Tongaat Hulett, a South African sugar producer and property group facing major challenges, has found a ray of hope in a strategic equity partnership with Tanzania’s Kagera Sugar. The Tanzanian sugar giant will acquire Tongaat Hulett’s sugar assets in South Africa, Zimbabwe, Mozambique, and Botswana, potentially saving the currently suspended JSE-listed company. When Tongaat Hulett entered business rescue in October 2022, the search for strategic partners to save the company resulted in Kagera Sugar being chosen from a shortlist of eight.
Kagera Sugar is a well-known sugar manufacturing company based in Tanzania’s northwestern region, with operations in the Democratic Republic of the Congo and the Middle East, where it owns sugar assets and refineries. The business rescue practitioners (BRPs) in charge of Tongaat Hulett’s restructuring emphasised Kagera’s financial stability and track record, deeming them an ideal fit to help Tongaat Hulett’s South African sugar assets turn around.
One of the primary benefits of this collaboration is Kagera’s exposure to complementary sugar assets in Tanzania and the Democratic Republic of the Congo. This exposure provides relevant technical and operational knowledge that can help Tongaat Hulett’s operations in South Africa improve efficiency and productivity. Furthermore, Kagera’s sugar refineries in Oman and Bahrain provide access to world-class technologies and expertise, bolstering efficiency efforts even further.
The decision by Tongaat Hulett to continue operating its sugar assets as a multi-country group ensures operational continuity for its businesses in Mozambique, Zimbabwe, and Botswana. It also gives the South African company access to technical capabilities that can lead to improvements, job retention in KwaZulu-Natal, and protection for stakeholders across Tongaat’s value chain, including small-scale growers.
This acquisition fits Kagera Sugar’s larger strategy of becoming Africa’s leading sugar producer. Kagera Sugar’s Managing Director, Nassor Seif, stated that the company’s successful core values will be extended to the newly acquired Southern African operations, benefiting employees, growers, and ultimately contributing positively to the regional economy. Kagera Sugar is committed to significantly investing in modernising and expanding the acquired plants, with the goal of increasing production and operational efficiencies.
While this collaboration appears to be promising for Tongaat Hulett’s turnaround, some experts are concerned about Kagera Sugar’s financial resources and technical expertise. Chris Logan, CIO at Opportune Investments and shareholder activist, emphasises the importance of significant investment in Tongaat Hulett’s operations, particularly in repairing ageing mills and cane lands. The success of the turnaround will be heavily reliant on the financial resources and technical capabilities that Kagera Sugar can bring to the table.
Logan acknowledges that Kagera Sugar may have significant financial backing, possibly from its Middle Eastern refineries, which may strengthen its ability to revitalise Tongaat Hulett’s operations. More transparency, however, is required to comprehend the extent of their commitment and the potential impact on the business’s revival.
The SA Canegrowers, a cane growers’ association, welcomed the announcement of the equity partnership. While they see the development as a significant step forward, they remain cautiously optimistic because there is still much to be determined. The ultimate goal is the survival of growers’ operations and the safeguarding of the livelihoods they provide.
Finally, the strategic equity partnership between Tanzania’s Kagera Sugar and Tongaat Hulett offers a promising path forward for the troubled sugar producer’s revival. With Kagera Sugar’s financial strength, operational expertise, and commitment to investing in modernization and expansion, there is hope for a successful turnaround that will not only benefit Tongaat Hulett but also protect stakeholders’ interests and support the region’s sugar industry’s sustainability.
