* The forced recommended reduce prices are not a true reflection of what is happening on the ground
* Key raw materials are currently in short supply as a result CoVID-19 and the war in Ukraine and Russia
* The question is, for how long can you mantain these prices when you are a net importer and you have a weak currency?
* These prices are misleading because they are unsustainable
By Duncan Mlanjira
Despite the Ministry of Trade & Industry’s intervention to order recommended reduced prices at 21% as minimum and 16.5% maximum, Consumer Association of Malawi (CAMA) warns that prices of the commodity will remain high because its key raw materials are currently in short supply as a result CoVID-19 and the war in Ukraine.
CAMA Executive Director, John Kapito argues that the short supply of key raw materials — such as palm oil and soybean — will continue making the prices going up and thus the forced recommended reduce prices “are not a true reflection of what is happening” on the ground.
“The question is, for how long can you mantain these prices when you are a net importer and you have a weak currency?” Kapito said. “These prices are misleading because they are unsustainable.
“From October 2020, cooking oil prices have gone up by approximately 160% and they are expected to be going up due to both internal and external factors.”
Kapito also maintains his call he made last month that the government — as well as the Competition and Fair Trading Commission (CFTC) — had been slow to act despite the consumer rights body raising red flags some two years ago — which if they had reacted to, the commodity’s current sky-high prices couldn’t have taken place.
Kapito had indicated that they requested both the Ministry of Trade & Industry and CFTC to investigate some anomalies that the cooking oil refining companies were indulging in — but neither reacted to the issues raised.
“It is sad that Government and CFTC took its time and now it is becoming completely difficult to engage and agree with these cooking oil refining companies regarding the reduction of cooking oil prices,” said the statement when government had implored on the retailers to reduce the prices.
The fresh order that now has come with the recommended reduced prices comes after the manufacturers and the retailers had failed to voluntary comply to reflect normal prices after the removal of 16.5% value added tax (VAT).
Kapito had said last month that the government creates Agencies like CFTC and Ministries “in order to ensure that some traders or producers do not take advantage of their monopolistic positions on the market”.
“Unfortunately, in Malawi institutions only work under political pressure despite using their mandates to carry out their functions and duties. It is either the Ministry of Trade and CFTC have been corrupted up to the level that they are unable to enforce their mandates.
“It is sad that the victims out of these failures by Government Agencies are ordinary consumers.”
CAMA argued that the cooking oil refiners “have cheated, lied and taken Malawians as fools worst still they have lied to Government officials that prices of cooking oil went up because of VAT and they mobilized masses and the media throughout the country to demonstrate against Government over the reintroduction of the VAT on cooking oils”.
“Government unwillingly removed the VAT and until today the cooking oil refining companies are unwilling to reduce the prices of cooking oils.”
“Surprisingly, they are now giving different reasons other than the VAT. The removal of VAT has made Government to lose a lot of revenue which would have assisted towards our already poor infrastructure in education and health sectors.”
In its statement on Monday last week, Minister of Trade & Industry, Mark Katsonga Phiri, said the decision to order for the recommended reduced prices follows an agreement that was reached during a consultative and interface meeting with producers and retailers held on February 24 and May 5, 2022.
Katsonga assured the public that in collaboration with (CFTC), they will be conducting regular inspections and will take action against all traders that are still charging VAT on cooking oil or engaging in price gouging.
“The ministry is further issuing a stern warning to all unscrupulous traders to immediately cease and desist from this malpractice and ensure that cooking oil is sold at the above agreed recommended prices,” he said.
He also advised consumers and the general public to report any aspects of price gouging and unfair trading practices to the Ministry.
When the cooking oil manufacturers attributed the price increase to the reintroduction of VAT last year, CAMA carried out its own survey and discovered some worrying trends in cooking oil prices on three brands of cooking oil as of February 2021 since the VAT was effected that showed:
* A 38% increase for a 5 litre bottle that was at K5,400 before VAT but it was adjusted to K7,438;
* A 2ltr bottle went up from K2,100 to K2,999 (representing an increase of 43%)
* A 1ltr bottle from K950 to K1,550 (63%) and 500mls from K520 to K790 (52%);
* For Kukoma, produced by Capital Oil Refinery Industries (CORI), 5ltr bottle increased from K5,700 to K7,735 (36%);
* A 2ltr bottle from K2,400 to K3,135 (11%);
* A 1ltr from K1,500 to K1,627 (8%) and 500mls from K620 to K858 (38%);
* Sungold 5ltr bottle increased from K6,200 to K6,999 (13%);
A 2ltr bottle from K2,700 to K2,999 (31%)
* A 1ltr from K1,450 to K1,500 (3%).
But as of last week, after the VAT was removed in Finance Minister Sosten Gwengwe’s National Budget that was presented in Parliament on February 18, cooking oil prices skyrocketed to over K1,000 for 250mltrs; K2,500 for half litre; K3,500 for 1ltr; K7,500 for 2ltrs and K24,000 for 5ltrs.