Sugarcane millers lose pricing lawsuit
Zimbabwean sugarcane millers have lost their bid to challenge the legality of the Government’s authority in determining the revenue sharing ratio with cane producers.
Hippo Valley Estates and Triangle Limited, subsidiaries of South Africa’s Tongaat Hulett, filed a lawsuit in the High Court against the Minister of Industry and Commerce, Mangaliso Ndlovu seeking a declaration that his recent directive establishing a revised Division of Proceeds (DoP) ratio, allocating 80,5 percent to farmers and 19,5 percent to millers, was invalid.
The revised DoP ratio was implemented based on a report prepared by Baker Tilly Chartered Accountants, who were engaged to review the revenue-sharing model within the sugar industry.
In the suit, Hippo and Triangle cited Minister Ndlovu as the first respondent, Baker Tilly as the second as well as 11 sugarcane farmer associations.
The millers challenged the directive’s legality, arguing that it exceeded the minister’s authority under section 10 of the Sugar Production Control Act.
While the Act empowers the minister to set cane prices under Cane Purchase Agreements (CPAs), the millers contended that it does not extend to setting revenue-sharing ratios under Cane Milling Agreements (CMAs).
Additionally, the millers alleged procedural deficiencies in the issuance of the directive, claiming inadequate stakeholder consultation and an economically unsustainable burden imposed on the milling industry. They argued that the revised DoP ratio would significantly reduce their revenue share, thereby impacting their ability to operate sustainably.
They contend that the minister’s directive represented an overreach of power, imposing a revenue-sharing model that disproportionately benefits farmers at the expense of the millers’ significant capital investment and operational costs, including machinery maintenance, fuel, labour, and distribution logistics.
The millers further asserted that the Baker Tilly consultations were insufficient, and they were not given adequate opportunity to negotiate or present alternative solutions.
They argued that the proposed 19,5 percent allocation disregarded historical DoP ratios previously established through expert assessments, which recognised the need for a balanced approach between the revenue interests of farmers and the operational costs of millers.
The millers contend that previous DoP ratios, while not perfect, maintained a measure of balance that allowed both parties to operate sustainably.
However, the revised DoP ratio represented a departure from this balanced approach, imposing a revenue share that undermined the industry’s economic foundation.
Conversely, the respondents argued that the directive was a lawful exercise of the minister’s authority, grounded in longstanding industry practices.
They asserted that the minister’s involvement in DoP ratios had been a stabilising force in Zimbabwe’s sugar industry, historically used to address disputes between millers and farmers.
The respondents further submitted that the application should have been brought as a review rather than as a declaratur, given the applicants’ focus on procedural and jurisdictional concerns.
The respondents defended the directive, arguing that the adjustments were necessary to reflect evolving economic conditions affecting farmers and millers. They submitted that Baker Tilly conducted extensive consultations with both parties, and that the revised ratio is the result of a thorough assessment of stakeholder interests and economic data.
According to the respondents, the directive served as a temporary measure intended to address immediate revenue-sharing disparities, while the ministry considered more permanent solutions.
The respondents emphasised that the minister’s role in adjusting DoP ratios has a historical basis within the industry, often invoked as a stabilisation mechanism during times of dispute.
They argued that the minister’s intervention was consistent with past practice, where the issuance of temporary directives has helped maintain stability. The respondents submitted that the applicants’ concerns about operational viability, while valid, must be balanced against the economic realities faced by farmers, who require adequate revenue to cover rising input costs and sustain cane production.
According to the respondents, the revised DoP ratio reflected an equitable response to these conditions and was essential to fostering industry-wide sustainability.
“Therefore, the court’s finding is that the minister’s directive is reasonable, fair, and aligned with the statutory requirements of section 4 of the Administrative Justice Act,” ruled Justice Joel Mambara.
“The directive strikes an equitable balance that is necessary in the context of an interim measure and reflects an appropriate exercise of administrative discretion given the economic complexities.”
herald
