the company. In the process, it engineered entrepreneurial strategy from an MBA class when it instead directly acquired the 13 banks’ R12 billion claims and security rights of THL’s banking creditors at a discount, placing Vision in a controlling position.
Commenting on the developments, Vision Sugar Group said the consortium intended to invest in the recovery of Tongaat Hulett’s operations, support growers and suppliers who form the backbone of the value chain, and safeguard livelihoods dependent on a strong and stable business.
Gumede said: “I’m heartened that the final negotiations and agreement to save the sugar industry, the 25 000 jobs and the growers’ investments, have black business stepping up to save a 143-year-old sugar group operating in the SADC region.”
Gumede also said the move marked a significant milestone for the new Vision Sugar group , a black-owned company that is the second-largest employer in Zimbabwe and Mozambique after the respective governments.
“Vision has the confidence to turn around the fortunes of the companies and hopes the South African government will now protect jobs and the industry from the dumping of foreign-produced sugar from Brazil and Thailand,” he said.
Meanwhile, Mmakgoshi Lekhethe, chief executive officer of the IDC, said the agreement reflected the institution’s commitment to supporting an outcome that safeguards productive capacity, protects livelihoods across the sugar value chain and creates a credible platform for long-term recovery.
“Our role is aligned with our developmental mandate: to preserve industrial capability, support jobs and enable sustainable economic participation in sectors that are important to South Africa and the region,” she said.
The South African Development Farmers Association executive chairman Dr Siyabonga Madlala said the developments augured well for growers and employees of Tongaat Hulett.
“This marks a new growth and a new trajectory for Tongaat Hulett, its employees and the growers that supply Tongaat Hulett. We are very much excited to have been part of the difficult times and we have stood firm and believed in the rescue of Tongaat Hulett.
“Finally we believe we’re moving towards a sustainable future. We thank the IDC for their support and we appreciate Vision’s commitment and the growers that have stood the difficult times to continue supplying Tongaat Hulett. The future jobs are secured as well as the future livelihoods of the farmers,” Madlala explained.