With the liquidation hearing of sugar miller Tongaat Hulett less than a month away and no firm solution to avoid liquidation in sight, a grower-led entity – GrowerCo – has been established with a view to securing the funding necessary to keep Tongaat Hulett’s mills and refinery operational, without which many parts of the sugar industry would collapse.

GrowerCo's proposal is built around the long-term sustainability of Tongaat Hulett and includes small- and large-scale canegrowers as equity partners, in stark contrast to an extractive private-equity model.

The group is focused on maintaining milling operations, safeguarding jobs, and preserving economic activity across rural KwaZulu-Natal. 

The 130-year-old Tongaat Hulett supports between 35 000 and 40 000 direct jobs at farm level and at its mills and its refinery, making it an economic anchor for entire rural communities. 

“The future of KwaZulu-Natal is intricately tied to the future of Tongaat Hulett. The long-term economic and societal consequences of its liquidation would far exceed the liabilities on the company’s balance sheet,” says Pratish Sharma, a grower who supplies Tongaat Hulett’s Maidstone mill. 

In a media release, GrowerCo explains that more than 17 500 of South Africa’s 28 000 sugarcane growers supply Tongaat Hulett, the majority of whom are small-scale growers.

It notes that about 77% of the sugar industry’s revenue stems from KwaZulu-Natal, where Tongaat Hulett is a dominant driver of economic activity. 

“GrowerCo not only makes sense because it puts Tongaat Hulett under the ownership of people with a long-term commitment to the sugar industry in South Africa, it is also a beacon of what true economic transformation can be,” says Nicholas Ngobe, a grower supplying the Amatikulu mill. 

“Small-scale growers are equity partners in GrowerCo and will earn returns not only on their sugarcane but will share in equity growth over the long run.

“This creates the possibility that a sugarcane grower who today owns and farms their own land, but whose forebears may once have worked as indentured labourers in the province’s sugar fields, could become an owner in one of South Africa’s oldest sugar companies.”

GrowerCo says it believes that, with the support of long-term and patient capital, the proposal presents a viable opportunity to unlock sustainable value over time by stabilising and strengthening one of South Africa’s most important agricultural value chains. 

The entity argues that Tongaat Hulett’s liquidation would destroy not only rural livelihoods but also value in the company for its current debtors.

GrowerCo estimates that debtors would be able to realise R3-billion to R4.5-billion for Tongaat Hulett if it is sold as a going concern, whereas value recovery during liquidation would be as low as R1-billion to R1.5-billion.

“Under this model, every creditor recovers more. GrowerCo is a stakeholder-inclusive plan to avoid a liquidation scenario and to ensure Tongaat Hulett's South African sugar operations can continue as a going concern.

“It has been designed by the people who supply the cane, operate the mills, and depend on the industry, and is built around patient capital and a model of reinvestment. GrowerCo would also be a beacon of real transformation in South Africa by including small-scale growers at ownership level,” says Sharma.

GrowerCo says Tongaat Hulett’s South African sugar assets sit at the centre of an integrated rural economy that stretches from cane growers and mill workers to transporters, food producers, retailers and consumers.

The interdependence of the system creates the foundation of the investment case: without functioning mills, growers have no route to market; without a sustainable supply of cane, the mills themselves have no value.

A grower-led ownership structure therefore helps secure both sides of the equation, creating greater long-term operational stability and sustainability across the entire value chain.

GrowerCo notes that it is an independent initiative with the support of industry organisation South African Canegrowers' Association and the South African Farmers’ Development Association.