War erupts over control of Tongaat-Hullet assets

Zimbabwe has raised a red flag after reportedly being denied a chance to take part in the process of selecting a strategic equity partner for Tongaat Hulett Limited (THL) that was given to a Tanzanian firm, Herald Finance and Business can reveal.

Kagera Sugar Limited, a sugar manufacturing company in the northwestern part of Tanzania, won the bid to acquire the assets of the entire sugar division of Tongaat Hulett Limited in South Africa and the investments in Zimbabwe, Mozambique and Botswana, ahead of as many as 70 bidders.

THL and Tongaat Hulett Development Proprietary entered into a voluntary business rescue process (BRP) in October last year, after its board found the company to be in financial distress. Its units in Botswana, Mozambique and Zimbabwe sugar continued trading normally as they were not financially distressed.

Zimbabwe, through Sovereign Wealth Fund (SWF), made a bid to acquire the assets but was “not allowed to participate,” Secretary for Finance and Economic Development Mr George Guvamatanga revealed this in a letter to THL business rescue practitioners dated July 27, 2023, seeking clarity on the awarding of the bid to Kagera.

Separately–Terris Sugar Limited–a South Africa-based sugar company has also raised serious concerns around awarding the bid to Kagera, a company that it claims to have little capacity and expertise compared to investors whose bids were rejected.

“We note the media update on July 21, 2023, stating that BRP (Business Rescue Practitioner) had selected Kagera Sugar Limited as the preferred strategic equity partner to acquire Tongaat’s operations,” Mr Guvamatanga said.

“While we are aware that BRP had received other offers, we are concerned that the Sovereign Wealth Fund of Zimbabwe was not allowed to participate as a part of a consortium or have any transparency into the process by which BRP selected Kagera in spite of the various discussions.”

Mr Guvamatanga said the basis for bidding on the assets of Tongaat was premised on solid relations between the Government and the company. He said Tongaat and the Government of Zimbabwe have a “longstanding relationship”, one that includes strategic investments the latter had facilitated. Mr Guvamatanga said the Government also assisted with water rights, which are crucial to Tongaat’s operations.

In addition, Tongaat is intricately linked to Zimbabwe’s capital markets through the listing of Hippo Valley Estates on the Zimbabwe Stock Exchange. But the relationship is more than just commercial and the Government partnered with Tongaat to provide land for sugar farming, “creating a bond with Zimbabwean farmers.”

“When the fund made its offer to purchase Tongaat’s Zimbabwe assets, it was drawing on this close relationship, being cognisant of the fact of the aged plant and equipment and as regards the biological assets, the need to replace them, planting new, higher-yielding varieties,” said Mr Guvamatanga.

“The fund has the ability to acquire all of the necessary approvals, especially the water and land rights, and it can continue the work started with Tongaat in the community. In addition, the fund is an ideal partner for any assets in Botswana, Mozambique, and South Africa.

“These countries border Zimbabwe and have been long-time trading partners,” he added.

Mr Guvamatanga said the SWF made a “fair offer,” had funds to acquire the assets, and met the deadlines to submit the bid. He expressed concern about the BRP selection criteria after choosing a partner who “does not appear to have operations in any of the countries where Tongaat has assets.” “…No information on price or whether Kagera plans to honour the commitments that Tongaat has made to Zimbabwe. Kagera has not laid out any plans, other than a desire to bring efficiencies. It is unclear if Kagera is willing to dedicate the necessary financial resources.”

Terris has also queried the manner in, which the bids were evaluated. It said Kagera’s successful bid was predicated on 80 percent of its funding being raised from the IDC (South Africa) or with the IDC’s assistance to raise the required funding.

However, Terris, whose bid was also backed by the IDC, was allegedly advised that funding from the IDC was not accepted. It was asked to provide proof of funding of R3,1 billion.

“We understand that the IDC has supported the BRP’s decision to select Kagera as a strategic equity partner,” said Terris in a letter to the IDC dated August 9. “We would want to know if the IDC had, prior to its decision of support, conducted due diligence on Kagera and its operations in the same way that the IDC did on Terris.

“We have recently learnt that IDC staff members only recently visited Kagera’s operations for the first time, which was post the IDC’s board approval or consideration of Kagera’s status as a chosen SEP. Please further confirm if indeed it is the case that at the time of bidding, the IDC had committed or offered to assist Kagera to raise more than R2 billion from its own funds or from other institutions.

“…If so, on what conditions…why the IDC would do so only for Kagera using government funds.

“We also request to understand how it came to be that the IDC which was supposed to be a neutral party up to that point, only assisted one bidder, especially one with no local representation nor the necessary experience in complex sugar plantations, milling, working with multi mills and diverse growers,” it added.

Responding to Terris, the IDC company secretary, Mr Maseapo Kganedi, said the group had requested “a comprehensive brief from management.” Kagera had partnered with Almoiz, which owns several sugar plantations, five milling plants, and an out-grower base of 40 000 farmers. It planned to spend R4 billion rand to recapitalise the operations.                                                                             

This email is confidential and may be legally privileged. 

It is for the intended recipient only. If you have received it in error, please immediately notify the sender and then delete it. Please do not copy it, disclose its contents or use it for any purpose whatsoever. 

Zimbabwe Newspapers (1980) Ltd and its subsidiaries do not accept any liability whatsoever for the contents of any e-mail. Please think environment before printing emails


Leave a Reply

Your email address will not be published. Required fields are marked *


AirZim starts accepting ZiG

National carrier, Air Zimbabwe is now accepting payment in Zimbabwe Gold (ZiG), boosting confidence in the new currency. In a statement on X (formerly Twitter) yesterday, Air Zimbabwe said the ZiG payments reflected a commitment to adapting to the evolving financial landscape by offering stakeholders convenient payment methods. “As we integrate Zimbabwe Gold currency into […]

Read More
VP Chiwenga

Take lead in developing value chains: VP Chiwenga

ZIMBABWE will continue to leverage its vast natural resources as part of bold steps towards becoming a producer of high-value goods and services that are competitive on the global market, Vice-President Dr Constantino Chiwenga has said. This demands that the private sector take the lead in developing the value chains that exist across key sectors, […]

Read More
Dr Mushayavanhu

Audits of ZiG money supply once a year: RBZ

ZIMBABWE should use its own currency to achieve higher levels of economic growth while the supply of the Zimbabwe Gold (ZiG) will always match increases in gold and cash reserves, with audits of money supply expected to be conducted at least once a year, Reserve Bank of Zimbabwe Governor, Dr John Mushayavanhu, has said.  In […]

Read More