eBusiness Weekly
Clifford Shambare
Sometime in May this year I began mulling over the idea of the involvement of indigenes in the sugar production industry of this country. My attitude to this matter was triggered by two aspects.
Firstly, I felt that the sugar prices that were taking place in the country then, were unjustified. (However, this is a subject that on further analysis, presents us with its own challenges vis-a-vis the general inflationary environment in the country today). Secondly, I had hitherto, been fascinated by the idea of involving the country’s indigenes as fully-fledged participants in this industry, not as surrogates to the big boys, so to speak.
As a result, I wrote an article on this subject but I shelved it for another time in future. So when the article: “US$ 500 for sugar plantations sought”, appeared in the 16-22 August 2019 issue of this paper, my interest in the subject was rekindled. Consequently, I have now revisited my original article, in the process making minor modifications to it; so here goes.
In order to understand better, the major issues involved here, we need to look briefly into the history of this industry in Zimbabwe. This industry has been, and still is, dominated by monopolies, but this should not be surprising because of the background of this industry in the country.
The sugar industry was started in 1937 by Murray MacDougal, a Scotsman, with the involvement of the colonial government of the day. The government of Southern Rhodesia became involved right from its beginning by funding its development. As a result, it promulgated the Sugar Act as an instrument to enable it to direct the development of the industry. In order to effectively carry out this function, the government deliberately created a management system for the purpose. This culminated in the formation of the Triangle Sugar Estate Company managed by the Sugar Milling Board appointed by that government. This action effectively made this company a parastatal organisation, otherwise known as a state enterprise today.
In 1944 (June 04), government sold the sugar estates to the Natal Syndicate on the understanding that “[ . . . ] A major settlement scheme involving immigration of young [white] farmers from Natal should be responsible for the production of the bulk of the cane to be milled at Triangle when adequate water for the irrigation for the large scale development became available”.
Thus we see the continued intimate relationship between the government of the day and the owners of this industry. Subsequently, Hulett, the company that had represented the Natal Syndicate, merged with the Tongaat Sugar Company in 1982.
Today this company, now known as Tongaat Hulett owns operations that span the sugar, starch and property industries of the two countries. In addition to its South African companies from where it originated, this company owns the whole operation at Triangle as well as 53 percent of Hippo Valley. This effectively makes it a dominant player in the local sugar industry.
On considering the Zimbabwean politico-economic environment, one finds that from the beginning of its production to date, sugar has played a critical role — a role that is similar to the one played by tea in America on the political front. Together with bread — another product that before independence, was not part of the staple foods of the indigenes — sugar has assumed a pivotal position regarding the attitude of the populace to the government of the day.
Today, the story of sugar in the country throws up an interesting state of affairs in which a heavy irony is embedded. Measured on a gross production basis, Zimbabwe is the smallest producer of sugar on the African continent but on a per capita basis, it occupies the top tier. And this sugar is produced by two companies namely, Huletts and Hippo Valley; so this is a typical monopolistic condition.
Current information on the average world sugar consumption per capita seems to be conflicting but according to the WHO’s 2017 sugar consumption statistics, the average world figure stood at 23kg while for developed countries it was 33,8kg. On the other hand, Zimbabwe produces 442 000 tonnes of sugar per year, of which 202 000 tonnes are exported while 247 000 tonnes are for the domestic market. With a population of 17 million this gives us a per capita sugar consumption of just over 26 kg per annum.
And yet sugar is often in short supply in local shops; and if it is not in short supply, its price is changing in the upward direction all the time.
Personally, I believe the main reason for the dominance of the sugar monopoly in the country is the heavy entry barriers to this industry. These are barriers that stem from the level of capital required to run a profitable sugar business.
And to make matters worse for anyone aspiring to join it, this industry has been strongly tied to the country’s political history with all its contradictions and controversies.
Therefore, it should not be surprising that some of the local politicians, those with experience in revolutionary politics, seem to have understood and appreciated the criticality of this industry to black empowerment. I believe that these people have been scouring the local industrial landscape to see where blacks can enter the system with relative ease.
In the process, they may have realised that this is an industry in which the indigenes already play a part albeit a peripheral one. So because of this fact, they may have reasoned that half the work has already been done for this purpose. Furthermore, they are aware that a considerable level of the capital costs to this industry — that is, the irrigation system, as well as the roads and bridges — belongs to the nation as a whole and therefore the indigenes are justified in claiming access to it.
It is probably for the same reason that in sometime in 2017, this political leadership implored the Government to enable the new indigenous out growers to enter the sugar industry by transferring the out growers from the armpit of the Ministry of Industry and Commerce to that of the Ministry of Lands Agriculture Water Climate and Rural Resettlement.
On the surface, their thinking seems surprising and rather confused since both ministries are part of the same Government.
However, a more critical look into the matter reveals the contradictions that are embedded in this industry; these are contradictions that have their base in the current dysfunctional relationship between the Government and the private sector.
So in this case, this political leadership reckons that if this transfer is successfully done, then the out growers, the majority of whom are indigenous, can be funded through the Command Agriculture Programme.
Despite its inherent weaknesses, this programme is a much cheaper, more egalitarian and flexible funding vehicle than any in the country today.
That said, we need to ask ourselves this question: How feasible is it for the country’s indigenes to enter the sugar industry? In order to address this question, we may need to know something about how those countries with the most sugar mills that are owned by indigenes, have achieved this status.
India is one country with a long history of sugar production with many sugar mills, all of which are owned by indigenes. All in all, that country boasts of 453 sugar mills, 252 of them being co-operatives and the remaining 132 being privately owned.
Because of certain factors to do with the history, politics, geography and technological development in that part of the world, the culture of sugar production among the indigenes of that country is quite old. Most of India’s sugar is produced from rain-fed cane; and all the plant and machinery used for this purpose is manufactured locally.
And because the Indians have the necessary technology for sugar production, their producers do not need foreign currency to partake in that industry. They also use local currency obtained from local banks and investors to fund working capital requirements — a substantial cost in such an industry.
On the other hand, because of the differences in all these factors as compared to India, the structure of the sugar industry in Zimbabwe is very different to that of the former. This state of affairs has serious implications on the quest of Zimbabwe’s indigenes to also become part owners of the sugar industry.
A study on the subject by Ian Scoones et al clearly elucidates the challenges the local indigenes have encountered regarding sugar production since the land reform programme was launched in 2000. Initially, these challenges were mainly centred around the need to achieve economically viable yields, access to capital and technological know-how.
And because of the relationship that exists between these cane growers and Hippo Valley and Triangle — a relationship cobbled by history — the former have had to depend heavily on the latter for inputs and milling facilities. In fact they are surrogates of big capital.
The out-grower model itself, is not new, nor is it peculiar to cane plantations; it was designed a long time ago in the cane plantations of America. It is a model that was not designed to make the out grower who in most, cases was a non-European — rich but to keep him perpetually dependent on big capital. This dependency status implies that in order to bring about an end to the system, the out-grower has to also become a capitalist, albeit a small one at first.
In that case he will need capital, but in that case the challenge becomes one of the source of that capital. So, as far as our sugar case goes, there in a paradox here in that those companies that are entrenched in the industry today have been, and still are, also in a way, heavily dependent on Government for the same infrastructure that is supposed to be publicly owned, and yet the indigenes who are part of that public, do not have equal access to same.
However, this should not be surprising if one takes into account the challenges that the same indigenes have grappled with in order to acquire land — itself, a not so obvious part of that infrastructure.
Despite the positive achievements that have been made in the area of sugar production by Zimbabwe’s indigenes to date, it is still an area that needs more research to enable them to become more empowered in it to a stage higher than the current one. This need arises from challenges to do with the relationship between two groups of people with fundamental differences between them.
The original cane growers were British colonists; they were of a different race — a race that regarded itself as superior to the natives as they were referred to, then.
In terms of resources — that is financial, technological and managerial resources — these cane growers were superior to the Africans.
This was the case even though some of these whites also occupied the position of out growers to the main companies. So what we had here were out growers of different classes, so to speak. In between were the Mauritians. The Africans are the group that was and still is, looked down upon by the other two groups.
This state of affairs has rendered these relationships rather tenuous and consequently, they are now shrouded in an atmosphere of mistrust between the two major racial groups of players in the industry. As a result, when soon after implementation of land reform, most of the original white and Mauritian out growers were replaced by indigenous ones, there were fears that the new out growers would not be able to meet the existing plants’ raw cane demand.
So, in order to make progress with regard to the involvement of the indigenes in the sugar industry, there is need for their complete integration into it. If well thought out and implemented, such a programme should also enable them to become fully empowered in this industry.
And in order to achieve state of stability in this industry with the full involvement of indigenes, there is the need to first work out the modalities for a win-win relationship between the two parties namely, the big companies and the smaller growers. This is especially necessary since there have been allegations of unfair treatment of the latter by the former group over a number of aspects of the relationship, vis-a -vis inputs costs, revenue sharing and so on.
In the next part of this article I shall continue to look into the other aspects of this important matter.
