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Mafambisse, Mozambique. [File photo: DW]
The problems facing the Mozambican sugar industry appear to arise in part from alleged malpractice inside the South African company Tongaat Hulett.
Tongaat Hulett is the dominant shareholder in two of Mozambique’s four functioning sugar mills – it owns 88 per cent of the Xinavane sugar company, in Maputo province, and 85 per cent of the Mafambisse company in the central province of Sofala.
An investigation by the PriceWaterhouse Coopers (PwC) auditing company into Tongaat Hulett, reported by the Bloomberg agency, found that a group of at least 10 senior executives at the company used accounting methods that led to profits and certain assets being overstated.
The PwC report, Bloomberg said, “found the company recognised revenue too early from land sales between fiscal 2013 and 2019 and overstated the value of cane assets and of sugar sales in Zimbabwe”. PwC also pointed to governance failures and a “culture of deference” that contributed to the financial misstatements.
“It soon became clear that, over and above the operational difficulties facing Tongaat Hulett, there was insufficient internal accountability, governance and financial oversight,” according to a six page summary of the report.
Among those named in the report is the former Tongaat Hulett Chief Executive Officer, Peter Staude, who had led the company for 16 years.
The Tongaat Hulett board is now considering taking legal action against those named in the PwC report, in order to recover bonuses and other benefits paid to them, and to have them declared “delinquent directors”.
The board is working with the South African National Prosecuting Authority, and will contact the equivalent bodies in Mozambique and Zimbabwe, where some of the malpractice is believed to have taken place.
A new CEO, Gavin Hudson, was appointed in February, and he initiated the PwC investigation. By that time it was already clear that the financial statements for the year up to the end of March 2018 were not reliable.
When those statements are rewritten, they are expected to show a reduction in the company’s equity of between 3.5 and 4.5 billion rands (between 239 and 307 million US dollars).Source: AIM