BUSINESS REPORTER
Tongaat Hulett’s Zimbabwe operations will not be affected after the struggling sugar processor entered voluntary business rescue as it seeks to raise R1.5bn to fund the peak working capital requirements to complete the 2023 financial year.
Tongaat Hulett South Africa announced on Thursday that voluntary business rescue proceedings had commenced for two operations—Tongaat Hulett Limited and Tongaat Hulett Development Proprietary Limited—after bankers said they would not provide additional funding.
“The international operations of Tongaat Hulett in Zimbabwe (as well as in Botswana and Mozambique) are funded independently from the South African operations and are not entering business rescue, continuing to trade in the ordinary course,” said Dahlia Garwe, Tongaat’s head of Industry and Corporate Affairs.
She said the action in the South African business was a result of it remaining unable to service its residual debt, the majority of which (around 87%) is carried by the cash flows of the South African sugar operation, the property business and operational support fees received from the non-South African sugar operations.
“This is despite the good progress on the turnaround strategy and debt reduction initiatives over the last few years,” Garwe said.
In a letter to stakeholders Tongaat Hulett CEO Gavin Hudson said the new leadership team, has worked “extremely hard” since 2019 on a comprehensive turnaround strategy.
He said good progress was made on several fronts, with debt decreasing by R6.6bn from a high of R11.7bn, through the selected sale of core and non-core assets.
Despite the good progress, the company has a shortfall in its working capital facilities, Hudson said.
“Our banking funders have unfortunately informed us that they are not prepared to provide the additional funding. In this context, the management team and board of Tongaat Hulett Limited have evaluated the group’s current financial position and after careful consideration with its legal, corporate and financial advisors, the board has confirmed that only the two South African operations are not financially sustainable without further liquidity,” he said.
