Embattled sugar producer Tongaat Hulett (THL) and business rescue practitioners (BRP) missed the October 31 deadline to pay about R400 million for sugar cane deliveries made in September, after the company failed to secure the funding.
A further R345m payment is due for the end of November.
The missed payment could sound the death knell for the more than 4 000 farmers and 14 000 full-time and seasonal workers in the industry.
On Tuesday, South African Sugar Cane Growers Association chairperson Andrew Russell said that while the situation was dire, the sugar industry could recover. For that to happen, it was essential that THL secure the funding necessary to maintain its operations.
"SA Canegrowers is committed to working with THL, the business rescue practitioners, banks, the government and other industry stakeholders to ensure that we can reverse the current crisis and mitigate the impact on the workers and the rural economies that rely on the sugar industry for their livelihoods.
“This will be the focus of tomorrow’s meeting between SA Canegrowers and the business rescue practitioners, so that a speedy solution to the current situation can be found,' he said.
The impact of the situation was far-reaching and would be devastating for affected communities in the rural areas of Empangeni, Eshowe, Gingindlovu, Amatikulu, Darnall, KwaDukuza, Shakaskraal, Tongaat, Ndwedwe, Isinembe, Nyoni, Entumeni, Kwambonambi, Nseleni, Melmoth, Heatonville, Jozini and the Makhathini Flats. The areas have high levels of unemployment and poverty.
"The number of jobs at risk is likely to increase as uncertainty rises about whether growers who delivered cane in October will be paid on time. An estimated R345m will become due for payment at the end of November to cover these sugar cane deliveries," Russell said.
The unpaid for cane stocks affect around 4 300 growers who delivered almost 600 000 tons of sugar cane to THL mills in September and were due to be paid more than R400m by the end of October.
More than 4 000 of those were small-scale growers who were especially vulnerable.
"Yet it is also important to stress that the viability of the sugar industry is dependent on the survival of both large and small-scale growers, as the larger producers provide the bulk of the cane tonnage that is required to keep the mills running at 350 tons an hour and also cross subsidise small-scale growers through a variety of financial support mechanisms," Russell said.
THL's board has been slammed for announcing a restructuring plan for the group that its lenders had neither received nor approved.
Last week, Tongaat’s lenders rejected the proposed restructuring plan and indicated they would not advance further funds to the company, resulting in Tongaat’s board announcing on Thursday that it had decided to embark on voluntary business rescue.
Tongaat’s South African operations are drowning in a pool of debt estimated at more than R5 billion, with a new R600m short-term borrowing facility obtained on July 29 to assist a R1.5bn or so working capital shortfall now due for repayment.
BUSINESS REPORT