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October 17, 2011

Zimbabwe:Chinese investors accused of unfair cotton sector business practices

by Wongai Zhangazhanga

AICO Africa Ltd, one of the leading companies in Zimbabwe's cotton sector, says it lost millions of dollars because of unfair business practices by Chinese investors who he accused of clandestinely buying cotton from contracted farmers.

Pat Devenish, Aico group chief executive officer tsaid his company lost about US$10 million dollars last year after Sino-Zimbabwe allegedly purchased cotton from farmers contracted by the local industry.

“I think we lost US$10 million in March 2010 following farmers breach-selling to Sino-Zimbabwe Holdings,  who had not invested in the production.  That is a lot of money,” Devenish said.

In July last year, Zimbabwe cotton players took steps to stop SinoZim from using political muscle to allegedly purchase cotton from farmers contracted by other companies in the industry.

In court papers filed at the High Court, the Cotton Ginners Association of Zimbabwe (CGAZ) accused Sino-Zimbabwe Holdings of using “political gurus” — including Zanu PF ministers and party youths — to buy the crop from farmers contracted with members of the CGAZ.

The CGAZ represents the interests of local companies involved in the production and buying of seed cotton as well as the ginning and marketing of the product.

Represented by Scanlen & Holderness law firm, CGAZ accused Sino-Zimbabwe Holdings of buying cotton at inflated prices from growers who signed contracts with its members throughout the country.

Sino-Zimbabwe Holdings was operating in Gokwe, Kadoma, Mhangura, Mount Darwin, Bindura, Guruve, Mutoko and Raffingora. Sino-Zimbabwe Holdings, however, rubbished CGAZ’s accusations, arguing in an opposing affidavit that the applicant “is scared of competition” and was abusing the courts.

Sino Zimbabwe director Jimmy Zerenie said the company had not induced anyone to do business with it and had not purchased any contracted cotton.

“The applicant has various other remedies available to it which includes but not limited to suing for breach of contract if there is such a breach between applicant and its contracted farmers.”

“The First respondent has not induced any contracted growers to breach the law. If anything, the first respondent has complied with the law and has operated in a very transparent way,” read Zerenie’s affidavit.

He said the application was misleading the court and that there was no evidence placed before the court to substantiate the allegations of political interference. However, the High Court ruled that the matter was not urgent.

Devenish told Standardbusiness that although contract farming with small-scale holders was profitable, recording a US$7 million profit in March 2011, side marketing remained the biggest problem.

“You will get a company like Cottco or Cargill spending a lot of money funding the production of cotton only to discover that someone who hasn’t invested in the production of cotton will then be licensed to buy.

“So really, that is why statutory instrument 142 is so important because what that does, it says you can only buy cotton if you have invested in its production. So that’s really an important issue to us,” he said.

Section 14 of Statutory Instrument 142 of 2009 makes it obligatory for contracted growers to sell their cotton seed to the company that supported them in terms of the contracts.

Members of CGAZ are all signed up as contractors and buyers with the Cotton Marketing Technical Committee in terms of the law.

The law states that seed cotton produced by a grower in terms of a contract with a company can only be sold to the contracted company.

The Standard

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