Domestic sugar demand picks up amid declining illegal imports

Malawi Stock Exchange-listed sugar manufacturer Illovo Sugar (Malawi) plc says demand for sugar has picked up on the domestic market, thanks to the declining influx of smuggled sugar into the country.

The firm’s managing director Lekani Katandula said this on the sidelines of the company’s media engagement in Blantyre last week, that the listed sugar manufacturer was affected by the development “but is now recovering from this and other market threats”.

Said Katandula: “We were faced with the challenge where imported sugar was sneaked into the country countering our own but we have been working towards ensuring that we continue to grow our customer base and fight on competitive grounds.”

According to Katandula, Illovo Sugar saw an improvement in total sales where the domestic market sales grew by 17 percent during the financial year ended August 31 2021.

On his part, Illovo Malawi finance director Kelvin Msimuko said the issue around illegal sugar and how Malawi is structured neighbouring countries has purely been dependent on the exchange rate among countries.

“During the last two years we have heavily seen this impact. Our best calculated estimate has been ranging between 30 000 tonnes and 35 000 tonnes. This is just looking at Zambia.

“The pricing structure in Zambia is the biggest threat when it comes to any devaluation. What we have seen over the last eight months or so is that the Zambian Kwacha appreciated against Malawi Kwacha by 19 percent. This has significantly created a cover in the sugar coming from Zambia to Malawi,” he said.

Msimuko said the company has since resolved to keep addressing the challenges as they come.

“We have plans to have special packets to fight when the trend resurfaces and we will still go out with our commercial initiatives to ensure that we reach the furthest places in the country. We are also intensifying on massive distribution ensuring that our sugar is available before competition,” he said.

In the year ended August 31 2021, the sugar manufacturer posted a profit after tax of K20.4 billion, up from K2.7 billion in 2020, representing an increase of 650 percent.

The company, which annually cultivates around 1.8 million tonnes of cane, which together with approximately 350 000 tonnes produced by Malawian smallholder farmers, has lately suffered the costs of illegal sugar imports, increased competition, pricing constraints and challenges with export quality.