SA Canegrowers seek legal recourse as defaulted levy payments threaten sugar industry

Levy payment defaults have cost sugar cane growers R1-billion in the 2022/23 season.

Since entering elective business rescue proceedings in October last year, Tongaat Hulett has defaulted on R900-million in levy payments, said South African Canegrowers Association chairperson, Andrew Russell.

Gledhow Sugar Company, also in elective business rescue since March this year, has similarly defaulted on their payments, the exact amount of which is currently unknown.

Levy payments are typically made monthly to the South African Sugar Association (SASA), grower associations and other millers.

According to SA Canegrowers CEO, Dr Thomas Funke, the payments fund grower associations which in turn set aside money for quarterly payments to individual grower councils.

Combined, the defaulted payments have caused a drop in the RV price by 8%.

The RV price is an industry term for the price that growers receive after their cane is processed and equates to an average of R424 less per ton of delivered cane compared to 2021/22.

It is calculated at the end of the season to reflect the fortunes of the industry in any given year.

“SA Canegrowers is disappointed by the 8% drop in the final RV price. The defaults are in violation of the Sugar Act and Sugar Industry Agreement and have lowered growers’ revenue, placing thousands of small-scale and commercial growers in danger of losing their business,” said Russell.

The defaults are the primary cause of an industry downturn of R1.5-billion for the season, R1-billion of which was borne directly by the growers, said Russell.

Twenty thousand small-scale growers will be directly affected.

It calls into question the continued delay of Tongaat Hulett’s business rescue plan which is expected at end of May following two extensions.

The company’s business rescue practitioners (BRPs) confirmed in March that post-commencement funding had been secured until June.

“This is anticipated to be sufficient for working capital purposes and provide comfort to employees and suppliers that payments should be made going forward,” the BRPs said on March 31.

It appears the BRPs do not see the levy payments as a necessary part of working capital. They did not respond to a request for comment.

SA Canegrowers’ position however, is that the industrial obligations set out in the Sugar Act and Agreement were mandatory.

The association is in the process of seeking potential legal recourse, but have already written to Trade and Industry minister, Ebrahim Patel, to ask for urgent intervention on the matter.

“Decisive action is needed from all role players to ensure that South Africa’s sugar industry is not fatally impacted. We will explore all options available to us to ensure that we protect the one million livelihoods the industry supports,” said Russell.

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