Property Flash


Sugar producer’s real estate development arm is being wound up amid ongoing fraud case against former executives

May 30 2023

JSE-listed Tongaat Hulett’s creditors on Tuesday voted in favour of the business rescue plan for the company’s property arm, which is to be wound down.

With 92% of creditors voting, 99.8% voted in favour, the business rescue practitioners trying to get some return for the company’s creditors, said. The plan required at least 75% support of those voting, with secured creditors, in aggregate, expected to receive distributions of about 7c to the rand. This is measly but the practitioners had said this was compared to 2.5c forecast if the company went into liquidation.

Tongaat’s lenders had claims worth R7.7bn billion against Tongaat Hulett Developments, which managed and developed Tongaat’s property interests. Tongaat owns numerous tracts of land and was expected to roll out a number of developments in the 2020s. But the company has unravelled in recent years and is mired in an accounting scandal. It’s a truly disgusting story how fraudulent directors can ruin a South African iconic company.

The accounting scandal is one of SA’s biggest since furniture producer and investment group, Steinhoff disclosed accounting fraud in December 2017. Tongaat in June 2019 asked the JSE to suspend trade in its shares after an investigation flagged accounting practices that meant its financial statements could not be relied on.

Accounting firm PwC identified 10 executives, including former CEO, Peter Staude, who were allegedly involved in fraud at the company.

Former chief financial officer Murray Munro was also accused, as well as former managing director of Tongaat Developments, Michael Deighton, former Tongaat Hulett Developments planning director Rory Wilkinson, and directors Samantha Shukla and Kamlasagrie Singh. Gavin Kruger, once a lead partner at Deloitte, was charged with contravening the Auditing Professions Act.

According to a charge sheet, the accused acted with the common purpose to commit fraud, relating to a scam worth about R3.5bn which involved 69 property deals, between 2015 and 2018. During part of 2015 and 2016, Deighton was president of the South African Property Owners Association (Sapoa).

The alleged fraudulent acts at Tongaat Hulett by the former executives ruined a company which had appeared to have years of history and integrity. Tongaat was founded 148 years ago and developed into one of South Africa’s largest farming companies.

Tongaat entered into business rescue in October and the property arm is just the first part of the business to publish its plan, which entails a structured wind down of the company, its operations and the sale of its property assets.

In March 2023 creditors approved an extension of the publication of Tongaat’s business rescue plan, including for its SA sugar operation and feeds division until the end of May 2023.

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