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
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