RCL Foods locks horns with Tongaat Hulett over R1.5bn default

RCL Foods has taken the Tongaat Hulett business rescue practitioners (BRPs) to the Sugar Industry Appeals Tribunal. 

This follows the failure by the BRPs to fulfil the company’s payment obligations of up to R1.5-billion to the South African Sugar Association (Sasa), including commercial sugarcane farmers and over 20 000 small-scale sugarcane farmers, most of whom are black. 

The sugar industry estimates that 1-million people rely on it for their livelihood.  

The company, which owns the Selati sugar brand, wants the tribunal to determine whether sugar millers’ industry levy and redistribution obligations are statutory obligations in terms of the local sugar industry’s legal framework and whether these can be unilaterally suspended as the BRPs have done, RCL Foods spokesperson Virginia Horsley told Sunday World.  

Tongaat Hulett entered into business rescue in October last year. 

“The BRPs have taken the position that Tongaat’s industry obligations are contractual and cannot be suspended during business rescue proceedings.  

“It is our contention, supported by Sasa’s view, that industry obligations are statutory and – like other statutory obligations such as income tax – cannot be unilaterally suspended. Non-payment has dire consequences for the viability and sustainability of the entire local sugar industry,” she added. 

The food company approached the tribunal to resolve the dispute through the law governing the sugar industry. “This action has since been suspended pending the outcome of an urgent high court application [in Durban] by the Tongaat BRPs.  

“Where a miller fails to pay amounts due to Sasa, the association still has a statutory obligation to continue to fulfil its legislated duties to both millers and growers. The outstanding amounts, therefore, become a cost to all other compliant millers and growers,” she added.   

Sugar milling company Gledhow Sugar Company filed for voluntary business rescue on 13 March.  “Tongaat and now Gledhow’s non-payment of their redistribution and levy obligations represents a nearly R1.7-billion cost to the remaining millers and growers when many are in a precarious financial position.  

“The decrease in the price of cane, caused by millers and growers having to carry the above industry cost, means that – as an example – the income of a typical small-scale grower delivering 1 800 tons of cane will reduce by R90 296 on average for the year. This seriously threatens their viability and transformation initiatives as set out in the Master Plan to 2030.” 

Tongaat is trading 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 lenders [creditors] over the legitimate interests of the industry and industry participants. 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,” Horsley added.  

The South African Cane Growers Association previously said it had written to the Minister of Trade, Industry and Competition Ebrahim Patel to request the government to intervene, but said they had received no response.

Sunday World contacted Department of Trade, Industry and Competition spokesperson Bongani Lukhele,  and although he acknowledged receipt of the questions and the email we sent to him, he had not responded at the time of going to print.

Follow @SundayWorldZA on Twitter and @sundayworldza on Instagram, or like our Facebook Page, Sunday World, by clicking here for the latest breaking news in South Africa.

Latest News