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Despite remaining concerns around sugar company, Tongaat Huletts’ business rescue plan, the owner of Selati Sugar, RCL Foods, will not proceed with its application to bring an interdict against the struggling competitor.
This, after Tongaat Hulett announced that it was revising it’s business rescue plans.
Last year, the Durban High Court determined that the two rescue plans, unveiled in November, were not eligible for voting in their current state because of the legal challenge by the South African Sugar Association (SASA) and RCL Foods.
The plan included holding off on paying about R526 million owed to the SA Sugar Association.
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However, the plan suggested putting this payment into a separate account (escrow account) only after the business plan was put into action. In other words, the money would be set aside and paid later, once the rescue plan was implemented.
RCL Foods saw this delay as a potential hindrance, expressing concerns that the plan could take years to implement, and the actual payment might be further delayed by an appeals process assumed to last longer than three years.
RCL Foods believed this delay could negatively affect the interests of industry stakeholders, including growers and millers.
But, after engaging in discussions with Tongaat Hulett’s business rescue practitioners, the concerns RCL Foods initially had about the lawfulness of the rescue plan were apparently addressed.
Hulett’s legal practitioners have set a date of January 10 for a vote on changes to the plan, which could lead to new ownership.
Tongaat Hulett faced significant challenges starting in 2018. The CEO, Peter Staude, retired early, and the CFO, Murray Munro, went on sick leave. The company’s financial troubles escalated in January 2019 when a new CEO was appointed, and it announced a drop in expected profits along with a liquidity crisis in February 2019.
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In May 2019, Tongaat Hulett revealed its published financial results were unreliable, with an overstatement of the company’s equity by R3.5 billion to R4.5 billion in its 2018 financial results.
PricewaterhouseCoopers conducted a forensic audit, questioning the diligence of the regular auditors, Deloitte. The company suspended trading on the Johannesburg Stock Exchange, laid a criminal charge against an unnamed executive, and initiated cost-cutting measures, including sending retrenchment letters to 5000 employees.
The scandal led to legal action, and in February 2022, seven individuals, including Peter Staude and Murray Munro, appeared in the Durban Specialised Commercial Crimes Court in connection with the financial misconduct.