Harare - Hippo Valley Estates, owned 53.3% by Tongaat Hulett [JSE:TON]
, has been given less than two weeks to effectively comply with the Indigenisation Act, according to an October 23 letter written to the sugar manufacturer by Zimbabwe’s National Indigenisation and Economic Empowerment Board.
This comes as the firm is yet to indicate plans to relinquish at least 51% shareholding to Zimbabwean locals as stipulated by the law, which requires all foreign-owned manufacturing companies to dispose of 26% shareholding to indigenous Zimbabweans by the end of October 2012 and the balance by October 2015.
In a report by FinX, a Zimbabwean-based news agency, Hippo is said to be indigenised only to the extent of 6.7%.
As a result, government is pushing for Hippo to dispose of about 43% of its shares to indigenous Zimbabweans, among which will be the community trust at 10% and employee trust at 5%.
“We request herein, as we have done before, that Triangle (Tongaat Hulett’s sugar operations in Zimbabwe comprise the wholly owned Triangle Sugar operation and its holding in Hippo Valley Estates) submit a compliant plan to the Ministry as soon as is possible and in any event not later than 14 days from receipt of this letter.
"We feel that we have afforded yourselves sufficient time within which to align with the requirements of law,” reads part of the letter.
“We would like to advise that the Ministry’s patience is running thin and that should we not receive a proper compliant plan within the prescribed period, Ministry and government would take it that the shareholders of Triangle are not interested in continuing to do business in the country.
"This may have serious consequences for the company. We trust that this however will not be necessary and look forward to a mutual resolution of the issues highlighted above.”
The indigenisation board argues Triangle has an obligation to participate in a community share ownership trust which government plans to launch within the next two weeks, primarily through the disposal of 10% of its shares.
Hippo CEO Sydney Mutsambiwa has previously said the company’s US$30m Successful Rural Sugarcane Farming Community (Susco) project is part of empowerment compliance.
Mutsambiwa said at the company’s annual general meeting in September the Susco programme was half complete.
“As we speak, about 7 100 hectares have been ploughed out and replanted and this equates approximately to 47% of the total area that has been allocated to outgrower cane farmers,” he said.
He added the plan is to plough out and replant some 4 000 ha per year, and to cover the entire 16 000 ha over a period of up to four years.
The outgrower scheme will effectively take outgrower production from the current 530 000 tonnes of cane to around 1.7 million tonnes.
In value terms, that represents revenue uplift to the farmers from the current $35m to about $108m at current prices.