Despite the fall in global fertiliser prices, research findings have revealed that Malawi has the highest fertiliser prices across the region.
This is regardless of the fact that from around mid-2022, global fertiliser prices have significantly gone down with many countries responding by reducing prices.
The research was conducted by the Comesa Competition Commission (CCC) in conjunction with the Centre for Competition Regulation and Economic Development (Ccred), a research consortium based at the University of Johannesburg in South Africa.
It was undertaken in seven Comesa member-States in eastern and southern Africa, namely Malawi, Zimbabwe, Democratic Republic of Congo (DRC), Zambia, Rwanda, Kenya and Uganda, to analyse the fertiliser markets in and across the bloc.
According to the findings, Malawi’s prices have remained persistently high, pointing to the non-competitive nature of the market due to fewer suppliers that are not just integrated across the supply chain, but are also affiliated.
“Prices in Malawi are substantially higher than world prices and have generally been the highest of all the countries considered here.
“The very high prices are in the context of highly-concentrated markets where the main suppliers are integrated with manufacturers of fertiliser in the Middle East and elsewhere and have logistics operations at the import ports and overland transport,” the findings state.
The findings, released in May in Harare, Zimbabwe, disclose that this is because there are only two leading fertiliser suppliers in Malawi—ETG and the Meridian Group—that source fertiliser internationally in bulk “with bagging and warehousing facilities at the main ports”.
ETG, established in Kenya in 1967, is one of the largest and fastest growing integrated agricultural conglomerates in sub-Saharan Africa, processing and trading in soft commodities in 48 countries, including Malawi.
In 2023, the firm had over 400 strategically placed warehouses and port-related infrastructure supported by over 600 trucks and retail assets across over 20 countries in Africa with over 2.5 million tons of storage capacity and operates 71 processing plants across the globe.
On the other hand, the Meridian Group, headquartered in Mauritius, focuses on the importation, blending and distribution of fertilisers and agricultural products across Malawi, Mozambique, Zambia, and Zimbabwe.
In Malawi, the group owns Farmer’s World Limited, Demeter Seed Limited, Malawi Fertiliser Company Limited in Liwonde, Agora Limited, Grain Securities Limited, Liwonde Property Investment Limited and Optichem (2000) Limited.
This company sources fertiliser from global producers which it imports through its Beira, Nacala and Maputo port operations in Mozambique to Malawi and their other various blending facilities in the region.
The study further reveals that the prices at which the suppliers sell their products in the country are too high compared to the production costs (landed costs and other operational costs) plus the addition of a reasonable mark-up.
For example, in Malawi, the aggregated production cost amounts to around $466 (about K815 966) per tonne.
According to the study, in this regard, the agro-dealer fair price, including a reasonable mark-up of 20 percent, would be ranging between $559 (K978 809) and $655 (K1 146 905) per tonne.
However, the study reveals in effect, that the suppliers are selling the fertilisers at $1 300 (about K2 276 300), which has a mark-up of between 98 percent and 133 percent over the aggregate cost of production.
Our analysis also confirms that the above prices are way above those in neighbouring countries that are also landlocked like Malawi.
For instance, according to the report, in Zimbabwe, the aggregated production cost amounts to around $443 (K775 693) per tonne.
According to the study, the agro-dealer fair price, including a reasonable mark-up of 20 percent, ranges between $532 (K931 532) and $571 (K999 821) per tonne.
The suppliers in Zimbabwe, according to the study, are selling the fertilisers at between $700 and $800, which translates to an equivalent of K1 225 700 and K1 400 800, which has a mark-up of between 31 percent and 41 percent over the aggregate cost of production.
A snap survey on the local market shows a 50kg bag of fertiliser is selling at between K90 000 and K110 000.
In May 2024, CCC organised a workshop in Harare, Zimbabwe to disseminate the findings of the market study to heads of competition authorities and researchers in competition and consumer protection authorities in the region.
A report by Malawi’s Competition and Fair Trading Commission (CFTC) issued after the Harare meeting observes that the prices are clearly uncompetitive and only result from the non-competitive nature of the market but as well as lack of effective competition regulation and enforcements.
“The fertiliser market is largely controlled by ETG and the Meridian Group of companies, both at importation, manufacturing [blending] and distribution. The business affiliation between ETG [through Sabic] and Meridian Group, therefore, implies that the fertiliser market in Malawi is controlled by companies that are affiliated, thereby compromising on competition,” reads the CFTC report.
Fertiliser Association of Malawi chairperson Andrex Kalinde attributed the high prices of fertilisers in Malawi to a number of factors, including forex shortages, fluctuations in the local currency both of which make it difficult for suppliers to work on stable pricing methods; and use of road as opposed to railway transport. He also said NPK 23:10:5+6s+1zn formulation is specific for Malawi with most manufacturers rating it an expensive formula.
CFTC public relations officer Innocent Helema said, in an interview yesterday, that the commission has since instituted investigations into the high fertiliser prices in the country to determine the reasons.
He said the commission has lately been probing the justifications for such pricing in collaboration with other competition enforcement agencies in the region.
“We commenced investigations against the companies involved in the alleged malpractice. Once the investigations have been concluded, the nation will be informed on our enforcement actions,” Helema said.
But on his part, Minister of Agriculture Sam Kawale said it was hard to comment on the issue as the ministry is not responsible for determining fertiliser prices.
He said: “We are not responsible for determining fertiliser prices. Our role is to facilitate that our farmers access it and use it to benefit the nation. Issues of fertiliser prices are not under Ministry of Agriculture. The Ministry of Trade might help.”
Ministry of Trade spokesperson Patrick Botha asked for more time to respond to our inquiry. We also did not get responses from ETG and the Meridian Group.
