THE Ministry of Industry and International Trade will soon change the Sugar Production Control Act of 1964 to level the sugar industry playing field, it emerged this week.
In an interview the director of the Competition and Tariff Commission Alexander Kububa told businessdigest that the move was part of recommendations made by his association in a report to the ministry last year.
Last year the Competition and Tariff Commission revealed that Zimbabwe’s sugar industry was only benefiting a handful of firms involved directly or indirectly at all levels of production and distribution.
“Our recommendations have been followed and the ministry is now working on a new Sugar Act,” Kububa said. “We have also received a lot of support from the farmers themselves who are now allowing others, especially from the small-scale sector, to come in.”
In a 68-paged investigative report, a five-member team last year named the Zimbabwe Sugar Refineries Corporation Ltd (ZSR), Hippo Valley Estates Ltd (Hippo), Zimbabwe Sugar Sales (Pvt) Ltd, and Triangle Ltd (Triangle) as sugar industry kingpins.
The investigation began in July 2002 and was chaired by William Mudekunye, a former permanent secretary in the then Ministry of Industry and Commerce.
The report said in different ways ZSR, Hippo, Triangle and ZSS were “involved directly or indirectly at all levels of production, from cane growing and milling to sugar refinement and distribution”.
The confidential report, which was given to President Robert Mugabe, had opened a can of worms in both government and the business community leading the Minister of Industry and International Trade Samuel Mumbengegwi to brief cabinet colleagues on the matter.
The named companies were accused of sabotaging the country’s fast track land programme and abusing government price control regulations.
The investigation was conducted after a sugar trading company known as Frontline Marketing Services (Pvt) Ltd complained through the Ministry of Finance and Economic Development that the role and involvement of ZSR, a major sugar exporter, in the process of issuing sugar export permits to other sugar exporters who are its potential competitors on the export market was restrictive and “anti-competitive”.
The company alleged that small sugar exporters were being discriminated against in the allocation of Zimbabwe’s sugar export quotas for the European Union and the United States.
Frontline Marketing also alleged that small sugar exporters were being offered different ex-factory prices of sugar for different export markets, and that the existence of a monopoly in sugar distribution was resulting in the excessive pricing of the commodity on the domestic market.
The investigating team said this was “exclusionary behaviour aimed at suppressing competition from new entrants”. It said this was unhealthy and the sector needed opening up.
The commission concluded that the Sugar Production Control Act, enacted in 1964, needed to be revamped because it was introduced at a time when there was a “serious over-production of sugar on the world markets”.
It said the lack of effective competition in the sugar industry was cause for concern since it stifled “innovation and hinders efficient allocation of resources in the industry”.
“The close linkages between production, processing and distribution companies is very disturbing,” the report said.
“The same stakeholders would appear to be enjoying all the benefits of value addition throughout the market chain. Such a situation can be open to abuse and it ought to be thoroughly investigated.”