eBusiness Weekly
Business Writer
Zimbabwean cane farmers have urged the Government to “pursue and support” the establishment of another milling facility to break the “monopoly” of Tongaat Hulett.
Tongaat, a South African company owns 51 percent of Hippo Valley Estates and 100 percent of Triangle Limited, the only two firms owning milling assets in Zimbabwe.
The Zimbabwean operations are effectively managed and controlled by Tongaat with respect to decision-making, sugar exports, budgetary support, ICT (same ERP is used group-wide and the servers are located and monitored in South Africa), technical support for mill maintenance, employee recruitment, Hulett’s sugar brand, and other shared services, the development at THL would impact on local operations.
The farmers, who deliver 44 percent of sugarcane to local mills said “the time is ripe” to break the dominance of Tongaat given the changes that have taken place in the industry.
“To effectively manage the attendant risks associated with a monopoly, such as is the case with Tongaat mills, there is a need for the Government to not only consider, but to actively pursue and support the establishment of another sugar mill,” said the farmers in a recent submission to the Ministry of Industry and Commerce.
Dr Sekai Nzenza, Industry and Commerce Minister said in an interview “I support value addition initiative because it is one of the key thrusts that the government is pursuing.”
In 2019, farmers petitioned Parliament for the repeal of the Sugar Control Production Act, arguing that it has been overtaken by developments resulting from land reform.
In the petition signed by eight associations representing local farmers in the Lowveld, sugarcane growers sought reforms in the entire value chain from a regime of monopoly by Tongaat to that which takes into account changes in the industry resulting from land reform programme that increased participation of local farmers.
The farmers unanimously concurred the Sugar Production Control Act of 1964 was outdated.
The farmers indicated that the Act was devoid of the following; the establishment and incorporation of the Zimbabwe Sugar Association, membership and composition of the association, powers of the ZSA Council, and sugar industry agreements. The associations noted with concern that Tongaat is the sole-dominant player in the entire sugar milling process in the sugar industry value chain in Zimbabwe.
Sugar Amendment Bill which seeks to repeal Sugar Production Act is on the legislative agenda for the Fifth Session of the Ninth Parliament opened by President Mnangagwa recently.
“We have the Act which needs to be amended and we are working on that,” Dr Nzenza said.
“What we are seeking is fairness for the farmers and the millers,” Nzenza added.
A representative of sugarcane cane farmers said Tongaat’s dominance was affecting and compromising the viability of the farmers and called for sweeping reforms.
“They do everything, from weighing our sugarcane, testing the sugar content, and determining the price through Zimbabwe Sugar Sales,” Madock Chivasa said.
“At some point, we requested a tour of the testing lab to appreciate the processes but we were denied.
“It is unlike in South Africa where such activities are done by independent parties. If we are to have another mill, I am sure these monopolistic attitudes will be dealt with.
“The Government should support the initiative for the establishment of another mill but at the moment, it can’t take any material decisions because of bilateral agreements between Zimbabwe and South Africa. So far, it is only facilitating the engagements.”
The National Competitiveness Commission’s report on the sugar industry launched early this year said the sector was being hampered by monopoly, with Tongaat subsidiaries, Hippo, Triangle, and Zimbabwe Sugar Sales dominating all levels of the value chain.
“The monopoly has its own challenges,” Dumisani Sibanda, NCC chief economist said at the launch of the report in February.
“In Zimbabwe, we only have two sugar cane millers to all affiliated to Tongaat. In other countries such as Egypt which has 15 companies in the sugar industry offers 15 mills and competitive pricing.”
