Chinese investors accused of unfair business practice

Published: 09/10/2011

AICO Africa Ltd, one of the leading companies in the country’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. In an interview in Washington DC on Thursday, Pat
Devenish, Aico group chief executive officer told Standardbusiness 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 following farmers breach selling to
(Sino-Zimbabwe Holdings) Sino-Zim who had not invested in the production. It
was in March 2010 that we reported a loss of US$10 million. 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.


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