Top court clears way for Tongaat’s R517m sugar levy payment

The Constitutional Court’s refusal to hear an appeal by Tongaat Hulett’s business rescue practitioners (BRPs) has brought finality to a long-running dispute over R517m in sugar industry levies owed to the South African Sugar Association (Sasa), removing one of the remaining uncertainties around the company’s restructuring.

The dispute centred on whether Tongaat Hulett, while under business rescue, could suspend its obligation to pay statutory sugar industry levies.

The BRPs argued that the company’s rescue status allowed the obligations to be deferred, which Sasa challenged. Having moved through several courts, the high court refused leave to appeal, after which the BRPs successfully petitioned the Supreme Court of Appeal (SCA) to hear the case.

The SCA ruled in favour of Sasa, and the BRPs then approached the Constitutional Court. The apex court has refused to hear the appeal, leaving the SCA’s decision standing.

“The BRPs are currently engaging with their counsel and relevant stakeholders to consider the implications and impact of the judgment on the business rescue process, if any,” the turnaround experts said in a statement.

The business plan provides for the disputed funds to be placed in an escrow account 20 business days after the closing of the transactions underpinning the business rescue. The arrangement was designed to ensure that the money would be available to whichever party ultimately prevailed in the legal dispute.

The Vision Group , which signed a binding rescue deal with the Industrial Development Corporation in June, has committed to ensuring that the money is available if Sasa is ultimately entitled to payment once the transaction is completed.

The dispute was already under appeal when creditors voted on the rescue proposal and Vision entered the transaction. The plan and related escrow agreement were therefore structured to accommodate either outcome.

The broader concern, however, is what an immediate payment could mean for a company that is already financially distressed. A large payment could place further pressure on Tongaat Hulett and potentially push the company towards liquidation, with consequences extending beyond the business to include sugar cane growers, millers and other participants industrywide.

The funds will be paid to Sasa once the escrow mechanism is triggered, while the timing remains linked to the completion of the broader transaction underpinning the restructuring, according to the plan.

Tongaat was placed under business rescue in 2022 after an investigation uncovered severe accounting irregularities. The process is intended to give financially distressed companies an opportunity to restructure their affairs and avoid liquidation while turnaround practitioners work to stabilise the business.

The BRPs had halted payments to Sasa during the rescue process before approaching the high court to have the decision confirmed, setting off the legal battle that has now reached its conclusion.

The case also comes against the backdrop of Gledhow Sugar’s business rescue , where Sasa claims were structured for repayment over three years after the mill was taken over by the Ushukela Consortium.