Illovo maintains stance on pricing

Illovo Sugar (Malawi) plc has justified its stance on sugar prices, insisting that prices in the country remain competitive and lower than in neighbouring countries.

The Malawi Stock Exchange (MSE) listed firm’s managing director Lekani Katandula said this yesterday on the sidelines of an investors’ forum in Blantyre.

He was reacting to the mounting pressures from consumers and other stakeholders who feel local sugar prices are exorbitant and require import competition.

But Katandula said in an interview: “Sugar remains competitive in the country. We have been in the space before where our sugar was significantly lower compared to our peers and the end result was we had run out sugar.

“As much as it sounds appealing to the consumer for us to reduce the price, the reality is that they can actually generate more pain as was the case last year around May and April where the prices went up due to the scarcity of the commodity.”

He indicated that the company sets its prices to ensure that it can sustainably supply the product throughout the year by trying to make it less attractive for people to export or smuggle the commodity to neighbouring countries.

“We try to ensure that we are favourably priced compared to our peers but that difference cannot be too big, otherwise it becomes easy for traders to buy and export the sugar to neighbouring countries, in the end we run out of sugar,” said Katandula.

Speaking separately during the meeting, one of Illovo Sugar shareholders Lovermore Tinto backed the company on the stance, saying sugar prices in the country are fairer compared to other commodities.

He said: “While prices of other commodities have risen significantly, prices of sugar have risen but not much.  If we compared a kilogram of sugar and maize flour, you will see that sugar is fairer. This is because for a kilogramme [kg] one can afford to use the same for a week yet a kg of maize flour cannot last a week.”

Mid last month, Ministry of Trade and Industry issued a statement ordering Illovo Suagr, which commands a 97 percent domestic market share, to reduce its price of industrial sugar within seven days.

The statement came after government led by Minister of Finance and Economic Affairs Sosten Gwengwe engaged the listed firm on the matter.

Meanwhile, government has indicated it is analysing Illovo’s position on the reduction of sugar prices and waiting for other stakeholders’ submissions before making its determination on the matter.

Minister of Trade and Industry Simplex Chithyola Banda said last week government’s position on the issue that has attracted so much attention from various stakeholders will be known in due course.

Meanwhile, the government has issued two sugar import licences to Mugisha Investments to bring in 20 000 metric tonnes (MT) of brown sugar, a development Illovo Sugar has protested against, saying this will affect local manufacturers.

The ministry has since threatened that it would issue more import licences to other players in the sugar sector to help cushion the price of commodities that use sugar as raw material if Illovo does not reduce the price of sugar.

Locally, the price of sugar is currently trading at K1 500 per kg while for industries they have been buying it at $1 250 (about K1.283 million) per metric tonne.

Illovo Sugar is the country’s biggest sugar manufacturer and annually cultivates around 1.8 million metric tonnes of cane from its two estates in Dwangwa, Nkhotakota and Nchalo in Chikwawa, employing about 9 500 people.

This is supplemented by approximately 350 000 tonnes produced by Malawian smallholder farmers.