Sugar scandals in Zimbabwe’s lowveld

While visiting our research sites in Mkwasine and Hippo Valley in Zimbabwe’s lowveld recently, there was only one topic of conversation among sugar farmers we have been working with in land reform areas: the scandal that has overwhelmed the South African sugar firm, Tongaat Hullett.

A forensic audit by Price Waterhouse Cooper (PwC) uncovered massive accounting irregularities and the report named most of the top brass of the company, including the top team in Zimbabwe. What’s more, the accounting audit identified land acquired for land reform as an asset that shouldn’t be on the books, immediately wiping billions of Rand off the company’s value.

This episode has sent shock-waves through South Africa’s corporate sector. The company was delisted from the Johannesburg stock exchange, all those implicated have been removed from their posts, and there are potentially criminal charges pending. Not surprisingly, big questions are being asked about the companies that previously audited Tongaat’s accounts.

Sugar deals: alliances between state and capital

Tongaat Hullett is the owner of Triangle estates and mill and the major stakeholder in Hippo Valley, having bought out Anglo-American’s shares. A total of 640,000 tonnes of sugar can be produced per year from two mills. Since the late 1950s, this has been a strategic contribution to the national economy. Ever since the sugar industry was first established in the lowveld with 100 hectares planted by Murray McDougall in 1937, the companies involved – first MacDougall’s Triangle company, then the Hullett company from 1957 then conglomerate, Tongaat Hullett, later – have been a central part of the lowveld political economy. In the estate museum there are pictures of company executives and colonial governors, prime ministers or presidents from the early colonial era to the present. The state indeed invested substantially in the sugar industry – building dams, creating canals, levelling fields and offering land. The state and sugar capital have always been intimately intertwined in Zimbabwe (see the brief history in our open-access JSAS paper).

This was certainly the case during land reform when deals were struck to protect the core estates from land invasions. Concessions were offered and the white and Mauritian outgrowers were expelled in favour of new A2 farmers, but the main business was protected. By all accounts this was agreed at the highest political level. Since then the company has been cajoled into make further concessions, releasing cane land for those local invaders who felt that they had lost out in the early 2000s, and again recently a major new initiative has been started, opening up new land for outgrower cane, and the settlement of more people.

When we started our work in the sugar growing areas in the early 2000s, soon after land reform, the company executives were dismissive of the resettled farmers. How could they possibly grow cane at the level and quality that the estate does? As our work has shown, they have been surprised. Yield levels are comparable to the estate and the outgrower sector is delivering a significant proportion of the cane. With risk transferred to outgrowers and the company acting as a monopoly buyer, this has worked out well for the estate.

But farmers and the company have not always got along well. The company has monopoly market power and sets the terms (even if these are quite good by regional standards), and the exposure of the level of dodgy accounting by PwC has only acted to enrage farmers. For them, this proves that they are being ripped off, and that the company fat cats are benefiting, while they suffer. Growing sugar is hard, and made harder, especially for those in Mkwasine area operating outside the estate, as water and electricity supply is challenging, given the decline in infrastructure. For them, not only the company, but the state – always seen to be in cahoots – are to blame for their plight.

Plantation life and empire economics

Sugar plantations have always been central to the economics of empire. Linked in some parts of the world to slavery, land expropriation and exploitation, sugar, global capital and colonial states are intimately entwined, as Sydney Mintz has so eloquently written about in Sweetness and Power. Yet plantations also have connotations of modernity and progress, creating order and wealth in marginal areas, and with this gainful employment and an export commodity that boosts national economies.

Being in the lowveld sugar areas you can feel this. The emerald green sugar cane is laid out in neat blocks, and the busy efficiency of the tractors, haulage trucks and mills give a sense of unified purpose. The massive engineering works that have gone into ensuring continuous supplies of water to this otherwise dry land are witness to state commitment, with canals criss-crossing the landscape, and the area dotted with sluices, check-dams and ponds. Meanwhile, the country clubs, the golf courses, the manicured village greens, the cricket creases, the football teams and the schools named after sugar heroes of the lowveld, present a sense of another world, beyond the mayhem of contemporary Zimbabwe. The massive Tongaat billboards on the roads welcome you to an almost sovereign space, beyond the nation, with its own rules and security forces.

Plantation life is often a separate existence, where you are provided for; as long as you commit to the deal with the company you can be housed, educated, medically cared for and provided with a job. The remuneration may be poor and conditions bad, but there is not much else among the dry baobabs of the lowveld.

The outgrowers, begrudging and forever complaining, have by-and-large accepted this incorporation into this company world. Many have done well from sugar, faring considerably better than their counterparts on other A2 farms, and with better deals than other sugar producers in the region (see our JSAS special issue on the political economy of sugar in southern Africa). Learning the ways of sugar, and its seasonal cycles, has taken some doing, and many have diversified to avoid total reliance on one commodity, but our data show significant levels of income from most. And this is much more than the pathetically remunerated government jobs that many retired from.

Yet the accounting scandal has upset this accommodation. People are angry at being ripped off. And dodgy accounting is resurfacing resentments around land politics. Noone is very clear about who actually owns the land that sugar wealth is built on. For land reform areas it is clearly state land as it was expropriated, but the estate as whole does not have clear land titles. It was always an accepted arrangement that the estate provided a strategic industry, valued and supported by the state, and lowveld land was cheap and plentiful. But forensic accounting doesn’t take account of vague agreements struck in the early twentieth century, and the deregistering of land reform land may have opened up a larger can of worms, as land rights and control in the lowveld sugar areas are renegotiated.

Sugar and power

What this episode once again exposes is that sugar and power are intimately linked. The state and sugar capital have worked together across regimes in Zimbabwe, incorporating outgrowers – white, Mauritian and more recently black – in this bigger project. The order of the estate, with its facilities and regimented control – meant that a colonial style status quo could be preserved long into Independence, no matter how loudly outgrower farmers shouted or local politicians agitated.

When updating investors in December, Tongaat Hullett tried to put a brave face on the scandal, suggesting that they’d turned a corner, everything had been rectified, and that all would be OK. There is a prospect that the company will be listed again on the Joburg exchange today. But, in the last months, the accounting scandal has changed the game in Zimbabwe. When dubious corporate accounting and colonial land politics get mixed up, things get messy. With Tongaat bosses allegedly fiddling the books to get bigger bonuses, the fragility of the long-running arrangement between state, capital, outgrowers and local populations has been seriously tested. Farmers are more vocal about their rights and demand a greater share from the company. And estate land, and perhaps other assets, are now being contested in ways that they haven’t been since MacDougall’s planting of the first sugar in 1937. An accounting scandal has created a whole new politics in the lowveld, which is likely to run and run.

This post was written by Ian Scoones and first appeared on Zimbabweland

 

Zimbabwe’s sugar politics

In 2000, as land invasions occurred around Zimbabwe, there were many calls for the sugar estates to be taken over. Indeed, there were a number of occupations of ‘white’ outgrower farms on the lowveld estates. This coincided with major strikes, and the burning of large areas of cane. Yet high-level negotiations and political manoeuvring averted wholesale takeover. Despite the rhetoric, the strategic importance of the sugar industry to the national economy was recognised and the state and the sugar companies brokered compromises. The result was the subdivision of former settler outgrower areas in Hippo Valley and Mkwasine estates and their transfer to now around 800 land reform beneficiaries who had applied through the A2 scheme, designed for medium-scale enterprises and suited to those with capital and expertise. The sugar outgrower land reform represented nearly 16,000 ha, leaving about 30,000 ha as core estate land.

How have the new outgrowers fared? In a new open access paper published as part of the Journal of Southern African Studies special issue on the political economy of sugar in southern Africa (see last week’s blog for an overview), we explore this question with data over 12 years from Hippo Valley from 2002. Following land reform, company officials, government extension agents and others were sceptical that the new outgrowers would be able to supply sugar in amounts and at the quality required for Tongaat Hulett’s two mills at Triangle and Hippo Valley. They argued that the new outgrowers were given portions of land that were ‘unviable’, and that commercial sugar growing could only occur on irrigated plots of more than 35 ha. Further, they argued that the land reform beneficiaries did not have the skills for the highly technical and demanding process of sugar production. And finally they suggested that a politically-driven land reform process was inimical to economically successful production, and that the investors would flee, abandoning Zimbabwe for more stable contexts.

The new outgrowers: how have they fared?

In the years since, the sceptics have been proven wrong. Outgrowing on A2 resettlement plots is now a central part of the business, supplying 852,000 tonnes of cane in 2013 of a total throughput of 3.9 million tonnes. Yields are up too, with our sample of cane farmers producing 86 tonnes/hectare since 2009, higher than the estate average of 83 tonnes/hectare in 2014. Outgrowers must hand over 26 per cent of their crop to the mill, and pay additionally for irrigation water, transport and inputs. Many complain, but the company ‘rips us off’ and ‘cheats on price’, but sugar growers have little option, and are tied intimately into the company’s operation. Tongaat Hulett makes considerable profit from its Zimbabwe business ($30 million in 2014), and land reform farmers are central to this. As part of the rehabilitation of cane land, the company (via the Canelands Trust, and supported until recently by over 30 million euros in aid from the European Union as part of the sugar adaptation fund) subsidises the replacement of cane, and improvement of infrastructure.

In our Hippo Valley sample, the average plot size is 24.3 ha (with a range from 9.8 to 58.1 ha), with on average 20.9 ha under sugar. Only four farmers (of 38) have centre pivot irrigation equipment, although everyone has access to canal water. Farm labour compounds exist both in the new resettlements and on the estate, from where labour for the range of sugar production tasks is derived. The new outgrower farmers on land reform plots come from a mix of backgrounds, including teachers, extension workers, estate employees, as well as well-connected politicians and security service personnel. Not everyone is doing well, and some recent arrivals have taken time to establish, but across our sample the levels of production and management are good. Making a go of sugar production is however tough, as explained in one our ‘voices from the field’ videos. Organising inputs, hiring and managing labour, dealing with cash flow, and negotiating with the company is always a challenge. But despite the early scepticism, the new farmers are by and large doing well, investing and accumulating, as well as providing employment and providing sugar for the profitable company mills.

The land reform in the sugar outgrower areas was not a ‘land to the people’ redistributive move to combat landlessness and poverty. This was part of an accommodation of a middle-class demand for land, creating a very particular type of outgrower arrangement, quite different to other sugar outgrower relationships elsewhere in the region, as discussed in other papers in the Journal of Southern African Studies special issue. The A2 beneficiaries are certainly not universally powerful and well connected, but the sugar allocations were definitely not addressing the poor, disadvantaged masses. Nationally, the land reform had to accommodate multiple class interests, and one was the middle-class aspiration for land, particularly in the context of declining living standards, wages and job opportunities in the post-structural adjustment period.

 Zimbabwe’s sugar politics

Zimbabwe’s sugar politics since land reform – and indeed much earlier – involves a complex balance of competing forces. Large-scale international capital, seeing the opportunities for accumulation from the excellent climatic conditions and top-quality infrastructure and increasingly guaranteed supplies of irrigation water, has invested in the area over decades, despite the political and economic challenges. Tongaat Hulett sees Zimbabwe as central to its ability to make profit in the region, and so is prepared to weather the storms of economic and political crisis, and broker deals which are far from ideal.

Politically and economically, sugar is vital for Zimbabwe. Together with tobacco, these export commodities create a particular dependency politics, and are central to the imaginaries and processes of state-making. They are deeply implicated in both national and local politics. Today debates about indigenisation, restitution and resettlement colour these politics, and result in much rhetoric and frequent threats usually linked to the electoral cycle. But in essence the story is the same as it always has been; one about how the state makes deals with capital, and how farmers, and other local people, including workers, are incorporated, and on what terms.

It is such political-economic dynamics, rooted in often fragile, contingent elite alliances that have driven the transformation of the sugar industry, and with it the agrarian landscape in Zimbabwe since land reform. As has been the case since 1937, when Murray MacDougall first planted cane in the Lowveld, a contested political economy will continue to shape sugar, people and livelihoods over the next decades too. And the new land reform beneficiaries operating as sugar outgrowers will be central to the story.

This post was written by Ian Scoones and appeared on Zimbabweland

The sugar rush in southern Africa

The expansion of sugar production in southern Africa has been dramatic. From its early beginnings in Natal to the huge commercial estates across the region established during the colonial era, new investments are being planned. The land rush in southern Africa is often a sugar rush, with the ‘white gold’ promising riches to governments, local elites and large corporates alike.

While sugar consumption is rising with increasing wealth and urbanisation, the prospects for export to the favoured European Union market look more fragile. In 2017 preferential trade access ceases, and with this the huge ‘adjustment’ payments that some southern African countries and sugar corporates have received as aid. Nevertheless the sugar giants, mostly centred on three South Africa-based companies – Illovo, Tongaat Hulett and TSB – as well as new entrants, are still eyeing up cheap land, good soils and water resources for new ventures.

With these major changes underway it is a good moment to review the political economy of sugar in southern Africa. This is what a new open access special issue of the Journal of Southern African Studies does. There are 9 papers, with case studies from 7 countries across the region, and a valuable comparative overview of patterns of accumulation in different operations.

The issue argues that the region’s sugar industry provides a useful lens through which to understand current dynamics of corporate capital and agricultural production in Africa. The papers highlight the rapid concentration of corporate control over the past decade, but also the very diverse outcomes across the cases. Capital does not operate in a uniform way, and local contexts, resistances and struggles, and wider political economy make a big difference.

Taking the company Illovo (now owned by Associated British Foods), Alex Dubb shows how it gains high profits in Malawi due to favourable market conditions (notably preferential trade access and protected domestic markets) and  high productivity (combining cheap field labour, land and water with capital-intensive milling). By contrast, Mozambican profits come exclusively from favourable market conditions, while profits in Tanzania, Swaziland and especially Zambia are due to particularly high levels of productivity. South Africa, Illovo’s country of origin, receives low profits, making expansion across the region essential for commercial success. Value relations, at the heart of political economy, are core to understanding accumulation through sugar, Dubb argues. As companies seek to expand their operations, the search for cheap land, water and labour continues. As papers from Malawi and Tanzania caution, attempts at expansion of sugar land through grand development schemes – such as the Green Belt in Malawi or SAGCOT in Tanzania – may result in elite capture and exclusions of poorer people, even when ‘outgrower’ approaches are advocated.

A central theme of the papers is an examination of the diverse patterns of ‘outgrower’ sugar cane production. This is massively different in South Africa, Zambia, Zimbabwe or Swaziland for example, where starkly different relationships between the estate and mill and smallholder outgrowers (of different scales, and with different involvement in direct production) apply. While often presented as the ‘inclusive business’ solution to corporate engagement with smallholders, it is clear that there is no single model, and relations between corporate capital, states and local producers varies massively.

How then should we understand sugar in southern Africa? Is the sugar industry part of a new developmental frontier in the region, transforming investment, market opportunities and livelihoods with a ‘win-win’ model, centred on linking core agro-industrial investments with outgrowers, as the industry and other advocates claim? Or is it a predatory form of capital, backed by elites and international finance, where production and market risks are transferred to vulnerable smallholders and estate labour; where land and water resources are ‘grabbed’; where a colonial model of exploitative estate production is at the centre, and profits are accumulated through monopoly power?

The experience in southern Africa suggests that these stereotypes rarely apply. While the logic of capital results in a relentless pursuit of profit, state agency and national political-economic context influence outcomes, as do local conditions. Local negotiations, resistances, and accommodations matter. The result is diverse patterns of production and profit, together with different livelihood outcomes for very different types of ‘outgrower’, and quite different implications for different groups of estate labour, as shown for Xinavane in Mozambique, both in terms of gender relations and health and wellbeing.

With the vagaries of the international market dominating, and the changing fortunes of large corporate agribusiness capital in the region so deeply intertwined with this, we cannot predict whether the long-established corporation-state-outgrower relationship will persist. But for now, in all its variety and differing political dimensions, this relationship dominates the southern African sugar sector, and is central to understanding its contemporary political economy.

This post was written by Ian Scoones and appeared on Zimbabweland