Zimbabwe-How Hippo Valley bosses sugarcoated results for bonuses


Executives at Hippo Valley and Triangle estates overstated sugar sales in order to meet targets and reap bonuses, according to an audit by parent company Tongaat Hullet.

Tongaat yesterday said it had received the results of a six-month forensic probe into its books carried out by auditors PwC, and that the audit shows fraud across its business units, including in Zimbabwe.

Tongaat called in PwC after receiving allegations of fraud via its internal whistle-blowing channel.

Tongaat’s operations in Zimbabwe comprise the wholly owned Triangle operation and a 50.3% holding in Hippo Valley Estates. The company operates in six countries in the region.

The PwC investigation found agreements at Hippo and Triangle which were financing arrangements, but were structured as sales of significant sugar stocks. These were accounted for as sales every six months, at financial half year and year-end.

“Furthermore, even though at least part of the sugar stocks comprised raw sugar, these ‘sales’ were accounted for as sales of refined sugar, and priced accordingly. As a result, revenue pertaining to sugar sales was overstated,” the report says.

The report names executives responsible for the fraud across all its operations. Among those listed are officials at Tongaat’s Zimbabwe arm:

Mr John Chibwe (Hippo Valley Estates Finance Director), Mr Michael Deighton (former managing director of Tongaat Hullet Development), Mr Steve Frampton (former Zimbabwe Sugar Sales General Manager), Mr Shelton Nhari (Triangle Finance Director), Mr Sydney Mtsambiwa (former managing director of Tongaat Hullet Limited’s Zimbabwean operations), Mr Les Munro (former Finance Executive of Tongaat Hulett SA Sugar), Mr Murray Munro (former Chief Financial Officer of THL), Mr Raphael Pfunye (Zimbabwe Sugar Sales Finance Executive), Mr Sean Slabbert (former Finance Executive of THL) and Mr Peter Staude (former Chief Executive Officer of Tongaat Hulett).”

Mtsambiwa briefly acted as Tongaat group CEO before the arrival of Gavin Hudson in February this year.

According to PwC, the overstatements may have been due to incentives that senior executives would receive if they reached certain targets.

“From the PwC investigation, it appears that personal financial enrichment of key senior employees was largely limited to the financial incentives paid to them during the years in which they achieved their employment targets,” Tongaat says.

Tongaat is now taking action to recover bonuses and benefits paid to the executives. The company also wants the officials blacklisted as “delinquent directors or otherwise incapable of occupying fiduciary positions”. Tongaat is engaging law enforcement agencies in South Africa, Mozambique and Zimbabwe for prosecution on some of the cases “where applicable”.

In June, Tongaat asked for its shares to be suspended on the Johannesburg Stock Exchange after it was found that its financial results for the year to March 2018 had been inflated by between R3.5 billion and R4.5 billion.


Tongaat’s JSE suspension, in turn, saw the Zimbabwe Stock Exchange (ZSE) suspending Hippo Valley in August after missing three deadlines to publish its full year results to March.

Hippo Valley failed to release results by the mandatory June 30 deadline. The ZSE requires listed firms to release results within three months of the end of a reporting period. Hippo then went on to miss two other extended deadlines, on July 31 and on August 14.

The mills at Hippo Valley and Triangle have a combined milling capacity to crush more than 4.8 million tons of cane annually and produce over 640 000 tonnes of sugar. Refining capacity is 140 000 tons per year.

This year, Zimbabwe expects sugar production at 490 000 tonnes, which is 6% more than in the last season. This would be higher than the country’s annual consumption of 350 000 tonnes, making Zimbabwe a net exporter of sugar.

Earlier in November, Tongaat announced a US$40 million investment plan to increase sugar production in Zimbabwe by 50 000 tonnes, through opening up an additional 4000 hectares of virgin land to local cane farmers.


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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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