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Illovo hints at Sugar Price drop

 

Listed sugar manufacturer Illovo Sugar (Malawi) plc has hinted at reducing the price of the commodity following the continued drop of inflation and interest rates.

The Malawi Stock Exchange (MSE)-listed firm last increased prices in May this year and pegged a one kilogramme (kg) packet at K778.22, five months after a nine percent increase in December 2016.

In an interview on the sidelines of the company’s annual general meeting in Blantyre on Wednesday, Illovo Malawi chairperson Gavin Dalgleish said looking at the easing of inflation and coming down of interest rates, consumers should expect a possibility of reduced sugar prices soon.

Sugar production in process at Nchalo Factory in Chikwawa

“We have always been responsible when pricing our sugar because we recognise that our consumers are important to us. We have always followed processes that when inflation is high, we have always adjusted our prices.

“I think with those fundamentals, we should expect limited price increases, but possibly prices coming down,” said Dalgleish, who is also South African-based Illovo Group managing director.

Inflation has over the past 12 months been on the downward slope, and is currently at 10.2 percent.

This situation has compelled the Reserve Bank of Malawi (RBM) to reduce the policy rate—the rate at which commercial banks borrow from the central bank—from 22 percent to 18 percent, resulting in subsequent reduction in bank interest rates below 30 percent. The coming down of sugar prices could give a respite to consumers, as sugar is a commodity that is consumed by majority of Malawians.

In an interview yesterday, Consumers Association of Malawi (Cama) executive director John Kapito said while the possible reduction of sugar price is good news to consumers, it still constitutes a smaller percentage in the basic needs basket.

He said that steady goods prices on the market has resulted in the continued high cost of living, a situation which he argues points to further increase in the cost of living as the country nears the lean period.

“We also need to look at transport, water and electricity costs as well as the cost of other food items such as rice, which is substituted for maize if we can have any impact on the cost of living.

“As it is now, we can only fear for the coming months ahead as the lean period fast approaches and food prices will escalate,” he said.

Figures from the Centre for Social Concern (CfSC) released on Wednesday show that in July, the cost of living went down by a paltry K192 to K164 113 from K164 305 the previous month for an average family of six.

Commenting on the increased United States (US) sugar quota by 45 percent, Dalgleish said while the US market is not a big contributor to the company’s profits, the move will mean increased exports to the US which is also a good opportunity for the company.

During the year under review, the company’s headline earnings jumped to K7.1 billion from K1.87 billion last year.

However, the company has not given out dividends. n

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