South African Canegrowers said it was disappointed that sugar producer Tongaat Hulett’s (THL) business rescue practitioners (BRP) have chosen to approach the Supreme Court to appeal that it must pay almost R526 million in statutory levies to the sugar industry.
On Friday, THL’s BRP’s, in an update of the business rescue process, said they had been granted the right to appeal a December 2023 decision by the Durban High Court that they had to pay outstanding levies to the sugar industry.
“The industry is already facing other threats, including dampening demand for local sugar thanks to the Health Promotion Levy (sugar tax) and cheap sugar imports. Further delays in the payment will be to the detriment of thousands of growers and the rural economies of Mpumalanga and KwaZulu-Natal that the sugarcane industry sustains,” SA Canegrowers chairman Higgins Mdluli said this weekend.
The BRPs said in the update they now had one calendar month to deliver a notice of appeal to the Supreme Court of Appeal (SCA). The BRPs had won the right to appeal at the SCA after the Durban High Court, in the initial judgement, denied them that avenue of action.
THL had suspended paying the levies from the end of October 2022 until March 2023, claiming it did not have to pay them while in business rescue. THL applied to the courts to ratify that the payment of the levies could be suspended under the Companies Act, but the Durban High Court in 2023 confirmed the legally binding Sugar Industry Agreement must be honoured and that the Companies Act did not override the sugar legislation.
Mdluli said the overdue payment threatened the livelihoods of many, including 24 000 small-scale farmers and 1 200 commercial farmers and a large downstream economy that together support the livelihoods of one million people in South Africa.
“SA Canegrowers had hoped the new owners of THL, the Vision Consortium, would have honoured the outstanding levies and put the matter to rest. Prolonging this matter with legal action puts the livelihoods of the South African sugar industry, including small-scale growers and the one million people that the industry supports, at risk,” he said.
Meanwhile, THL said in the update on Friday they and the Vision Consortium were proceeding on schedule with the preparatory steps to implement the adopted Business Rescue Plan.
The plan was adopted by the requisite majority of creditors on January 11, 2024, and provides for the Vision Consortium, among other things, to settle the more than R7 billion outstanding to lenders through a debt for equity swap and share subscription..
“Substantial progress has been made with regard to the implementation of the Plan and the Vision transaction. To give effect to the recapitalisation…the Competition Tribunal in South Africa approved the transaction on 24 July 2024,” the BRP’s said.
The Botswana competition filing was submitted in late June, with the Zimbabwe competition filing submitted in mid-July. The Mozambique competition filings were expected to be submitted shortly with a pre-notification having been submitted to the authority.
In addition the IDC’s (Industrial Development Corporation) post commencement finance facility had been extended to August 21, 2024. The BRPs were also in negotiations with the IDC for a further extension.
The BRPs said the Vision Consortium continued to cooperate fully with them and the company’s executive management, to implement the transaction as soon as possible.
The BRPs also continued to advance the preparatory steps to implement the business rescue plans of Tongaat Hulett Sugar South Africa and Voermol Feeds Proprietary as approved and adopted by the creditors on January 31.
Regarding the legal application brought by Mohini Singari Naidoo trading as Powertrans Sales & Services to declare the plan unlawful and set the plan aside, Tongaat and the BRPs had opposed this application, and served their answering affidavit, the BRPs said.
Powertrans had delivered its replying affidavit. The company and the BRPs were considering whether it was necessary to seek leave to deliver a fourth set to deal with new allegations in Powertrans’ replying affidavit.
“It remains our view that the company stands a reasonable prospect of being rescued… in a manner that will balance the rights and interests of all affected persons,” the BRP said.
BUSINESS REPORT