Tongaat Hulett says its Zimbabwe operations will not be affected by its decision on Thursday to go into business rescue over debts.
The company runs Hippo Valley and Triangle sugar estates in Zimbabwe. The estates provide the bulk of the group’s sugar output, but it is only the South African unit that is under stress, the company said. The company has been struggling to survive since 2019, hurt by corporate scandals and mismanagement.
Tongaat slashed its debts from R11.7 billion by selling some of its assets, but this has not been enough.
“Despite the good progress, we currently have a shortfall in the Company’s working capital facilities of approximately R1.5 billion, which is required to fund the peak working capital requirements to complete the 2023 financial year. Our banking funders have unfortunately informed us that they are not prepared to provide the additional funding,” the company said.
But this will not hit Tongaat’s Zimbabwe operations, whose Hippo Valley controls 53% of sugar sales in the country.
“These are the South African operations only. Tongaat Hulett’s Botswana, Mozambique and Zimbabwe sugar operations are not financially distressed and therefore will currently continue trading in the ordinary course,” says Tongaat CEO Gavin Hudson.
Tongaat says 87% of its leftover debt is carried by the cashflows of the South African sugar operations, the property business and dividends and operational support fees received from its non-South African sugar operations.
Going into business rescue means the company is protected from creditors, giving it time to recover.
In January, Tongaat shareholders approved an offer from Zimbabwean businessman Hamis Rudland to rescue the company by underwriting a R4 billion rights offer. However, the offer faced strong resistance from some Tongaat shareholders and the media. It fell through in June after the Takeover Regulation Panel of South Africa’s Department of Trade declared the shareholder approval a “nullity”. Shareholders had called for an investigation into whether Simon Rudland, a tobacco baron, was linked to his brother Hamish’s offer.
The probe established that Ebrahim Adamjee, an associate of Simon’s, had bought shares in Tongaat before a shareholder vote on the deal, which the panel said was evidence Simon and Hamish were “inter-related parties” in the attempted takeover.