Introduction
Contract farming has over the past few decades received considerable attention from policymakers and analysts who view it as a mechanism capable of pulling the African continent out of economic and agrarian stagnation (Amanor 2019, 2009). The economic and agrarian crises triggered by structural adjustment programmes (SAPs) and exacerbated by the 2007/2008 global capitalist crises laid a firm foundation for ‘land grabs’ on the African continent (Moyo, Jha, and Yeros 2012, 2019). In recent years, much scholarly work has focused on ‘land grabs’ and how the insertion of capital through contract farming and ‘land investments’ impacts on the general peasantry in peripheral countries (Chinsinga 2017; Dubb, Scoones, and Woodhouse 2017; Martiniello 2017; Jha and Yeros 2019). Such work has demonstrated negative impacts attributed to such ‘investments’, i.e. greater food insecurity, displacement of the peasantry and social stratification (see Martiniello 2017; Luna 2018).
Critical to highlight is that contract farming is not a new phenomenon, as it predates the era of SAPs. In some post-colonial states such as Kenya, Ghana, Ivory Coast and Cameroon there was a deliberate policy to promote contract farming through state-owned plantation estates (Oya 2012). This phenomenon obtained in the ‘Africa of the concessions’ for commodities such as cocoa, tea, coffee, sugarcane and palm oil and less in the ‘Africa of settler colonial states’ mainly found in southern Africa. Many African governments utilised the newly established state marketing boards to drive agricultural production via contract farming (Sachikonye 1989; Ochieng 2010). There are various definitions of contract farming. This study defines contract farming as an agreement entered into between a farmer and an agribusiness firm, whether written or verbal (developed from Rehber 2007, based on Roy 1963).
As shown in some sections of this paper, contracts examined in this study are both oral and written, hence the adoption of the above definition.
Debates on the socio-economic impacts of contract farming on the peasantry are polarised. A more optimistic school of thought sees contract farming as a mechanism capable of pulling peasants out of poverty through enhanced access to credit and extension services (see Kirsten and Sartorious 2002; World Bank 2007). However, this view is challenged by critical analysts who see contract farming as an exploitative tool used by agrarian capital to transfer production and marketing risks to peasants, in the process further pauperising them (Singh 2002; Gray, Downuribe, and Kaminski 2018; Luna 2018). They further assert that contract farming brings about social polarisation, leaving vulnerable groups such as poor farmers, women and labourers further marginalised (Luna 2018).
This study aims to interrogate the nature of contracts and the scale and spread of contract farming in the sugar sector in Hippo Valley, Zimbabwe. More specifically, the paper examines the contradictions embedded in outgrower production. This is done though analysing the inclusiveness in the drafting of contracts, formulae used in the determination of output prices, risk sharing between the Tongaat Hulett Zimbabwe (THZ) and outgrowers as well as the role of producer associations in the sugar industry. Much scholarly work on sugarcane production in Zimbabwe has largely focused on production and productivity outcomes among land beneficiaries since the Fast Track Land Reform Programme (FTLRP), and consequences for livelihoods (see Scoones et al. 2010, 2018; Mazwi and Muchetu 2015). An in-depth study on power dynamics in the sugarcane sector is a timely intervention.
Debates on contract farming/outgrower production revisited
Under contemporary global capitalism, monopoly finance capital wields much influence on global production structures, thereby reducing global South countries to mere producers of primary products while global North countries are mainly processors and consumers (Moyo and Yeros 2005; Jha and Yeros 2019). This international division of labour is driven by two factors, namely the desire to maximise profits through labour exploitation and the unfavourable climatic conditions prevailing in the global North. These factors have also contributed to the massive growth of contract farming in recent times (Patnaik 2011). However, the nature of contracts and power relations between agrarian capital and outgrowers remain subject to debates in agrarian studies.
More generally, plantation estates are viewed by some analysts as wielding disproportionate control due to the monopsonistic nature of the sugar industry and the poor organisation of producer associations (Martiniello 2015; Chambati, Mazwi and Mberi 2018). The sugar industry in Africa is dominated by two South African-based conglomerates, namely Illovo and Tongaat Hulett, whose operations cover countries such as Mozambique, Malawi, Swaziland, Tanzania, Zambia and Zimbabwe (Dubb, Scoones, and Woodhouse 2017). Martiniello (2015) and Paradza and Sulle (2015) report that plantation estates abdicate or delay in securing produce during seasons when they are able to meet their production targets, thus highlighting the skewed power relations in favour of capital.
For agrarian political economists, global price volatility and determination is an area where power relations in contract farming are tilted in favour of capital in various crop commodities (Little 2014). In a number of outgrower schemes, farmers reportedly do not have a say in the determination of prices, leaving the plantation estate to set prices. Price determination leads to conflicts between agrarian capital and outgrowers, as it is reportedly opaque (Perez Nino 2016; Mazwi, Chambati, and Mudimu 2020). The desire to generate foreign exchange through export commodities has rendered African states ineffective in resolving disputes related to prices. Tanzania, Mozambique and Ghana are examples of countries where private capital has disproportionate power over farmers due to governments' efforts to attract foreign direct investment (FDI) in the agricultural sector (Buur, Mondlane, and Baloi 2011; Sulle 2016). In Zimbabwe, the ‘new administration, that came to power in November 2017 is following a similar trajectory of prioritising large-scale oriented agriculture' and contract farming in an attempt to re-engineer economic development (Mazwi and Mudimu 2019, 2; see also Mkodzongi and Lawrence 2019).
Agrarian political economists argue that power imbalances are also reflected by shifting the production burden to the farmer (Watts 1994). Furthermore, in circumstances where crops are destroyed by thunderstorms or droughts, the failure by contracting firms to cancel the debts owed by the farmer is a reflection of skewed power relations (Smalley 2013). The literature shows that power imbalances are also gendered in contract farming (see Von Bulow and Sorensen 1993; O’Laughlin 2017; Luna 2018). Women are confined to labour provision in contract farming, in comparison to their male counterparts who control means of production while also controlling decision-making processes at the household level (Luna 2018). In a study conducted in Mozambique, O’Laughlin (2017) argues that the skewed power relations often leave women and wage workers suffering from ill health and malnutrition, thereby undermining their livelihoods. For Von Bulow and Sorensen (1993), women are not passive victims under contract farming, as they sometimes exercise their agency to demand better returns from contract farming. Neo-classical economists, however, hold a different view. For them, contract farming is entered into by two equal partners to produce a mutually beneficial outcome (Grosh 1994).
Models of contract farming
In southern Africa, the literature shows that there are various models of contract farming (see Von Maltitz et al. 2019). The sugarcane sector, which is the subject of this study, has contract farming which assumes block or individual models, both of which are often linked to the mill owned by the plantation estate (Ibid.). Under the block model, farmers collectively surrender their pieces of land to large-scale sugarcane operations for a certain period of time, and in return are given income by the latter (Chinsinga 2017; Adams et al. 2019). This typology of contract farming has been the subject of criticism from analysts and social movements who characterise it as land grabbing (Adams et al. 2019). For example, at Dwangwa scheme in Malawi, a state-run trust involving peasant farmers distributes profits emanating from sugarcane sales, while in Magobbo and Manyongo in Zambia, outgrowers have formed a trust which administers outgrower operations (Von Maltitz et al. 2019). The renewed focus on sugar outgrower schemes in Africa must be understood in the context of the global land rush to satisfy the food and energy requirements of northern countries following the 2007/2008 capitalist crises (Martiniello 2016).
Study area, design and background
Data for this study were collected from Hippo Valley estate, which is located in Chiredzi district, in the south-eastern lowveld. Chiredzi district is well known for sugarcane production and contributes immensely to the economy of Masvingo province by employing over 14,000 workers at the Hippo Valley and Triangle estates, which are both owned by THZ (Scoones et al. 2018). The production of sugarcane through irrigation facilities, combined with cattle and game ranching, is the most common agricultural activity in the district among middle-scale capitalist farmers (Mazwi and Muchetu 2015). The peasantry (A1 and communal area farmers) grow small-grain and maize crops for auto-consumption, with a few selling surplus output to local markets (Moyo et al. 2020). Since the 1940s, there has been a strong presence of international capital in the district, which makes the outgrower production an early phenomenon compared to the more recent investments currently taking place in many parts of the continent (see Dubb, Scoones, and Woodhouse 2017). Also, outgrower sugar production in Zimbabwe is unique compared to that occurring in many parts of Africa, in that farmers have plots that average 23 ha (see Mazwi and Muchetu 2015) while growers in other countries (excluding South Africa) have smaller pieces of land for sugarcane production, averaging 1 ha (Dubb, Scoones, and Woodhouse 2017). In Zimbabwe, outgrower sugar production was deepened by the FTLRP implemented from 2000 (Moyo 2011). Attempts to create a black middle class resulted in the settlement of over 800 outgrowers (Mazwi and Muchetu 2015). Although the plantation estate retained large pieces of land, an estimated 9000 ha was transferred to middle-scale farmers. The sparing of sugar estates from land expropriations during the FTLRP reflected a process of accommodating capital after a period of heightened radicalisation (Moyo 2011). As shown in later parts of this article, the politics surrounding land allocations and the influence of THZ over the state continue to shape power dynamics in sugar today.
Study design
To obtain a broader understanding of the nature of contracts in the sugarcane sector and power relations between agrarian capital and outgrowers, 97 households were interviewed. A mixed-methods approach was used to collect data. A questionnaire was administered to 97 sugarcane outgrowers while an in-depth interview guide was used to obtain data from three producer associations and extension workers. Data from farmers and key informants were collected from December 2016 to January 2018, and the process also involved household revisits and phone calls to verify and validate some of the information.
Monopsony control and the subsumption of outgrowers under capital
In Zimbabwe, it is important to highlight that THZ enjoys monopsony control, or a buyer’s monopoly, over milling such that outgrowers have no option but to use its sugar mills. A recent entrant in the sugar industry, Green Fuels, which produces ethanol from sugarcane in the neighbouring district of Chipinge, also has a mill, although few growers use it, citing prohibitive distances (interview with the secretary of a sugarcane producers’ association, 12 December 2017). Prior to the FTLRP, outgrowers at Hippo Valley entered into marketing contracts – known as ‘cane purchasing agreements’ (CPAs) – committing them to providing an annual supply of sugarcane to the estates (Sachikonye 1989). This study shows that marketing contracts are no longer signed at Hippo Valley, due to disputes since 2000 between outgrowers and THZ over the milling fees (interview with the chairman of a producer association, 12 December 2017). Outgrowers are therefore compelled to market their produce through THZ and accept its prices due to this milling monopsony. This points to their adverse incorporation into agrarian capital. Illovo Sugar, based in KwaZulu Natal (the same provenance as Tongaat Hulett), has similar monopsony control over milling at Maragra sugar estate in Mozambique and Kilombero in Tanzania. In fact, the sugar industry in eastern and southern Africa is controlled by Illovo and Tongaat Hulett (Dubb, Scoones, and Woodhouse 2017). This exclusive control of the sugar industry in Zimbabwe has implications for negotiations over output prices, as shown later in this paper.
Survey data show that 89.7% of the outgrowers were involved in production contracts while 10.3% produced sugarcane independently – without receiving input loans from the plantation estate. The reliance on inputs from contract farming is far higher in the sugarcane sector when compared to other commodities, largely because it is capital-intensive – requiring more financial resources that are often beyond the reach of the majority of farmers. The higher demand for production contracts is also an outcome of changes in the macro-economic situation, which has been unstable since 2000. This has required outgrowers to seek input support in response to the crisis of agrarian finance. From a gendered perspective, only 12.6% of contracted farmers were female, a pattern also found in the tobacco sector in Zimbabwe (see Mazwi, Chambati, and Mudimu 2020). The limited participation of females is a result of patriarchal relations, which are pervasive in most African societies; this validates findings by Von Bulow and Sorensen (1993) and O’Laughlin (2017) that women are often marginalised under contract farming arrangements.
A total of 9.2% of outgrowers stated that they had pulled out of production contracts because of high interest rates and strict monitoring mechanisms of the crop by THZ – reflecting the adverse incorporation under contract farming. Apart from high interest rates and the strict supervision, many sugar outgrowers struggled due to uneasy relations between them and THZ post-2000. The sour relationship between the outgrowers and THZ was over milling charges, pricing of cane and high transport costs (see Scoones et al. 2010; Moyo 2011). According to an official with one of the five sugar producers’ associations: ‘The production of sugar requires a lot of capital which many outgrowers here at Hippo Valley can’t mobilise … 90% of outgrowers source inputs from THZ through contracts and the money is deducted on a 30- to 60-day account’ (interview with the chairman of a sugarcane farmers’ association, 14 December 2017).
Most farmers from the survey were engaged in production contracts by THZ through the Successful Rural Communities (SusCo) Project, implemented in partnership with Banc ABC, a foreign-owned bank. SusCo was introduced around 2010 with the objective of increasing sugar production, the volume of which had significantly declined following the implementation of the FTLRP (Tongaat Hulett Annual Report 2015). From the evidence presented above, it is quite clear that escalation of contract farming production and THZ monopsony control of sugar represent the subsumption of outgrower production under agrarian capital.
The political economy of contract farming
Production contracts were entered into by outgrowers under the SusCo project, launched by THZ in collaboration with Banc ABC, an Africa-wide financial services provider headquartered in Gaborone, Botswana, with subsidiaries in Germany and throughout Africa, indicating that sugar production in Zimbabwe is firmly in the hands of international capital (interview with the secretary of a producer association, 12 December 2017). Through SusCo, THZ works with a number of actors to finance outgrowers under production contracts. THZ acts as an agent of the bank, which provides finance for inputs and pays input providers directly (fertiliser, seed and chemical companies) and recovers the loans by deducting farmers’ incomes. The partnering between private commercial banking institutions and sugar plantations is not unique to Zimbabwe but also exists in other countries. For example, Martiniello (2017) demonstrates how Kakira Sugar Works and Tropical African Bank were instrumental in the resuscitation of the Kakira sugar outgrower scheme in Busoga, Uganda.
To access inputs under production contracts, outgrowers sign ‘requisition forms’ with THZ, and other contracts with Zimbabwe Electricity Supply Authority (ZESA) and the Zimbabwe National Water Authority (ZINWA) for electricity and irrigation supply, respectively (interview with the secretary of Hippo Valley Sugarcane Producers’ Association, 12 December 2017). Water and irrigation costs are also deducted by THZ from the outgrowers’ gross income, in addition to input loans and milling charges. From interviews with outgrowers, this limits their potential when it comes to capital formation since they are also required to repay inputs and agricultural credit advanced by THZ and Banc ABC (focus group discussion, 31 December 2016). The perspectives of outgrowers and producers’ association leaders on the operations of SusCo, ZINWA and ZESA reinforce the view that contract farming tends to limit possibilities of accumulation for outgrowers.
Also constraining accumulation possibilities for outgrowers are high milling charges and terms set by THZ and Banc ABC for the repayment of input loans (focus group discussion, 31 December 2016). As already highlighted in the previous section, this happens because THZ wields monopsony control in the sugar sector. At the inception of production contracts in 2010, outgrowers were given three years to repay loans with interest. Since 2014, however, the bank has loaned farmers inputs on 30-day repayment terms, a development which outgrowers are strongly against, citing a too-short period provided to allow them to harvest and sell their cane in time (Ibid.). While there are two forms of agricultural credit for outgrowers in Basoga in Uganda – one repayable in six months and the other over five years (see Martiniello 2017) – the onerous 30-day terms demanded by THZ and Banc ABC suggest the adverse incorporation of outgrowers to capital. Farmers accept such conditions because there are limited alternative sources of agricultural credit post FTLRP. Failure to repay loans on time attracts penalties such as the continued accrual of interest. It is important to highlight that the state remains heavily involved in outgrower sugar production through irrigation water and electricity supply.
Entry requirements for sugarcane contract farming
Entry and exit requirements are critical in examining power dynamics in contract farming. In examining these requirements, it is essential to point out that outgrower production in colonial Rhodesia was propelled by the desire to boost the output of the Triangle and Hippo Valley estates and the need to come up with a political settlement for white settlers who had fought in World War II (Scoones et al. 2018). The FTLRP brought new farmers on to the sugar plantations, leading to conflicts with the estates (Scoones et al. 2010; Moyo 2011). With the land reform programme, the state became the primary driver of outgrower sugar production, and black outgrowers have come to be viewed as a political force, as can be seen in the confrontations between agrarian capital and the producers’ associations over pricing, transport costs and milling charges.
While ownership of land is considered a prerequisite, 100% of the surveyed outgrowers indicated that there is no requirement for the grower to own assets or offer collateral. Nor does THZ consider the production history of the cane grower, as is the case with tobacco and other contract farming schemes. This is partly because THZ has a monopsony that allows it to make deductions for inputs after the farmer delivers the sugarcane, and such control and the perishability of the commodity also make it nearly impossible to market the output elsewhere. It is also important to acknowledge that sugar outgrowers post FTLRP have been viewed as a political force with agency by THZ, a factor which leads to the relaxation of entry requirements. Before providing inputs, THZ’s only requirement is a land offer letter. All of the households surveyed in Hippo Valley stated that THZ conducted no checks of previous production levels before offering them contracts. This finding contradicts Singh’s (2002) assertion that contract farming excludes or marginalises poorly resourced farmers on the basis of asset ownership. The desire to meet its annual production output for exports in the wake of declines in productivity post FTLRP is also one of the factors which forced THZ to relax entry requirements for participation in contract farming.
While outgrower schemes that operated in the 1980s and 1990s in Zimbabwe in the sugar, tea and coffee sectors required farmers to be married for labour purposes (Jackson and Cheater 1989; Sachikonye 1989), this no longer applies. The change is attributable to the increased role of the state in the selection of land beneficiaries, compared to the early years of independence when estates played a central role in the recruitment of outgrowers (Sachikonye 1989). Also, less important now for eligibility is the employment status of farmers; again, in the early years of independence, this was considered an essential requirement.
Extraction of surplus value and growing indebtedness
The issue of inputs is one of the most critical subjects in contract farming as it is viewed in part as a tool of agribusiness expansion and accumulation with a propensity to pauperise the peasantry (Amin 2015). The adequacy of inputs has a bearing on the ability of farmers to meet quality standards which are often prescribed by plantation estates, and also ultimately determines outgrowers’ net income. The input support programme under SusCo has been a controversial subject in Hippo Valley. Most of the outgrowers polled in this survey contended that although the project had enabled them to gain access to inputs to kickstart their production in the turbulent years post FTLRP, the arrangement had also been marked by overpricing and high interest charges by THZ and Banc ABC.
While the prevailing market prices for ammonium nitrate and urea were US$30 and US$25.90 respectively, THZ charged interest rates of 12% per 30 days for the inputs provided to outgrowers. Survey data show that contracted growers utilised 110 bags of ammonium nitrate fertiliser and 39 bags of urea at a cost of US$5060 and US$1143, respectively, against a prevailing open market price of US$3300 and US$975, respectively. The pricing by THZ has the effect of reducing incomes for outgrowers and is a strategy used to extract surplus value by monopoly finance. Table 1 shows the input package advanced to outgrower farmers by THZ in the 2015/2016 agricultural season.
Inputs supplied by Tongaat Hulett Zimbabwe to outgrowers in Hippo Valley, 2015/2016.
| No. of farmers from the sample | % | |
|---|---|---|
| Fertiliser | 6 | 6.9 |
| Technical advice | 1 | 1.1 |
| Seed, fertiliser, chemicals, technical advice and transport | 16 | 18.4 |
| Fertiliser, herbicides and fuel | 1 | 1.1 |
| Fertiliser and herbicides | 54 | 62 |
| Seed, fertiliser and chemicals | 1 | 1.1 |
Source: Author's survey data, 2017.
As Table 1 shows, 62% of the outgrowers polled in the survey reported having access to fertilisers and herbicides through contract. A further 18.4% received packages consisting of seeds, fertiliser, chemicals, technical advice and transport services, while 6.9% obtained only fertilisers. A similar lack of standardisation in production contracts was observed in the tobacco sector (see Mazwi, Chambati, and Mudimu 2020). The inadequacy of inputs cannot, however, be blamed on THZ as it is the outgrower who specifies the type and quantity of inputs required. A local extension officer said in an interview in November 2017 that THZ mainly offered fertilisers and herbicides. Diesel was provided on request. More than 88% of the households polled in the Hippo Valley survey expressed satisfaction with the quality and quantity of inputs received. The other 11% of outgrowers stated that they had applied for fewer inputs out of fear of the high interest rates charged by THZ (survey data 2017).
Most outgrowers use inputs provided by THZ in the absence of alternative forms of finance. Eighty-five per cent of the households surveyed in Hippo Valley cited a lack of capital as the main reason for signing production contracts. A substantial proportion, 40%, stated that the 30-day repayment deadline was too soon to complete cane cutting. Missing the deadline means that they are unable to repay for the next 3 months if not more, incurring crippling interest charges in the process (interview with the chairman of the Hippo Valley Productive Sugarcane Farmers Association, 17 December 2017). Under normal circumstances, outgrowers have three to four cuttings per year, meaning that they cut sugar only once in a quarter and thus incur 12% interest charges for three months in a quarter. This places the average interest rates for inputs provided at 36% should outgrowers fail to repay in one quarter.
A chairman of one of the producer associations stated that the SusCo input programme is one of the biggest scandals to emerge in the sugar industry since the start of the FTLRP. He added that the programme had led to severe exploitation of sugar outgrowers by THZ and Banc ABC:
SusCo was introduced to dupe farmers as it has only benefited THZ and the bank. The loans provided by the bank were at a high interest rate, cumulatively 38% when you add the establishment costs. This has put sugar outgrowers in a debt spiral. The cost of establishing one hectare of cane is $3,200, but we have farmers whose cane was established at $11,000. The group CEO [Chief Executive Officer] of the bank [name supplied], its managing director [name supplied], local branch chairman and the bulk of clerks were all fired because they stole from poor farmers who are sustaining the lives of the citizens of this country. (Ibid.)
Outgrowers in Hippo Valley also pointed out that although the contract farming programme had led to increased yields and incomes for farmers, the accruing interest rate charges left many of them heavily indebted. It is alleged by outgrowers and producer association leaders that contract farming has resulted in higher levels of indebtedness on the part of outgrowers and greater dependency on THZ for farming inputs. It is difficult today to find an outgrower who does not owe THZ and the bank some loans (interview with the secretary of the Hippo Valley Productive Farmers Association, 17 December 2017). The SusCo programme exposed sugar outgrowers to what Mamdani (1987) describes as a ‘double form of exploitation', whereby they are forced to participate in unfavourable markets yet are also being taxed by the state. The indebtedness on the part of sugar outgrowers confirms submissions by McMichael (2013) and Martiniello (2017) that contract farming is a tool used by capital to keep farmers forever indebted. Given the high levels of indebtedness, there has been greater dependency on inputs provided.
The findings call to mind Clapp’s 1988 ‘loss of autonomy’ thesis, which holds that contract farming arrangements are designed to trap growers in a cycle of recurring debt and so increase their dependence. Sachikonye (1989) and Buch-Hansen and Marcussen (1982) argue that such loss of autonomy should not be interpreted as ‘disguised wage-labour’; it can be argued that the independence of farmers to grow other crops or diversify into livestock production and off-farm enterprises invalidates the ‘wage-worker’ thesis. The continued reliance on inputs supplied by THZ, however, points to the subsumption of outgrowers under capital.
Power asymmetries in outgrower sugar production
In examining the nature of contracts, scholars of agrarian political economy and neo-classical economists pay special attention to the power dynamics between contracting firms and farmers, although they come to different conclusions about the balance of forces (World Bank 2007; Martiniello 2016). In examining the role of the state in contract farming relations, some analysts contend that the state is a central player in the promotion of capital penetration, but in many circumstances, it tends to be the weaker player, allowing international capital to exploit the peasantry (Sachikonye 1989). Such approaches provide insights on whether contract farming is a ‘win–win arrangement’, as argued by neo-classical economics proponents, or an exploitative arrangement, as argued by scholars of agrarian political economy. The following sections examine price determination and risk sharing at Hippo Valley.
Monopoly finance dominance and resistance from farmer groups
Complicating relations between the state and THZ, which represents South African-based monopoly finance, is the role played by the South African government in protecting the continued operations of THZ in Zimbabwe. While South Africa played a leading role alongside other southern African countries in mitigating the effects of international sanctions against Zimbabwe and averting its total collapse during the first decade post FTLRP, THZ on several occasions sought the intervention of Pretoria to prevent the seizure of farming land. It is worth highlighting that although much of the land held under the Bilateral Investment Promotion and Protection Agreement (BIPPA) between Zimbabwe and other states was repossessed under the FTLRP, THZ land was to a large extent unaffected. The tangled relations between Zimbabwe and THZ demonstrate the power of monopoly finance in developing countries. Smart and Hanlon (2014) highlight the influence of international companies in wringing monopsony licences and tax holidays in the tobacco and sugar industries from the Mozambique government. This also confirms observations by Patnaik (2020) and Yeros and Jha (2020) that monopoly finance wields significant influence over the state.
Table 2 shows that outgrowers in Hippo Valley have a nuanced appreciation of the role of the state in sugar production. Their views are considered to be crucial given that the state is seen to be a mediator in conflicts between outgrowers and THZ. Seventy-six per cent of outgrowers believed that the Ministry of Industry and International Trade was playing a positive role in the promotion of outgrower sugar production, thus showing their optimism, while the remainder said the state was not doing enough to promote contract farming.
Outgrowers’ views on whether government plays a positive role in the promotion of contract farming in Hippo Valley.
| Contract | Non-contract | Total | |||
|---|---|---|---|---|---|
| No. | % | No. | % | % | |
| Yes | 76 | 88.4 | 6 | 66.7 | 86.3 |
| No | 10 | 11.6 | 3 | 33.3 | 13.6 |
| Total | 86 | 100 | 9 | 100 | 100 |
Source: Author’s survey data 2017.
Contracted outgrowers who felt that the state was not doing enough to support them cited its failure to intervene in bringing to finality the division-of-proceeds issue, which was the subject of a court application by producer associations in February and March 2007. The issue has been a bone of contention with THZ since they were resettled. Outgrowers also accused the state of siding with THZ in price negotiations and said that by failing to help them obtain fair contracts it had been unable to influence THZ to extend the repayment terms from 30 days to a year (Hippo Valley survey 2017). The 30-day accounts were an outcome of the SusCo project which government officials negotiated on behalf of outgrowers. At that time, the state was desperate to finance outgrower production, which was then at an all-time low.
Between the plantation estate and outgrowers, power relations are heavily skewed towards agrarian capital, mainly because of the monopsony enjoyed by THZ. The power asymmetries are reflected in the one-sided setting of prices, as discussed in detail in the next sub-section, and in the unequal share of proceeds from sugarcane by-products such as bagasse and molasses (interview with a sugarcane farmers’ association official, Chiredzi, 17 December 2017). THZ’s retention of the proceeds at exchange value is the subject of protracted negotiations between producers’ associations and THZ. One of the five producer associations representing outgrowers tried to break THZ’s monopsony in 2017 and early 2018 when it approached the Ministry of Finance to obtain a licence to establish a mill in competition with Triangle and Hippo Valley (Ibid.). The expectation is that the licence, if granted, would lead to the lowering of production and milling costs for the outgrowers. Litigation and growing other crops have been strategies used by producers’ associations and farmers, respectively, with a measure of success, to counter the power of agrarian capital.
Fragmentation of the producers’ associations has, however, weakened outgrower voices at Hippo Valley. At the centre of the divisions are governance matters: the leadership has frequently been accused of failing to uphold the constitution by avoiding open elections. Moreover, some outgrowers question the independence of certain producers’ associations amid allegations that the elected leaders have been co-opted by THZ management (interview with a key stakeholder, November, 2017). During interviews, leaders of producers’ associations countered by suggesting they have done their utmost for the farmers and point to their confrontations with THZ since 2000 over milling fees, the milling agreement and the high transport costs as confirmation of their independence (interview with the chairman of a producer association, 14 December 2017). In comparison to the tobacco sector (see Mazwi, Chambati, and Mudimu 2020), it can be argued that producers’ associations in the sugar sector have represented outgrowers with a degree of success.
Asymmetries in pricing and risk sharing
The estates calculate the price of cane using the ‘estimated recovery of crystal’ (ERC) mechanism, a method of determining sucrose content (interview with THZ official, 15 December 2017). Under this arrangement, the estate has sole discretion in determining the ERC content since it controls the laboratories where the ERC is measured. Eighty-six per cent of the interviewed households in Hippo Valley expressed concern that they were not involved in determining cane prices (Hippo Valley survey 2017). Outgrowers strongly felt that THZ was reducing sugar content as a strategy to lower prices (Ibid.). These findings are consistent with two surveys in Chiredzi – a 1989 study by Sachikonye and another by Chidoko and Chimwai in 2011 – during which 57% and 75% of outgrower households, respectively, found the arrangement to be unfair. For its part, THZ posits that the quality of sugar produced by outgrowers is poor, hence the low prices. THZ further states that it is essential to base output prices on those prevailing on global commodity markets. To balance the asymmetrical power relations, which are quite evident in the sugar industry, it would benefit stakeholders in Zimbabwe to follow the South African route, whereby an independent milling board, Cane Testing Services, determines the quality of sugar supplied by independent outgrowers.
Another key issue is the staggered delivery dates of cane quotas to the mill; households polled in the survey were of the view that these led to a significant decline in the quality of the cane (focus group discussion, 3 January 2017). Sugarcane requires immediate processing and the staggered dates delay the processing, leading to a loss of quality and value. Given the long-standing animosity between THZ and outgrowers, outgrowers firmly believe that THZ employs such tactics as an attempt to frustrate their production. Such disproportionate power in determining sugar prices and imposing delivery dates is not unique to Hippo Valley: Kilombero Sugar estate in Tanzania employs similar tactics in relation to its outgrowers (Martiniello 2016; Sulle 2016).
A comparison was made of the benefit ratios between outgrowers and milling firms in five African countries. It was observed that outgrowers in Zimbabwe benefit by a larger ratio from the cane they supply to millers (74%) than do outgrowers in South Africa (63%) and Zambia (59%). It would be inaccurate, however, to conclude that outgrowers in Zimbabwe are better off, given that by-products must be factored in when analysing the fairness of contracts. It is instructive to note that outgrowers in Zimbabwe, unlike other countries, are not compensated for other by-products from the sugar such as ethanol and bagasse, a development which underscores the exploitation of farmers by THZ. THZ benefits from these resources by using bagasse in the generation of electricity while the ethanol by-product is used to make alcohol spirits, in the process short-changing the Hippo Valley outgrowers.
Although the system of determining cane prices is riddled with power asymmetries, the producers’ associations that represent outgrowers in the Zimbabwe Sugar Association with millers and the estates have made considerable efforts to negotiate a better benefit ratio since the early years of the FTLRP. This involves referring the matter to the Ministry of Industry and International Trade and an arbitrator for resolution. The stalemate over the milling agreement, which has gone on for more than a decade, is also indicative of efforts by producers’ associations to ensure that outgrowers derive maximum benefits from the sale of sugarcane.
One of the biggest sources of contestation in contract farming is the suppression of producer prices when earnings fluctuate on global markets (Shivji 2011). Sugarcane prices tend to decline in line with global prices. A large share of outgrowers (92%) stated that there is no fixed price for sugarcane and that THZ augmented, or topped up, their earnings when global market prices increased (Hippo Valley survey 2017). Similar practices are noted at Maragra sugar estate in Mozambique (Chambati, Mazwi, and Mberi 2019) and in Zimbabwe’s cotton sector, where peasants are paid more for their produce in seasons when the crop fetches higher prices on international markets (Masuka 2012).
However, the study also shows that risk sharing is not practised in the event of natural calamities and technological failure, since 100% of contracted farmers indicated that they bear the costs for losses resulting from floods, thunderstorms and droughts or when their farming equipment breaks down. Emanating from these imbalances, sugar associations representing farmers have been pressing THZ to sign a favourable milling agreement that factors in the sharing of risks between the outgrowers and the estate. The lack of compensation in cases of technological failure or natural calamities reflects the adverse incorporation of outgrowers under contract farming. This exploitation underscores views expressed by agrarian political economists that contract farming is used as a tool of transferring production risks by agrarian capital to the farmer (Clapp 1994).
Conclusion
The nature of contracts was examined as a basis for exploring whether contract farming in sugar production is a ‘win–win’ arrangement, as espoused by new institutional economists, or an institution that leads to a ‘loss of autonomy’ on the part of farmers, as argued by agrarian political economists. The paper shows that THZ uses monopsony control to dominate contractual relations by charging high interest on input loans and levying excessive milling charges, which undermines capital formation among outgrowers. The overreliance of many outgrowers on inputs supplied by THZ and their failure to extricate themselves from debt give credence to assertions that contract farming creates indebtedness and loss of autonomy. A glaring source of unfairness in contracting for outgrowers has been the SusCo programme, which has seen collusion between Banc ABC, THZ and the state against outgrowers, particularly in negotiations over the 30-day repayment period for input loans. Outgrowers at Hippo Valley face a double form of exploitation – compelled to participate in unfavourable global markets while also being excessively taxed by the state over electricity and water, a development that hinders accumulation from below.
While earlier studies found that there were stringent entry requirements for farmers to qualify for an outgrower scheme, this study established that more relaxed eligibility criteria were introduced with the FTLRP. This study shows that THZ does not consider prior production trends in the recruitment of outgrowers, nor does the plantation estate require collateral security. These less stringent conditions for participation in sugar outgrower production remove entry barriers for participation in contract farming.