Photo By: Tongaat Hulett
Earlier in the week, we profiled the challenges that Tongaat Hulett had to negotiate while the rest of South Africa was enjoying a much-deserved rest.
While the company did manage to receive a cash injection from the Industrial Development Corporation (IDC) in the form of post commencement financing, the company is still in dire need of cash that will be necessary for it to exit its financial distress. While the sale of certain assets will generate much needed cash, more needs to be done. Tongaat is on the lookout for a potential suitor which will hopefully turn out to be a long term solution to the cash problem.
However, there is an issue between Tongaat Hulett and Deloitte that the sugar producer hopes will be resolved as soon as possible.
Shareholders call for an end to the Deloitte issue
Business rescue is a stressful process with many affected parties left uncertain about what the future may hold. According to another News24 article, this prompted Tongaat shareholders to angry shareholders call for a speedy resolution to a damages claim against auditors Deloitte. The big question is how much Deloitte could pay (some speculate in the order of R1 billion) when Tongaat Hulett is in dire need of a cash injection.
The article adds that Tongaat’s business rescue practitioners are currently in mediation talks with Deloitte, and though while non-binding, could result in a payout.
Deloitte charged Tongaat Hulett R299 million in fees over 11 years, during which time there were major misstatements in the company’s annual finances that eventually led to the collapse of the company’s share price.
The News24 article points out that action by corporate whistle blowers exposed these. The misstatements resulted in huge debt. The exposé prompted a change in management, and civil and criminal charges were laid against former Tongaat Hulett boss Peter Staude, other company executives, and Deloitte’s Gavin Kruger.
Tongaat has since almost halved its R12 billion debt to R6.5 billion by selling off its profitable starch business. It is poised to sell interests in Mozambique and Zimbabwe to further reduce debt.
The News24 article pointed out that Tongaat Hulett shareholders have repeatedly expressed dissatisfaction with the pace of the claim against Deloitte.
Trouble brewing
The News24 article points out that Tongaat Hulett shareholders have repeatedly expressed dissatisfaction with the pace of the claim against Deloitte.
Shareholders Chris Logan and David Woollam repeatedly complained.
At the 2020 AGM, Logan flagged the issue, arguing that if Deloitte had done its job properly it would have picked up the misstatements and saved billions.
The article adds that, at the meeting in January this year, Tongaat Hulett chairman Louis von Zeuner denied action against Deloitte was slow.
Independent non-executive company director, Linda de Beer, referenced Steinhoff.
She said a strong legal team had reviewed Deloitte’s role in the collapse of Tongaat and would move to expedite the issue.
The article points out that, as to the quantum of a settlement, she described talk of a R10 billion claim as interesting, adding that it was likely to encounter significant push back, especially since not all Tongaat’s misstatements were Deloitte’s fault.
She said a hard fight for damages, would hopefully secure a sensible settlement. She also denied Logan’s claim that board members kept schtum on claim.
Logan said, “Even if you got a billion, it would change the whole tone of where Tongaat is at… you haven’t informed investors about this Deloitte issue, and it’s huge.”
Logan described the Tongaat fraud as simple.
Steinhoff was far more complex… but in the Steinhoff matter they (Deloitte) settled a long time ago.
Logan said the claim against Deloitte had to be vigorously pursued, but instead Tongaat leadership had come with all types of excuses.
The article points out that De Beer disagreed and said the figure would be influenced by a number of factors.
“I did not say it’s not going to be R10 billion but maybe it’s going to be half or maybe it’s going to be a billion. I said that we are not disclosing and we are still debating and doing the work on what the amount is going to be.”
Von Zeuner, De Beer and other non-executives recently resigned.
Photo By: Canva
Legal battles
The News24 artiucle points out that Deloitte lawyer Murray Dicks said the firm did not want to comment.
In October 2022 Deloitte had said that after studying the charge sheet against Gavin Kruger it could see no evidence that pointed to unethical behaviour.
This doesn’t wash with all shareholders.
One told News24: “If Tongaat-Hulett fails then they might as well put up a sign outside the mill that reads ‘Thanks Deloitte’.”
The article adds that, damages aside, the shareholder said, Tongaat needed R300 million and had paid R299 million in fees to Deloitte. That alone would cover mill maintenance.
Cleasby said the grower consortium had taken “the first profound steps in a long and complex process” aimed at exploring avenues to save the firm and protect jobs.
The article points out that he also wouldn’t be drawn on Deloitte. He said while some farmers might have a stake in Tongaat Hulett, the grower consortium wasn’t privy to proceedings.
Cleasby was not able to provide details about the financing of the proposed grower acquisition, nor did he say how the consortium might fund mill maintenance if the deal went through.
