TAX HAVEN: ZAMBIA’S STOLEN WEALTH
A GLOBAL FOOD GIANT ASSOCIATED BRITISH FOODS, THE ILLOVO GROUP AND ZAMBIA SUGAR PLC
ASSOCIATED British Foods (ABF) is a hidden giant in the global food industry. You may not know its name, but its products are probably on your kitchen shelves, including well-known UK brands like Kingsmill, Ryvita and Ovaltine.
ABF is Britain’s second-largest food and drink manufacturer, and also owns the clothing retail chain Primark.38.
Beyond Europe, the company’s operations range from yeast factories in Brazil to spice production in India. A FTSE 100 company, ABF has operations in 46 countries and an £11 billion (ZK90 trillion) turnover – almost as large as Zambia’s entire GDP, and nearly three times the Zambian national budget.
ABF is also the biggest sugar producer in the UK, as well as in Africa. Its subsidiary, British Sugar, sells one in every two spoonfuls of sugar consumed in the UK, from the ubiquitous UK-produced “Silver Spoon” to Fairtrade-certified sugar processed by the group’s sugar mills in Malawi and Zambia and sold in the UK under its “Billingtons” speciality sugar brand.
Its “White Spoon” sugar is consumed by most Zambian households.
ABF’s move into African sugar began in 2006 when it bought a majority stake in the Illovo Sugar group, the continent’s largest sugar producer.
A long-standing South African sugar producer, Illovo had by the mid-2000s expanded rapidly throughout southern and eastern Africa, primarily through buying up previously state-owned sugar companies. In 1996 Illovo bought up sugar milling operations in Mozambique (Maragra Açucar), followed in 1998 by sugar estates in Malawi (the previously state-owned SUCOMA), Tanzania (the Kilombero Sugar Estate) and Swaziland (Ubombo Sugar).
In April 2001 it bought a controlling interest in Zambia Sugar (privatised in 1995), now Africa’s largest sugar operation. Illovo’s African sugar estates now cover an area twice the size of London.
This Illovo group of sugar companies has long been an African-headed operation. The Illovo group is owned by ABF through a central parent company in South Africa, Illovo Sugar Ltd, described as the “corporate centre of the group,” from where Illovo’s African operations have in practice been coordinated since they were established in the 1990s.
Yet our investigations have found that the ownership, management, procurement, finances and profits of their onshore African sugar operations are routed through a network of companies registered in the tax havens of Mauritius, Jersey, the Netherlands and Ireland.
This report shows the impact this maze of tax haven companies has on ABF’s Zambian tax bill.
Current payments between companies (2012/13): Previous payments between companies (2007-12) Equity ownership of companies
Sources: Corporate structure provided by Associated British Foods to ActionAid, 30 January 2013. Annual returns and accounts of Illovo Sugar Ltd (South Africa), Illovo Sugar (Malawi) Ltd, Zambia Sugar Ltd, Illovo Sugar Ireland Ltd, Illovo Project Services Ltd (Jersey), Mauritius company registry.
Illovo Sugar informed ActionAid that Société Sucrière de Markala S.A. (Mali) and Illovo Project Services Ltd (Jersey)
ABF is Britain’s second-largest food and drink manufacturer, and also owns the clothing retail chain Primark.38. In April 2001 it bought a controlling interest in Zambia Sugar (privatised in 1995), now Africa’s largest sugar operation. Illovo’s African sugar estates now cover an area twice the size of London. Its “White Spoon” sugar is consumed by most Zambian households. ABF’s move into African sugar began in 2006 when it bought a majority stake in the Illovo Sugar group, the continent’s largest sugar producer.
are inactive companies. In addition, payments declared in Zambia Sugar’s 2012 accounts from “The Silver Spoon Company Ltd” (an ABF subsidiary declared as inactive in the UK) were, according to Illovo Sugar, actually from a separate ABF subsidiary, British Sugar Plc.
25% Ubombo Sugar Ltd (Swaziland)
Maragra Acucar Sarl (Mozambique)
Société Sucrière de Markala S.A. (Mali)
ABF Investments Plc (UK)
Illovo Sugar Ltd (South Africa)
Associated British Foods Plc (UK)
ABF Overseas Ltd (UK) British Sugar Plc (UK) Illovo Project Services Ltd (Jersey)
East African Supply (Pty) Ltd (South Africa)
Illovo Sugar (South Africa) Ltd (South Africa)
Illovo Sugar Cooperatief U.A. (Netherlands)
Illovo Group Marketing Services Ltd (Mauritius) 60% 90% 73.3% 99% 81.55% 75% 76% Illovo Sugar Ireland (Ireland)
Illovo Group Holdings Ltd (Mauritius)
Illovo Sugar (Malawi) Ltd (Malawi)
Kilombero Sugar Company Ltd (Tanzania)
Sucoma Holdings Ltd (Mauritius) Kilombero Holdings Ltd (Mauritius)
Zambia Sugar Plc (Zambia) 55.1%
The human cost of a British sugar giant avoiding taxes in southern Africa
“The sweetest town in Zambia” – a sign on the road to Mazabuka in southern Zambia, where Zambia Sugar is located.
Mazabuka: the sweetest town in Zambia?
How tax-funded services struggle in Mazabuka In a speech to London’s Royal African Society in 2010, ABF’s chairman George Weston said “our sugar factories employ loads of people. The areas around them become islands of relative prosperity.” ABF’s Corporate Responsibility reports also describe its social investment programme in Zambia and elsewhere in southern Africa: providing employees with schooling and medical services on its estates; building a new classroom block during 2011 at the Mazabuka Girls’ High School; donating sugar to school feeding projects.
ABF told ActionAid that “the payment of tax is only one way in which (our) Illovo (group} supports the Government and local community in the countries in which it invests. In many countries, Illovo’s most important contribution is the direct provision of services to the local community and its workers, for example, providing healthcare and educational facilities, feeding schemes and improvements to public facilities.”
These are welcome interventions in a country where, despite enormous natural wealth, 45 percent of children under five are malnourished to the point of stunting, average class sizes (at nearly 60) are amongst the highest in Africa, and two-thirds of people live below the poverty line.
There is no doubt that the employment Zambia Sugar creates around its Mazabuka estate is critical to local livelihoods. Many parts of Zambia are certainly poorer than Mazabuka and its surrounding communities. But the comparison is relative.
A closer look at this “island of relative prosperity” shows how jobs, philanthropy and company-sponsored social projects do not remove the need for sustainable, well-funded clinics, schools, roads and water supplies available to everyone, not just to employees or selected communities.
Even amidst Mazabuka’s lush green cane fields, the availability of overstretched public services is sometimes literally a matter of life and death. Such public services rely, of course, on everyone paying their due taxes.
Indeed, we found that many of Zambia Sugar’s employees themselves rely on government-funded clinics and schools, since free access to the company-run schools and clinics cited in ABF’s corporate social responsibility reports is not granted to the families of seasonal workers, who constitute the majority of Zambia Sugar’s employees, and who are also generally the lowest paid.
It is many of these workers who have to pay their families’ school fees and medicine charges to bridge the gap of inadequate public funding for education and healthcare. And although Zambia Sugar has told us that it “bears approximately 95 perent of the cost of running the (company’s) medical facilities,” charges are also taken out of workers’ wages for their own treatment at the company’s clinics.
ABF told ActionAid that “the payment of tax is only one way in which (our) Illovo (group} supports the Government and local community in the countries in which it invests.