Mumba catches traders hoarding sugar
* Otherwise Trade & Industry Minister Vitumbiko Mumba will continue his industrial raids till the end of the world
* It is a shame that the entire sugar distribution, which is supposed to be in the hands of local Malawian business as was the case before 1994, is now in foreign hands
* There has to be a proper criteria of whom we define as foreign investors and which sectors need protection for Malawian business participation
* As Chifipa exposes clandestine exportation of sugar by foreign investor ‘Sugar Barons’ that are hoarding the commodity
By Duncan Mlanjira
South Africa’s Don Consultancy Group (DCG) Chief Economist, Chifipa Mhango maintains that Malawi Government needs to deal with the root cause of sugar hoarding — otherwise Trade & Industry Minister, Vitumbiko Mumba will continue his industrial raids “till the end of the world”.
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Chifipa stresses that “it is a shame that the entire sugar distribution, which is supposed to be in the hands of local Malawian business as was the case before 1994, is now in foreign hands”.
“There has to be a proper criteria of whom we define as foreign investors and which sectors need protection for Malawian business participation.”
He further says “it is disheartening” that a whole Minister was being disrespected in broad light in front of media cameras on one of his industrial inspection raids.
“I commend the Minister of Trade & Industry in his efforts to combat sugar hoarding. However, this task needs more consequence management and its root cause lies with how the industry is structured in Malawi.
“I really question how as a country we are issuing sugar distribution business licences. The sugar is produced in Malawi, and by Malawian workers in the field, in its entire value chain — but what is being exposed as those running its distribution, needs serious reflection at political leadership level.”
The Chief Economist reminds Malawians that under the management of Sugar Corporation of Malawi (SUCOMA), the entire value chain to the retail market benefitted Malawi.
“I vividly remember that one prominent politician, that later became President of Malawi, was once a ‘Sugar Baron’ for the tonnes he was responsible for distribution. Nothing wrong with this, for he is an indigenous Malawian business person.
“I know several other indigenous Malawians that were involved in this distribution and at no time was there issues of sugar hoarding of the current scale in the country.
“Surely, sugar distribution is not an area that requires foreign investors from an Asian country. The issue should be about what the Malawi Government has done is setting operating conditions for Illovo Sugar Malawi that it seems sugar distribution is now a ‘foreign investors’ space.”
Chifipa then exposes clandestine exportation of sugar by foreign investor ‘Sugar Barons’ that are hoarding the commodity, saying currently, 97% of Malawi sugar is being exported.
He indicates that from the latest available data, sugar consumption per person in Malawi annually is around 5.56kg, which “is significantly low compared to many countries”.
“USA, for example, is at 75kg per person. On health grounds, that is concerning, however, for Malawi consumption, that reflects poverty levels (a topic for another day).
“Now with consumption of 5.56kg per person annually, that means with a population of 19 million people as estimated, Malawi needs 105,640 tonnes annual of sugar for its population.
“However, note that Malawi produces about 300,000 metric tonnes of sugar annually — which means from this total production of 300,000, 35% should be reserved for the local market before exporting the remaining 65%.
“However, currently, 97% of Malawi sugar is being exported, meaning only 9,000 tonnes is being reserved for the local market annually, instead of 105,640 tonnes.
“Malawi has no shortage of sugar, but numbers above show that despite the high production, most sugar i.e. 97% or 291,000 tonnes is headed for exports, thus creating shortage of supply locally of 96,640 tonnes annually, due to export preference.
“Now no matter what the Minister of Trade & Industry does, he is just killing fires in the short term — the fight should be to regulate the sugar export and enforcement of rules.
“Allowing 97% of sugar to be exported, is the underlying policy failure. Hoarding will continue if those involved in the distribution are only foreigners with connections to international markets and also when Government is not playing its role to manage the high export levels of sugar.”
Chifipa, who is highly involved in the sugar industry in South Africa working as DCG’s director of economic research & strategy, enlightens that sugar prices are administered on the international market: “The prices can be lucrative on the global market in US$ terms per tonne, than on the local Malawi market.
“However, it is the responsibility of a government administration to ensure that the local market is satisfied and protected,” he said while also enlightening that in his host country, where Illovo also operates, the industry is highly regulated under the South African Sugar Association (SASA).
“This is an area that requires attention from Malawi Government on enforcement or strethening regulation. For sure, most of the sugar in these warehouses in Malawi is heading to international markets that do not even benefit Malawi even in forex earnings due to externalisation.
Revered Chief Economist Chifipa Mhango
Chifipa thus makes some recommendations to the current Government, through the Minstry of Trade & Industry, as follows:
1. to openly engage Illovo Sugar Malawi on the distribution model that seem to be foreign dominated;
2. to review with Illovo how such distribution licences were issued, and how trading licences were provided to by Malawi Government to foreign traders;
3. work on a new distribution model that limits foreign participation with preference to indigenous Malawi business as was the case under SUCOMA before 1994;
“Malawi produces almost 300,000 metric tonnes of sugar annually, and 97% of it is exported to the disadvantage of local consumption — why is the Government allowing this trend?
“Having all those caught hoarding sugar being ‘foreign investors’ is what must force a review as Malawians. It is obvious that the very same sugar that Malawians are involved in producing in its entire value chain, has its intended purpose only serving the interest of ‘foreign distributors’ in international markets against local consumption.”
Over the past few days, Minister Mumba caught red handed some sugar distributors and shops such as Chipiku Plus Supermarket in Lilongwe and SANA Supermarket who were hoarding the commodity — yet they informed customers they had run out of sugar.
The Minister was in company of CEO for Competition & Fair Trading Commission (CFTC), as hoarding is a violation of the Competition and Fair Trading Act.
Chifipa adds that while he commends Minister Mumba for his efforts in addressing “symptoms of a dysfunctional sugar industry, it requires proper regulation or enforcement thereof”.
“I recommend Minister Mumba to use the tools of his Ministry and engage Illovo openly; and review the entire sugar distribution in Malawi — that is where the problem is eminent.”
He maintains that “a minimum of 35% of the sugar production should be reserved for local consumption and allow maximum 65% exports under the current per person annual consumption against the current annual production”.
“This means strethening of monitoring institutions and deal with possible corruption of officials and export traders, especially at border posts.”
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