Malawi’s EU sugar market under threat

Malawi’s European Union (EU) sugar market is under threat following reforms being implemented in one of the country’s main lucrative export destinations.

A Trade Law Centre (Tralac) research published recently notes that Africa Caribbean Pacific (ACP) countries, including Malawi, will be negatively affected by the EU’s new sugar import regime.

In the discussion, the Cape Town-based centre notes that the EU’s reforms could lead to a 4.2 percent increase in local beet sugar production while imports of sugar are estimated to decline by 42.6 percent.

The new sugar regime will see the end of the EU production quota and reference price for EU beet sugar consequently changing the EU from being a net importer to a net sugar exporter.

Sugar is one of the country’s major forex earners apart from tobacco, legumes and tea.

Illovo Sugar Malawi public relations officer Ireen Phalula responding to an e-mailed questionnaire said the effect of this development will be a possible reduction of sugar being exported into the EU.

“Any drop in the export volumes will impact export earnings for Malawi. Illovo has as one of its core strategies to be internationally competitive as a low cost producer of sugar. Being an efficient producer, we are well placed to sustain our business.

“Our main market will always be our domestic market and we will ensure it is well supplied first. For any excess sugar, we will look to placing in regional markets. We see a solid future for Illovo supported by a high quality product and efficient agricultural and production processes,” said Phalula.

According to Illovo’s financial statements, the bulk of sugar produced in 2012/13 season was sold to the local market for direct consumption and industrial consumers who accounted for 55 percent.

Exports to preferential markets in Europe and the US represented 32 percent of total sales volumes and the balance was sold to regional customers mainly in Zimbabwe.

In the 2013/14 season, the domestic market accounted for 58 percent of total sales volume while the balance was exported to Europe, North America and the region, according to financial statements.

But the Tralac research shows that EUs current demand for sugar from ACP countries could decline significantly when the sugar reforms enter into force.

The research further notes that due to the potential negative effects that the sugar reforms might have on ACP producers, the world sugar market and the price of sugar, some African countries have called upon the EU to extend the current quota system to 2020.