The government wants to buy the country’s biggest sugar estates from Tongaat Hulett, and is opposed to the company’s decision to pick a Tanzanian buyer instead. Government says the new buyer may risk the joint plans it has been pursuing to grow the operation.
South Africa’s Tongaat Hulett was placed in business rescue in 2022. It had racked up debts of R7 million following an accounting scandal. In July, the business rescue practitioners (BRP) announced that they planned to sell Tongaat operations, including those in Zimbabwe, to Kagera Sugar of Tanzania.
But Zimbabwe’s Finance Ministry had put in a bid to take over the estates through the Sovereign Wealth Fund (SWF), according to a July letter from Treasury Secretary George Guvamatanga to Tongaat’s administrators.
Says Guvamatanga: “While we are aware that BRP had received other offers, we are concerned that the Sovereign Wealth Fund of Zimbabwe was not allowed to participate as a part of a consortium or have any transparency into the process by which BRP selected Kagera in spite of the various discussions.”
The government is keen to gain control of an asset that has significant economic and social clout.
“Hulett Sunsweet is the leading brand of sugar in Zimbabwe, and Tongaat has a the capacity to crush over 3.5 million tonnes per year. This would be equivalent to the entire production of sugar in Zimbabwe, giving Tongaat the ability to potentially monopolize the sugar market,” government says.
Tongaat’s operations, which include Hippo Valley, account for over 50% of Zimbabwe’s sugar output. The government has partnered with Tongaat and local banks on Project Kilimanjaro, a plan to open up 4,000 hectares of virgin land for production. Under this arrangement, the government gets to select the growers who will get the land, according to Hippo Valley’s last financials.
Government appears to fear that a new owner will not continue this project. Guvamatanga says he is not sure whether “Kagera plans to honour the commitments that Tongaat has made to Zimbabwe”. He says the ties with the estates are “more than just commercial” as operates have “created a bond with Zimbabwean farmers that goes beyond merely working the fields.”
“When the fund made its offer to purchase Tongaat’s Zimbabwe assets, it was drawing on this close relationship, being cognisant of the fact of the aged plant and equipment and as regards the biological assets, the need to replace them, planting new, higher-yielding varieties,” writes Guvamatanga.
Selling the estates to SWF makes sense, Guvamatanga argues, because the fund “has the ability to acquire all of the necessary approvals, especially the water and land rights, and it can continue the work started with Tongaat in the community”.
In 2021, Tongaat’s sugar milling licence was extended by a further 20 years to December 2040. The company and government are in delicate talks for 99-year leases for some of its estates, Hippo Valley reported in its last annual results.
Guvamatanga insists that government had made a “fair offer”, but does not mention how much it offered or how it would have raised the money for a deal. South Africa media reports speculate that the transaction, still to be approved, could be the equivalent of US$160 million. Zimbabwe’s SWF has been largely dormant since it was formed in 2014. It only got a new board early this year, and some of its investments include shares in Kuvimba Mining and potential rights in Invictus Energy’s gas projects.
Guvamatanga wants a meeting with the administrators before the Kagera deal closes, writing: “Before proceeding to closing, the fund requests a meeting with the BRP representatives to discuss what the media update actually means and whether there is any room for the fund’s participation in a consortium or the purchase of the Zimbabwe, Botswana and Mozambique assets.”
The Zimbabwe government is not the only one bitter about the planned Tongaat sale to Kagera. A consortium led by South African businessman Robert Gumede and Rutenhuro Moyo, a Zimbabwean businessman who sits on the Hippo Valley board, is also protesting against the decision. Moyo owns Remoggo, an investment fund based in Mauritius.