Tongaat Hulett is set to sell its sugar estates in Zimbabwe to a Tanzanian company, Kagera Sugar, following years of mismanagement and financial misstatements worsened by a debt burden of R6.3-billion.
Tongaat was placed under business rescue in October 2022 as debt levels remained high while delays in its recapitalisation had worsened the situation.
In a notice on the Johannesburg Stock Exchange on Friday, the embattled company said it has been struggling to operate since 2019 hence the decision to sell sugar estates to Kagera Sugar.
“The proposed transaction will comprise the acquisition of the complete sugar division of Tongaat Hulett Limited in South Africa and the investments in Zimbabwe, Mozambique and Botswana,” Tongaat said.
Accordingly, Tongaat will take over Hippo Valley and Triangle sugar estates in Zimbabwe, which provide the bulk of the group’s sugar output.
Tongaat issued a media statement on Friday morning explaining reasons behind the business rescue mission.
“The business rescue practitioners (BRPs) today announced that the preferred strategic equity partner (SEP) has been selected,” read the statement.
“The proposed transaction will comprise the acquisition of the complete sugar division of Tongaat Hulett Limited (THL) in South Africa and the investments in Zimbabwe, Mozambique and Botswana (Tongaat Sugar Assets).
“The selected SEP, Kagera Sugar Limited (Kagera), is a sugar manufacturing company situated in Kagera in the North-Western part of Tanzania.
“It is part of a group of companies which are the largest producers of sugar in Tanzania and owns sugar assets in Tanzania, the Democratic Republic of Congo and the Middle East.”
The BRPS also said that they started the process with a list of more than 70 interested parties, which was narrowed down to eight that focused on acquiring the combined Tongaat Sugar Assets.
“After a rigorous process, we identified Kagera Sugar as the preferred candidate. 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 THL’s South African sugar assets.
“In addition, the sugar refineries in Oman and Bahrain will provide access to world-class technologies and expertise to improve efficiencies.
“Continuing to operate Tongaat Sugar Assets as a combined multi-country group will ensure continuity for the operations in Mozambique, Zimbabwe and Botswana.
“It will also provide the South African business with access to technical capability to improve and to retain jobs in KwaZulu-Natal and to protect the livelihoods of several stakeholders across THL’s value chain, including that of the group’s many small-scale growers,” the BRPS said.
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