South Africa’s Tongaat Hulett is to sell its sugar estates, including those in Zimbabwe, to Kagera Sugar, one of East Africa’s largest sugar producers.
This is part of a plan to rescue Tongaat Hulett group, which has struggled for survival since 2019, hurt by corporate scandals and debt.
“The proposed transaction will comprise the acquisition of the complete sugar division of Tongaat Hulett Limited in South Africa and the investments in Zimbabwe, Mozambique and Botswana,” Tongaat said in a notice on the Johannesburg Stock Exchange on Friday.
Tongaat runs Hippo Valley and Triangle sugar estates in Zimbabwe, which provide the bulk of the group’s sugar output. However, only the South African operation was under stress.
In January last year, Tongaat shareholders approved an offer from Zimbabwean businessman Hamish Rudland to rescue the company by underwriting a R4 billion rights offer. But the offer faced strong resistance from some Tongaat shareholders. It fell through after the Takeover Regulation Panel of South Africa’s Department of Trade declared the shareholder approval a “nullity”.
Now the business rescue practitioners running Tongaat are going with Tanzania’s Kagera, which owns assets in Tanzania, the Democratic Republic of Congo and the Middle East.
“We started the process with a list of more than 70 interested parties, which was narrowed down to eight that focused on acquiring the combined Tongaat Sugar Assets. After a rigorous process, we identified Kagera Sugar as the preferred candidate,” the administrators say.
They believe Kagera’s access to sugar refineries in Oman and Bahrain will provide modern technologies and expertise to improve efficiencies at Tongaat operations.
Nassor Seif, Managing Director of Kagera Sugar, said: “The Group is committed to investing significantly in the operations to modernise the plants and expand them to increase production and efficiencies.”
Kagera is backed by Norfund, a Norwegian develoment finance fund which invested in the company in 2020.
The sale would still need the approval of Tongaat creditors when they meet in September. It may also be subject to regulatory approvals in Zimbabwe.
Tongaat’s Hippo Valley produces more than half of Zimbabwe’s sugar requirements. It has been growing output by expanding land under cane and signing up private farmers. Project Kilimanjaro, a US$40 million investment to open up 4000 hectares of virgin land for production, has been delayed by a lack of funding and insecurity over land tenure.
The company has recently had its sugar milling licence extended by a further 20 years to December 2040, while tenure is being secured on its two main estates.