The Sugar Production Control Act is set to be amended to review the production, milling, marketing and sharing of revenue from proceeds from cane supplied by farmers, as Government moves in to resolve a long standing impasse between sugar producing firms and outgrowers.
The amendments will also create a legal framework which takes into account the changes that have since ensued in the sugar industry since the Act’s establishment in 1964.
This was said by Industry and Commerce Minister, Dr Sekai Nzenza while delivering a ministerial statement in the National Assembly last week.
“The ministry has started the process of reviewing the Sugar Production Control Act (Chapter 18:19) of 1964,” she said. “The draft principles were drafted and submitted to Cabinet for consideration. The Act also seeks to address the long-standing issues which have been raised by the farmers.”
One of the sticking issues that the amendment will deal with is in respect of sugarcane farmers and Tongaat Hulett Miller, on milling and marketing of sugar and share of the revenue from sugar produced from cane supplied by farmers using a division of proceeds (DOP) ratio.
Minister Nzenza said since 2014, payment to farmers had been 73,5 percent: 26,5 percent in favour of farmers based on a DOP ratio that was determined by PricewaterhouseCoopers (PWC) in 1999.
The DOP ration is a temporary arrangement pending its independent and objective review by an independent consultant.
Said Minister Nzenza: “Key areas which will be reviewed are the role of the Government in facilitating the negotiations of determining division of proceeds, period of reviewing DOP, who will bear the costs of reviewing DOP, membership and composition of the Zimbabwe Sugar Association (ZSA) board, Sugar Industry Agreements, among others.” Later in 2014, Government engaged Ernst and Young to carry out the review process and on November 23, 2016, the ministry directed that the consulting firm compute the DOP ratio of 77 percent: 23 percent in favour of farmers be implemented pending a robust review which will take into account the inadequacies and recommendations raised by both parties.
“This is the current DOP ratio being used by the sugar industry,” said Minister Nzenza. “The ongoing amendment of the Sugar Act will specify a pre-requisite of period review of the DOP in order to enable a fair operating environment for all players.
“The Ministry of Industry and Commerce has engaged the sugarcane outgrower farmers and the miller in order to come up with terms of reference and engagement to be used by the consultant to carry out DOP review process in the interim.”
Minister Nzenza said with the ongoing dialogue, all parties will agree on who will meet the cost of the next DOP review process since the previous exercise was financed by the ministry. She said she envisaged a milling agreement being secured, which might see farmers benefit from by-products such as molasses, ethanol and bagasse or optionally be remunerated.