Sugar industry makes strides to rebound

The North Coast’s sugar industry is making positive steps to rebound from a year of crisis.

Last week, Tongaat Hulett’s business rescue practitioners (BRPs) announced their preferred buyer for the struggling sugar giant, while Gledhow Sugar Company published their proposed business rescue plan on July 12.

Together, the two companies operate all four still operational sugar mills on the North Coast – at Gledhow, Maidstone, Felixton and Amatikulu.

Tanzanian company Kagera Sugar Limited has emerged as the frontrunner to purchase Tongaat Hulett’s sugar assets after proposals from 70 interested parties were considered.

Tongaat Hulett’s creditors and shareholders are expected to vote on the sale at the presentation of the updated business rescue plan in September.

Priority in the bidding process was given to proposals for a full acquisition of Tongaat Hulett’s sugar related assets in South Africa, Mozambique, Botswana and Zimbabwe.

Industry stakeholders also backed full acquisition as it would provide more stability in the daily operations for cane growers.

There is little publicly known about Kagera, which does not have its own website, but it is understood to be backed by Norwegian investors Norfund and Tanzanian businessman Seif Ali Seif.

Per the BRPs, Kagera is part of a group of companies which are the largest sugar producers in Tanzania, with sugar assets spread across Africa and the Middle East.

“The group is financially sound, with a solid track record. Its exposure to complementary sugar assets in Tanzania and the Democratic Republic of Congo offers relevant technical and operational knowledge to assist the turnaround of Tongaat Hulett’s South African sugar assets,” said the BRPs.

“In addition, the sugar refineries in Oman and Bahrain will provide access to world-class technologies and expertise to improve efficiencies.”

The BRPs did not comment on the monetary value of the deal, but it would need to be significant given Tongaat Hulett entered their voluntary business rescue process with over R6-billion in debt.

This aside from the value of their sugar assets across southern Africa.

Kagera managing director, Nassor Seif, said the acquisition was in line with the company’s vision to become a leading sugar producer on the continent.

“We will extend the core values that have resulted in the success of our group companies to the new southern African operations to benefit employees, growers and ultimately the economy of the region. The group is committed to investing significantly in the operations to modernise the plants and expand them to increase production and efficiencies,” he said.

The South African Canegrowers Association welcomed the announcement of a strategic equity partner, but conceded there was much still to be determined.

“We will continue to monitor the situation closely as it develops. The most important outcome will be the survival of growers’ operations and the protection of the livelihoods they sustain,” said SA Canegrowers CEO, Dr Thomas Funke.

As for the Gledhow Sugar Company, the publication of the proposed business rescue plan on the company’s website is the first major update since it entered voluntary business rescue on March 10.

The company did so after facing a number of obstacles over the past few years, including during the Covid-19 pandemic, 2021 riots and 2022 floods.

Per the plan, Gledhow had lost R185-million between 2018 and 2022.

When entering business rescue, the company owed around R625-million to creditors, R155-million of which was to secured creditors.

Given the debt, Harry Spain – the appointed BRP – premised his plan on seeking a sale of the company or constituent parts thereof.

A sale would have the benefit of continuing operations for producers while seeing a better return for the creditors.

Potential interested parties had until June 30 to submit their offers and four bids were received in varying forms.

Two bids are for 100% of Gledhow Sugar Company and one is for 51%, while the last is a funding offer for 20% of the company’s shares.

Creditors will vote on the bids and a final business plan is expected to be published on September 30.

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