Tongaat Hulett wants executives to pay back the money

Embattled Tongaat Hulett has taken the far-reaching step of naming key executives who it says were responsible for its fall from grace this year and has vowed to claw back performance bonuses paid to them.

The company’s shares were suspended from the Johannesburg Stock Exchange earlier this year after serious accounting irregularities were discovered.

Chief executive Peter Staude – one of those named – resigned days before the annual general meeting last year and experienced businessman Gavin Hudson was brought in to right the sinking ship. More than 5 000 jobs were cut as Hudson declared that the company would no longer be focussed on sugar production.

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A forensic report ordered by the board into suspect activities has implicated the group’s former senior executives of serious accounting irregularities.

Key findings from the six-month forensic investigation by Price–waterhouseCoopers (PwC) were released by the company on Friday. While the full report has not been published, the document on its website contains key findings from the report “in the interest of transparency”.

The seven-page document also highlights how Tongaat Hulett’s board plans to deal with the issues raised in the report.

Questionable or irregular practices highlighted in the report included:

• Early or premature recognition of land sales within Tongaat Hulett Developments, the group’s land conversion and property development division.

• Overstating the value of the group’s carrying amount of cane roots and standing cane related assets

• The overstatement of sugar sales in Zimbabwe

• Overstating the carrying amount of capital work in progress

• The incorrect capitalisation of infrastructure costs

• Overstating projected revenue

• The provision of cash collateral in relation to a land sale

In June, Tongaat asked for its shares on the JSE and in London to be suspended after it was found that its financial results for

the year to March 2018 could not be relied on. At the time, Tongaat said the 2018 financial statements might be inflated by between R3.5 billion and R4.5 billion.

The 127-year company was first listed on the London Stock Exchange in 1939, and on the JSE since 1952. In late 2014, Tongaat’s share price was trading at historical highs of R168. Since August 2018 the price has dropped dramatically with a subsequent calendar year decline of 77.4 percent to current levels around R13.21.

The PwC investigation found that the senior executives involved in some or all of the above practices, to a greater or lesser extent, include, in alphabetical order:

John Chibwe (Hippo Valley Estates finance director), Michael Deighton (former managing director of Tongaat Hulett Developements), Steve Frampton (former Zimbabwe sugar sales general manager), Shelton Nhari (Triangle finance director), Sydney Mtsambiwa (former managing director of Tongaat Hulett Limited’s Zimbabwean operations), Les Munro (former finance executive of Tongaat Hulett SA Sugar), Murray Munro (former chief financial officer of Tongaat Hulett Limited), Raphael Pfunye (Zimbabwe sugar sales finance executive), Sean Slabbert (former finance executive of Tongaat Hulett Limited) and Peter Staude (former chief executive officer of Tongaat Hulett Limited).

“In light of the information that has come to light in the PwC report, the board intends to pursue claims against certain individuals who appear to have been responsible for, or party to, the undesirable activities outlined in the PwC report,” Tongaat said.

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“From the PwC investigation, it appears that personal financial enrichment of key senior employees was largely limited to the financial incentives paid to them during the years in which they achieved their employment targets,” Tongaat said.

Former CEO Peter Staude received a total pay package of more than R13.5 million in 2018, and R20 million in the previous year, which included a R6.6 million cash bonus.

The group is looking to recoup some of these bonuses. In addition, the board was also engaging with the SA Police Service and the National Prosecuting Authority to provide relevant information.

Earlier this year the Independent Regulatory Board for Auditors (IRBA) also started an investigation into Deloitte’s work for Tongaat. The firm, which has been Tongaat’s auditors for more than 15 years were also Steinhoff’s auditors for years, before that company went into meltdown at the end of 2017.

With the PwC Report finalised the group is set to release its restated results for its 2018 and the delayed 2019 results in the second week of December.

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