Sugarcane farmers fight Tongaat ‘monopoly’
■ Push for reforms in the sugar industry ■ Seek review of revenue sharing formula
ZIMBABWEAN sugarcane farmers in the Lowveld are pushing for sweeping reforms in sugar industry to break the monopoly by Tongaat Hullets Zimbabwe and an “urgent review” of proceeds sharing ratio formula used to determine the sharing of revenue between sugarcane growers and millers, Business Weekly can reveal.
Amid growing agony over what seemingly is reluctance by authorities to act on the protracted and critical matter, farmer organisations have vowed to push for reforms — including the repeal of the Sugar Production Control Act — needed to boost viability of growers.
The reforms would protect them from the monopolistic and exploitative tendencies by Tongaat, they argue.
“Our biggest problem is the commercial relationship we have with Tongaat which is not viable,” Farai Mutamba, spokesperson of a group of eight farmer organisations told Business Weekly in an interview.
“The revenue sharing ratio is not a viable one.” Farmers get 77 percent value of sugar extracted from sugarcane. It is a combination of domestic and foreign currencies or proceeds from exports.
There is an agreement, which also allows farmers to participate through the value chain of molasses-a by-product of the milling process. Farmers can choose to collect the molasses, get paid for the molasses or paid from revenues realised from ethanol.
“We have an outdated law and this is the main reason why we have all these problems,” said Mutamba.
“For as long as the industry is structured as it is, we will not go anywhere. The structure of the industry can only be corrected through a new law.”
Industry and Commerce Minister Dr Sekai Nzenza, said her ministry would seek a dialogue with sugarcane farmers and Tongaat.
“Am positive that we will find common understanding and an equitable fair solution on pricing. Ultimately, we must deliver sugar, which is affordable and accessible to the consumer”, said Dr Nzenza.
No comment could be immediately obtained from Tongaat by the time of going to press.
Transition
Prior to the land reform, which started at the turn of the millennium, Tongaat, which owns mills in Triangle and Hippo owned 75 percent of all the land under sugarcane.
Changes in land ownership saw a major transition as plantations under Tongaat declined to 56 percent while out-growers took control of the remaining 44 percent.
This culminated into a prolonged antagonistic relationship between Tongaat and the farmers.
Petition
Last year, 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 are seeking 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 is out-dated.
The farmers indicated that the Act is 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. They regarded this hegemony as tantamount to abusive tendencies by the millers due to the absence of competition as epitomised by the Cane Purchase Agreement of 2008, which farmers signed unwillingly to have their sugarcane processed.
According to the petition, only three out of eight associations are represented on the Zimbabwe Sugar Association (ZSA) and Zimbabwe Sugar Sales (ZSS) boards but still with no executive powers.
As such, farmers have recommended that the Act should be repealed to warrant a mandatory representation of farmers in the boards and Government to appoint directors of the ZSA and ZSS boards.
“It is our prayer that a complete overhaul of the Act be instituted as a matter of urgency so as for Government to provide a policy framework that addresses the evil of monopoly interest and cartels while at the same time creating a level playing field for all stakeholders,” reads part of the petition.
Mutamba said farmers were keen to “trying to get the relationship with Tongaat work through the Parliament”.
In response to the petition, the Parliamentary Portfolio Committee on Industry and Commerce recommended the Government to come up with a new division of proceeds ratio that take into account the recommendations by millers and sugarcane farmers.
The Government should promote investment or bring more players in the processing, distribution and marketing of sugar to curb “hegemony” in the entire sugar value chain.
Further, the Government should be represented in the sugar industry boards and that the chairperson of the ZSA board is an independent person.