South African Tongaat to quit Mafambisse sugar mill in Sofala, Mozambique
An investigation into alleged wrongdoing at Tongaat Hulett Ltd. found that a group of at least 10 senior executives at the sugar maker used accounting methods that led to profits and certain assets being overstated.
The report by PwC also found the company recognised revenue too early from land sales between fiscal 2013 and 2019 and overstating the value of cane assets and of sugar sales in Zimbabwe, according to a summary of the findings published by Tongaat. PwC also pointed to governance failures and a “culture of deference” that contributed to the financial misstatements.
Chief Executive Officer Gavin Hudson started a comprehensive review of Tongaat after taking the helm in February, including allegations that came through the company’s whistle-blowing line. Shortly after, investigators at PwC were appointed to carry out the probe.
“It soon became clear that, over and above the operational difficulties facing Tongaat Hulett, there was insufficient internal accountability, governance and financial oversight,” according to a 6-page summary of the report published Friday.
Former Chief Executive Officer Peter Staude, who headed the company for 16 years, was among those identified. He didn’t immediately respond to messages left on his phone.
The board may start legal action against those involved, to recover bonuses and benefits paid and applications to have the relevant people be declared delinquent directors or otherwise incapable of occupying fiduciary positions.
It’s also working with the police and National Prosecuting Authority, and the equivalent authorities will be engaged in Zimbabwe and Mozambique, where some of the wrongdoing is alleged to have occurred.
This is the second forensic probe PwC has provided this year on a South African company. Its investigation into Steinhoff International Holdings NV’s financial scandal, which brought the retailing giant to its knees, found that a group of former executives — with the help of others outside the company — structured fictitious transactions that substantially inflated profits and asset values.
These cases have spurred South Africa’s Independent Regulatory Board for Auditors to weigh tougher measures for the profession. Tongaat will include findings from the PwC report as it calculates restatements to its 2018 financial results, as well as the delayed 2019 figures. Both will be published in the week starting Dec. 9.
The company’s stock had fallen 76% this year before its suspension in Johannesburg in June after the results were postponed. Shareholders shouldn’t expect more than Friday’s summary as the company says the full report is subject to legal privilege and won’t be published.
The Tongaat, South Africa-based company will “be as transparent as is prudent and possible in the circumstances on the work it is doing to turn around the business and restore the company’s reputation,” it said. “A fundamental reshape of the business is needed to restore trust and put the business on a sustainable footing.”
By Janice KewSource: Bloomberg