Hippo Valley, the Zimbabwean unit of Tongaat Hulett, is a lucrative sugar-producing company with upside export and local sales potential, but is facing headwinds emanating from political, operational and land lease risks.
Tongaat controls the Zimbabwe Stock Exchange-listed Hippo Valley, in addition to its wholly-owned and non-listed Triangle Sugar Corporation.
Dividend payments from the Zimbabwe operations, buffeted by hyper-inflation and other financial and headwinds, amounted to R140 million in the half year to end September 2020.
Hippo Valley, notwithstanding a 6 percent increase in sales volumes for the half year to end September, suffered a 2 percent decrease in inflation-adjusted revenue, weighed down by currency and inflation woes.
Hippo Valley is awaiting finalisation of land leases for about 24 000 hectares of land, on which it intends to pin expansion and independent producer programs. The company is additionally maintaining “freehold” titles over Hippo Valley South, constituted of 16 433 hectares currently “largely a game park and wildlife conservation” area.
The company has stated that expansion works on a 4 000-hectare cane development project, known as Project Kilimanjaro, “remain suspended due to delays in concluding funding arrangements” with financial institutions “pending further clarity” on land tenure.
“As previously reported, the government has since assured the company that the issuance of the 99-year lease is imminent,” the company said in December.
However, David Woollam, an analyst turned whistle-blower on Tongaat Hulett’s fall after financial and accounting irregularities, said in a recent interview in media that the Zimbabwean operations, though lucrative, were subject to political and operational headwinds.
“Zimbabwe is probably the best operation, but struggle with political (challenges) and the difficulty of accessing cash. It’s a very good operation, produces almost half a million tons of sugar per year, and in good times is a very valuable asset,” said Woolman in the interview.
Zimbabwe is home to Simon and Hamish Rudland, a family of Zimbabwean business tycoons with interests spanning logistics, transport and other interests. The Rudlands, and their allies, are said to be behind Mauritius-based investment company Magister, which underwrote yesterday’s R4-billion rights issue for Tongaat Hulett.
Questions have, however, been raised over the credibility of the Rudland family, especially over alleged questionable sources of wealth, lack of experience in agro-processing and suspected dodgy deals in the tobacco industry.
“This is an organisation that has come out of the blue and there are some questions around where they got their money. They have made a claim about agri-processing. The other one is insignificantly small; the other one looks like it’s been making losses,” said Woollam.
He added: “(Its) not (an) agri-processing company, they are into logistics and cigarettes. My concern is that there hasn’t been transparent engagement.”
However, Hamish Rudland this week said he believed that “with Tongaat's largest operating business being in Zimbabwe, our local knowledge of the landscape and operating environment will be of significant benefit” to Tongaat.
“Furthermore, there is no substance to allegations of state capture in Zimbabwe by the Rudland family. The reports and links have been published without evidence,” Rudland said in a right of reply response to Amabhungane on Monday.
BUSINESS REPORT ONLINE