The Violation of Tongaat Hulett.
(Image: amaB / Canva / Gijima / Vision Sugar / YouTube) On Friday, 27 February, the Business Rescue Practitioners and their lawyers will approach the High Court in Durban to request the provisional liquidation of Tongaat Hulett Limited (THL), the company that is a crucial backbone of the rural economy in northern KwaZulu-Natal.
They will act in the knowledge that their own fees, racked up over 37-months of business rescue, are secure.
In contrast, thousands of direct jobs and a great many more livelihoods – for cane-growers, workers, truckers, suppliers – will be placed at critical risk, notably because of the potential shutdown of THL’s mills, without which the harvest due to begin around April will become virtually worthless.
We are on the brink of this catastrophic disruption because of greed.
In fact, if there were to be a test case of why sometimes there is a need for expropriation without compensation, then a court-ordered seizure of THL might be a good fit.
At the centre of this vortex of greed and irresponsibility are a group of banks, led by Standard Bank, and their chosen partner, the Vision Sugar group, led by South African IT mogul Robert Gumede and Zimbabwean businessman Rute Moyo.
It was the banks that handed Vision the R11.7-billion debt-bomb that is now threatening to blow up the THL group and jeopardise the stability of the sugar industry and the province itself.
It was Vision that lit the fuse on 8 February by issuing a formal demand to THL for immediate repayment of R11,738,406,991.00 (triggering the liquidation application lodged four days later).
But it was the BRPs, Standard Bank and the state-owned Industrial Development Corporation (IDC) that enabled Vision to do a deal to buy the bank debt (at a massive discount, using other people’s money) and hence take control of the business rescue process in what analyst Dave Woollam has termed “a kind of corporate hijacking”.
Although, as we’ll see, it was the IDC, which finally refused to bow to relentless pressure from Vision to pay essentially the whole bill for Vision to acquire the THL group (including the valuable Zimbabwean and Mozambican assets) in exchange for 40% of the troubled South African sugar business.
However, when the IDC, which had been providing emergency funding to THL during the business rescue (known as Post Commencement Funding or PCF) finally baulked at Vision’s demands, Vision pulled the debt trigger – in what may be a bid to ratchet up the pressure on government in the face of the danger that Vision may otherwise strip the assets and leave the company in ruins.
RGS intervenes
Now, in a new twist, a former rival bidder, Mozambican-based RGS Group Holdings, has written to the IDC and the Department of Trade, Industry and Competition (DTIC) giving notice that RGS is joining the court case in order to oppose the liquidation.
In the letter, obtained by amaBhungane, RGS argues that the facts set out by the BRPs do not make out a case for liquidation, but instead demonstrate the failure and unlawfulness of the Vision Plan.
The rival company, which has launched a series of unsuccessful legal challenges to the Vision deal and the secrecy around it, states, “We are aware that the Liquidation Application is being used by some as leverage in an attempt to coerce the IDC to support the Vision Plan and provide all the funding required by Vision to both implement its Plan and support THL’s working capital requirements thereafter. We trust that the IDC will not entertain these advances.”
RGS alleges, “Vision has demonstrated a complete unwillingness to incur any financial exposure to secure the implementation of the Plan by (i) refusing the IDC’s request that Vision match the IDC rand for rand on providing the additional funding requests, and (ii) even refusing to release security to allow the IDC to create more headroom under the existing facilities to ensure THL’s survival.
“Instead, Vision has sought to enforce the Lender Group’s claims and security of circa R11.73 billion against THL in circumstances where Vision’s own Plan is being implemented to rescue THL.”
RGS makes several fundamental allegations about the undertakings that led to Vision’s business rescue plan being adopted.
Firstly, it alleges that representations made by Vision at a creditors meeting on 10 and 11 January 2024 to the effect that it had sufficient “cash” to implement the business rescue plan were false.
In amaBhungane’s set of questions to the parties, we amplified this point by suggesting that, likewise, a “proof of funds” letter provided by Standard Bank on behalf of Vision dated 21 December 2023 was also false, or at best materially misleading.
The bank letter stated, “This letter serves to confirm the following regarding the customer Vision Investments 155 (Pty) Ltd: Vision holds a Standard Bank account; The account has sufficient cash for Vision to execute the contemplated transaction as per the amended Vision business rescue plan.”
That assurance was widely taken to encompass four things that were central to the viability of Vision’s proposal:
- that Vision was in a position to purchase the R12-billion in debt claims held by the banks, albeit at some undisclosed discount;
- that it would be in a position to repay or refinance the Post Commencement Funding provided by the IDC;
- that it would pay out R75-million to ordinary creditors who were, unlike the banks, unsecured by any kind of asset or guarantee provided by THL; and
- that it would be able to set aside R517-million in an escrow account against the possibility that the courts might rule finally that statutory payments due by THL to the South African Sugar Association (SASA) could not legally be withheld, as the BRPs had done.
In its letter, RGS calls this out, alleging, “Vision… did not then have, and still does not have, access to the funds required to implement the business rescue plan and in particular, to settle the IDC PCF facility, pay the amount of R517-million due to SASA into escrow, and settle the unsecured creditors distribution (which together constitute Vision’s chief obligations under the Plan it proposed).”
Responses
Standard Bank told us, “We note that the contents of your email under reply are, either (i) largely the subject of ongoing legal action currently before the South African courts; (ii) relate to information which is of a confidential nature; and/or (iii) best placed to be addressed by the Vision Consortium, alternatively the Business Rescue Practitioners of Tongaat Hulett Limited.
“As such, we are not able to provide a response to the queries and/or allegations raised in your email at this time… Further, please note that nothing herein shall in any way constitute an admission of any kind whatsoever and any allegations against the Bank of any kind are denied in the strongest possible terms.”
The BRPs and Vision both strenuously challenged the credibility of RGS, but mostly avoided dealing with the substance of the issues raised.
Vision told us, “The complaints that you have asked Vision to deal with in your email are nothing more than a repetition of the same complaints that have been considered by the Durban High Court in the various applications brought by RGS.”
In regard to the letter provided by Standard Bank, the company said, “Vision has never asserted that the full acquisition price contemplated by the business rescue plan will be funded solely from Vision’s own cash resources… Vision negotiated with the lender group to pay a substantial deposit for the claims (out of its own cash resources), with the balance being settled at a future date.
“Vision is of the view that the Standard Bank letter was sufficient proof of funds to implement the Vision Plan at that stage (i.e. the settlement of the deposit to the lender group)… Vision asserts that neither the representations nor the letter from Standard Bank were false or misleading.”
They added, “To the extent that you persist in quoting extensively from the RGS letter, please set out the fact that RGS’ participation in the THL business rescue process is that of a failed bidder whose proof of funding is under criminal investigation.”
Vision’s full response is available here.
The BRPs also referred to this problematic RGS history, noting, “In late 2023, RGS proposed its own business rescue plan. The Lender Group required RGS to prove it had funding to implement its plan, proposing that RGS deposit R2 billion with them in South Africa. RGS claimed legal constraints in Mozambique prevented the transfer. Rather than producing genuine proof of funds, it provided a letter from ABSA Mozambique that was subsequently confirmed to be fraudulent – as confirmed by RGS on record in court proceedings. This conduct has given rise to criminal charges and has irreparably undermined RGS’s credibility.”
The BRP’s emphasised that they did not “choose” Vision.
“The Lender Group sold its claims to Vision, and Vision thereafter proposed a business rescue plan… Once RGS withdrew, the Vision business rescue plan was the only viable plan before creditors. It was the only business rescue plan the BRPs were capable of implementing, as has been the case to date.
“In contrast to RGS’s inability to demonstrate funding, the BRPs obtained formal confirmation from Standard Bank stating that Vision had sufficient funds to execute the contemplated transaction. A written confirmation of funds issued by a major commercial bank is, in any commercial context, reasonably accepted as proof of funding. The BRPs were entitled, and obliged, to rely on such confirmation in carrying out their statutory mandate.
“Throughout the implementation period, the BRPs acted in good faith to preserve value while funding discussions were ongoing, aimed at closing out the various sale agreements in accordance with the plan.” (Their full response is available here).
There are a number of problems with this narrative, not least of which is the way in which the deal was sequenced – which is something we’ll return to.
But first, let’s rewind and remind ourselves how THL got into this mess.
A giant betrayed and hobbled
THL is a sprawling giant with interests mainly in sugar, property and milling – with operations not only in South Africa, but also Botswana, Mozambique and Zimbabwe.
In 2018, long-serving and domineering chief executive Peter Staude was quietly retired amid backroom whispers of corporate impropriety. In 2019, forensic auditors were brought in to investigate – and discovered a roughly R11-billion hole in the accounts. The former auditors, Deloitte, paid a settlement of R260-million to walk away from claims they failed to detect the accounting fraud.
By 2022, Staude was charged alongside other executives with defrauding THL by manipulating the company’s financial results through backdating land sale agreements and misrepresenting revenue, which inflated reported profits.
In the meantime, in late 2019, THL was forced to go cap in hand to a group of banks (termed “the lender group”) to restructure and consolidate R12-billion in debt. The Lender Group demanded steep debt repayments and according to Wollam (speaking to Biznews earlier this week) the new management “did a pretty good job” and more than halved the debt to about R5.5-billion in late 2021, but did not achieve the R8-billion repayment the banks had required, in large part because of the disruptions of Covid-19 in 2020 and the July 2021 riots.
The debt pressure lead THL to embark on an ill-advised deal with Zimbabwe’s controversial Rudland family in late 2021, which would have injected at least R2-billion, but was scrapped when the Takeover Regulation Panel issued a negative compliance report.
Woollam says that in the course of the debt restructuring process THL was obliged to agree to a more punitive arrangement whereby default interest rates of 20% were put in place, leading the R6-billion to balloon to R11.7 billion, where it is now.
In June 2022, THL appointed Piers Marsden of Metis Strategic Advisors – the company now running the business rescue – as the chief restructuring officer. On 14 October 2022, the THL board approved Marsden’s plan to pay down the debt, largely through the disposal of the company’s non-South African sugar operations.
Inexplicably, the Lender Group vetoed this proposal and essentially forced THL into Business Rescue as of 26 October 2022.
The Business Rescue that became a Leveraged Buy Out
As Woollam explains, ordinarily BRPs will organise a process by which people are invited to make bids for the assets or to become strategic equity partners by injecting cash for a share in the business.
“But Vision… didn’t come in and put a bid to the business rescue practitioners, they actually went and bought the loan claims from the banks, but they bought them in paper only they didn’t actually pay for them.
“They said they paid for them. They didn’t. They actually bought them in a contract to be funded at some future date. They then went to the business rescue practitioners and said, ‘We own the debt now. We control the process.’”
Vision was treated as the owner of the Lender Group claims for the purposes of the January 2024 vote on the business plan. Because the banks had been the largest creditors, Vision could dictate the process, when in fact the banks’ claims and security were only transferred to Vision much later, in May 2025.
In other words they didn’t pay for the weapon they used to steamroll everyone (the banks’ claims) until May 2025 – and even then Vision used mostly or only borrowed money to put up the modest R3.2-billion that bought them R11.73-billion in claims and security over the assets of THL.
Woollam explains, “So what they've done essentially is a kind of corporate hijacking using everyone else's money to gain control of the company and then they started to tighten the screws.”
The record filed in the liquidation application by the BRPs bears out the claim that, once Vision were in the driving seat – with the R11.73-billion claim they could wield like a sledgehammer – then they began to make demands on the IDC, which had already put in R2.3-billion of emergency funding into THL – and was expecting Vision to pay it back, with interest.
As the wrangle continued into December last year, THL also began to run out of the cash that the IDC had advanced. The company’s management warned that it needed a further injection of R600-million if it was not to default on run-of-business payments.
Woollam takes up the story: “Vision said to the IDC you must put the money in. The IDC said not such a hurry. You know, we’ve already got a lot of debt here and we’ve got the smallest piece of the security pool. So, they came back and said, ‘Well, we’ll put in half if you put in half.’ Not an unreasonable request, quite frankly.”
But Vision said “no” – and they then started making outrageous demands of the IDC and of the BRPs, including trying to persuade the BRPs to transfer the foreign assets behind the IDC’s back.
Correspondence seen by amaBhungane shows that in the end Vision was demanding that the IDC lend them R5.3-billion so that Vision could pay all their dues (such as to Standard Bank, which had loaned them money to buy out the Lender Group claims).
That proposal would have given Vision 100% of the THL group, virtually without paying a cent for it. In return Vision offered the IDC the right to convert R3.6-billion of the loan into a 40% stake in the South African sugar operations only.
Someone at the IDC eventually drew a line; Vision called in their R11.73-billion claim against THL – and the BRPs moved to liquidate – which plays straight into Vision’s brinkmanship.
What happens next?
If no one blinks and the matter gets to court on Friday, the judge will have to unravel some key questions that may defuse Vision’s debt bomb.
One, did Vision misrepresent its true position at the crucial 2024 creditors’ vote and would that nullify the result or render it inappropriate?
Two, did the BRPs wittingly or unwittingly abet an improper process?
RGS alleges, “The BRPs have acted in breach of their statutory obligations by (i) intentionally withholding the true status of the implementation of the Plan from affected persons, and (ii) failing to implement the Plan according to its terms by conceding to Vision’s unilaterally imposed conditions and requirements that are, on the BRPs’own version, extraneous to the Plan.”
Three, is Vision’s claimed security for the R11.73-billion debt actually valid and enforceable?
RGS, again, think not.
In their letter they claim, “The status of Vision’s ownership of the Lender Group’s claims and security is known to be precarious… The extent, efficacy, and validity of the Lender Group’s security has never been proven and was not verified by the BRPs on their own version.”
In their counter application RGS will request the Court to compel the disclosure of (i) THL’s management accounts from which its true financial position can be ascertained, (ii) the agreements in terms of which Vision acquired the Lender Group’s claims and security, and (iii) the security instruments invoked by Vision.
Buckle up, it’s going to be a tough week. DM