Tongaat Hulett seeks legal help to protect business rescue process

Tongaat Hulett has taken to the courts in an attempt to protect their ongoing business rescue process.

The troubled sugar giant has recently come under fire for failing to pay more than R900-million in levies to the South African Sugar Association (SASA), which normally feed back funds into the sugar industry.

Said default caused an industrywide loss of over R1.5-billion for the 2022/23 season.

Aside from frustration surrounding the drop in revenue, Tongaat Hulett also faced a legal battle when RCL Foods took them to the Sugar Industry Appeals Tribunal.

RCL Foods, which owns Selati Sugar, are affected in part by the default and have argued that Tongaat Hulett’s business rescue should not give them blanket exemption from industry requirements.

“The business rescue practitioners (BRPs) have taken the position that Tongaat’s industry obligations are contractual in nature and can thus be suspended during business rescue proceedings

“It is our contention, supported by SASA’s own view, that industry obligations are statutory and – like other statutory obligations such as income tax – cannot be unilaterally suspended,” said RCL Foods.

“Non-payment has dire consequences for the viability and sustainability of the entire local sugar industry.”

In response, Tongaat Hulett filed lengthy court papers in the Durban High Court earlier this month, requesting a permanent stop of RCL Foods’ tribunal process and an order for them to pay costs.

The BRPs contend that forcing the company to pay levies could be “catastrophic” for the entire business rescue process and could permanently shutter the company.

This would cause widespread difficulty for the local sugar industry, where Tongaat Hulett is the biggest refiner, and would affect more than 23 000 growers countrywide.

Tongaat Hulett named all of those growers, as well as most industry stakeholders, as respondents in the court papers in an attempt to stave off legal battles until the business rescue can be completed.

RCL Foods confirmed that their tribunal action was temporarily suspended pending the outcoming of the High Court application.

“Tongaat continues to trade while under business rescue, despite not meeting their redistribution or levy obligations, while all other millers and growers remain bound to the legislative framework. This approach prioritises the interests of Tongaat’s lender group over legitimate interests of the industry and industry participants,” said RCL Foods.

“If payment obligations under the Sugar Industry Agreement are not enforced, it follows that the industry is at risk of collapse. It is not equitable for the industry and industry participants to bear the consequences of Tongaat’s non-payment.”

The business rescue plan is expected on May 31.

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