Zimbabwe Sugar Millers Challenge Court Ruling on Revenue Split

Zimbabwean sugarcane millers have lodged an appeal against a High Court ruling that upheld a Government directive favoring farmers in the revenue-sharing model under a sugarcane milling agreement.

The directive mandates that proceeds from sugar sales be distributed in an 80.5 to 19.5 percent ratio in favor of farmers.

Hippo Valley Estates and Triangle, both subsidiaries of South Africa’s Tongaat Hulett, challenged the decision in the High Court, arguing that Industry and Commerce Minister Mangaliso Ndlovu’s directive was “invalid.”

According to Hippo Valley’s trading update for the third quarter ending December 31, the company filed an appeal with the Supreme Court contesting the adjustment to the Division of Proceeds (DoP) arrangement. The new revenue split was implemented based on recommendations from Baker Tilly Chartered Accountants, which was engaged to review the revenue-sharing framework in the sugar industry.

The revised DoP ratio marks an increase from the previous 77 percent allocation to farmers and 23 percent to millers.

In their lawsuit, Hippo Valley and Triangle listed Minister Ndlovu as the first respondent, Baker Tilly as the second, along with 11 sugarcane farmer associations. The millers contended that the directive exceeded the minister’s authority under Section 10 of the Sugar Production Control Act.

While the Act allows the minister to set cane prices under Cane Purchase Agreements (CPAs), the millers argued that it does not extend to determining revenue-sharing ratios under Cane Milling Agreements (CMAs).

Additionally, they claimed procedural flaws in the directive, asserting that stakeholder consultations were inadequate and that the decision placed an unsustainable financial burden on the milling industry. They warned that the revised DoP ratio would significantly reduce their revenue share, impacting their capacity to maintain operations, invest in infrastructure, and cover essential costs such as machinery maintenance, fuel, labor, and distribution.

The millers further argued that the minister’s directive constituted an overreach, enforcing a revenue distribution model that disproportionately benefited farmers without considering the millers’ substantial capital investment and operational expenses. They maintained that the 19.5 percent allocation disregards previously established DoP ratios, which were developed through expert assessments balancing the interests of farmers and millers.

On the other hand, the respondents defended the directive, asserting that it was a lawful exercise of the minister’s authority and aligned with longstanding industry practices. They argued that ministerial involvement in DoP ratios had historically played a stabilizing role in Zimbabwe’s sugar industry, helping to resolve disputes between millers and farmers.

Furthermore, they contended that the millers should have filed their challenge as a review rather than a declaratory application, given that their objections were based on procedural and jurisdictional concerns. The respondents emphasized that Baker Tilly conducted extensive consultations with stakeholders and that the revised ratio was a result of a comprehensive evaluation of economic data and industry conditions.

The Supreme Court will now deliberate on the matter, with its ruling expected to have significant implications for Zimbabwe’s sugar industry and the balance of power between millers and farmers.