RCL Foods says its sugar division is under growing strain as instability in the sugar sector deepens with the business rescues of Tongaat Hulett and Gledhow Sugar Company, looming deregulation and rising imports all colliding to put pressure on margins.
In its latest annual report, the food producer said while the division delivered a strong result for the year to end-June, momentum slowed sharply in the second half, linking the slowdown to weaker consumer demand and a surge in imports, which are eroding margins and displacing local supply.
“The SA sugar industry faces an uncertain outlook amid significant structural and regulatory changes. The impending implementation of Tongaat Hulett’s business rescue plan under the Vision Group signals potential long-term shifts in the industry landscape,” RCL said.
“Moreover, the prospect of deregulation could fundamentally transform the operating environment, posing risks to all stakeholders across the value chain (including growers, millers and downstream participants) by increasing market volatility and operational uncertainty.”
Tongaat entered business rescue in October 2022 due to ballooning debt, alleged financial misstatements and historical mismanagement. Its creditors have since approved a rescue plan, paving the way for the Vision Partners consortium to take control of the business.
Gledhow Sugar Company followed into business rescue in March 2023 after flood damage, unrest and rising costs compounded financial challenges. It was later acquired by Ushukela Holdings.
RCL said the instability at these companies has spilled over into the broader industry, complicating long-term investment decisions and creating uncertainty for growers and millers.
CEO Paul Cruickshank said Tongaat’s approved rescue plan includes provision for the settlement of its statutory industry obligations, a development he said should bring “much-needed stability” to the sector.
He said the government’s decision not to extend the Health Promotion Levy reinforced its support for the Sugar Industry Master Plan, which aims to secure diversification and long-term resilience for the sector.
“Stakeholders in the sugar industry, including growers and millers, have experienced significant hardship due to Tongaat’s previous unilateral decision not to fulfil its statutory industry obligations, and the completion of the business rescue process will bring much-needed stability for the industry,” he said in his letter to shareholders.
“Tongaat’s approved business rescue plan makes provision for the payment of Tongaat’s outstanding industry obligations if their appeal is unsuccessful.
“We are confident in our legal position in support of Sasa and the minister of trade & industry that Tongaat’s statutory industry obligations are merely the costs of doing business in the regulated sugar industry, binding on all industry participants, and that those statutory obligations may not be suspended.”
Imports are another growing concern. The company reported a substantial increase in volumes during the year, which undercut local prices and weakened competitiveness. “Increased volumes of cheap sugar imports affect local competitiveness and impact the group’s pricing power,” RCL said.
Business Day recently reported that the high court in Durban dismissed RGS’s urgent application to compel Tongaat Hulett’s business rescue practitioners to disclose the Vision consortium’s funding details, marking the fifth such legal challenge in 18 months by the Mozambican group.
RGS, which previously positioned itself as a rival bidder, alleged financial misconduct and challenged Vision’s capacity to fund the rescue plan, but the court found RGS lacked urgency and credibility, citing its delay and admission of submitting fraudulent proof of funds.
Vision and the BRPs opposed the case, calling it vexatious litigation aimed at derailing the rescue process. The BRPs maintain the approved plan is on track to secure Tongaat’s future, protect jobs, and stabilise the sugar industry and regional economy.
Beyond these pressures, RCL’s sugar division delivered “another strong absolute result”, supported by solid agricultural and manufacturing performance. But the food producer said that rising imports, volatile global commodity prices and evolving tariff structures remain material risks.
CFO Rob Field said these dynamics directly affect input costs, pricing strategies and market competitiveness.
“We operate in a highly dynamic environment, where rising imports, fluctuating global commodity prices and evolving tariff structures continue to present material risks — particularly in sugar and wheat. These pressures affect input costs, pricing strategies and ultimately, market competitiveness,” he said.
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