Muloza traders attests to Parliamentary Committee on Trade that Illovo’s sugar prizes are lower in Malawi than in Mozambique

Illovo’s Trade Representative, Andrew Kazembe explaining business strategies being implemented for Illovo to perform well

* This follows calls for Illovo Sugar Malawi Plc to reduce sugar prizes being propagated by trade stakeholders and CSOs

* Such Consumer Association of Malawi (CAMA); Centre for Democracy & Economic Development Initiative (CDEDI)

* As well as Government itself — which are in the forefront demanding reduction of sugar prices

By Duncan Mlanjira

On its fact finding mission to comprehensively analyse the market trends of sugar prices in relation to the neighbouring countries, the    Parliamentary Committee on Trade, Industry & Tourism visited the border town of Muloza in Mulanje where traders attested to them that Illovo’s sugar prizes is lower in Malawi than in Mozambique.

This follows calls for Illovo Sugar Malawi Plc to reduce sugar prizes being propagated by trade stakeholders and CSOs such Consumer Association of Malawi (CAMA); Centre for Democracy & Economic Development Initiative (CDEDI) as well as Government itself — which are in the forefront demanding reduction of sugar prices.

The Parliamentary Committee asked for an engaging with Illovo Sugar Malawi, which was obliged and held on Saturday, starting with a closed door session at the company’s office in Limbe and the visit to Muloza for an interaction with traders — accompanied by Illovo’s Managing Director, Lekani Katandula and some senior members of staff.

When asked by the Parliamentarians to verify the prices of sugar in Mozambique, trader Danwick Nkhoma of Light & Danleck Enterprises attested to what Illovo management had already indicated that a bale of Malawi sugar is at K27,700 whilst in Mozambique, it is at an equivalent of K31,500-K32,000.

Nkhoma also indicated that due to market trends through forex exchange, Mozambican traders are currently buying Malawian sugar because theirs is on the higher side and the same happens for the Muloza traders — which was last done in October last year.

Without being urged, Nkhoma also told the Parliamentarians that Illovo sugar is sweeter than the Mozambican product, thus the neighbouring consumers preferring it since it is economical.

The same goes with SOBO Orange Squash — produced with ingredients that include Illovo sugar — which is informally imported to Mozambique while at the moment Malawian consumers are buying the neighbouring country’s cooking oil, which is cheaper.

“The way we do trade here depends on the market trends and the movement of the two countries forex,” he said. “The Mozambican traders are buying Illovo sugar because its prize is higher that side.”

Martin Baluti, trader for PriceWorthy Wholesalers, the whole area’s Illovo sugar sales distributor, also affirmed that he receives many Mozambican wholesale customers, who usually transport it back home using pedal and motor bikes through uncharted routes.

One of the issues that led to the trade stakeholders to allude that Illovo sugar is higher than in neighbouring countries is that the company has of late been posting healthier profits — which led to the belief that as a monopoly it is making “supernormal” returns — as described by CAMA in a public statement last week.

But the Parliamentary Committee were appraised by Illovo’s Trade Representative, Andrew Kazembe — during the visit at the PriceWorthy Wholesalers’ shop — that their impressive business performance was due to the aggressive approach the sales and marketing sections of the company executed.

He said when the company noted that prizes of sugar were different in many parts of the country due to the fact that traders were factoring in their own transport costs to and from sales depots — they implemented a strategy to reach out to hard-to-reach areas.

The company bought shipping containers and modelled them into wholesale shops and planted them in strategic areas to reduce transportation costs of sorrounding area’s traders in order to maintain the recommended prize of K1,500 per 1kg packet — and buying in bulk at K27,700 a bale.

“The strategy has worked wonders because our sales volumes went completely up,” he said, while giving an example — which trader Martin Baluti verified — that their initial delivery of consignment was at 5 tons a week but now it’s at 20 tons a week.

The delivery is sometimes quickly replenished when stocks are depleted at a fast-paced rate and Kazembe says this quick response is to make sure the traders do not run out of sugar.

He added that there are times on their consignment delivery, the pedal and motor bike traders from Mozambique gather in large numbers such that they they service them first.

Thus Katandula joined in to say their impressive profit margins was all due to this “successful” strategy of reaching out to those they were not able to and not that the sugar prizes are higher than the sorrounding neighbouring country’s communities.

In an interface with the media at Hapuwani Village Lodge after the visit, Katandula disclosed that while it was not their business to check what other countries are charging for their commodity, they still verified and found that the cost for Mozambique per 1kg packet was at US$1.15; Zambia at US$1.21 and Tanzania at US$1.20.

At K1,500 per 1kg packet for Malawi, it is pegged at approximately 94 US cents due to variations of the parallel forex market as opposed to the official published bank rates — thus Mozambican traders preferring the Illovo sugar, which is translating to huge sales volumes that’s helping them make sound profits.

He also said as they experienced more sales, the smallholder farmers who sell their sugarcane to Illovo also increased their production since the company needs more raw materials to increase their own production to meet market needs.

“These farmers are economically benefiting from our marketing and sales strategy by growing more sugarcane to meet the high demand,” he said.

Katandula also disclosed that the genesis of the whole sugar prize saga started when the Government announced that it intended to award import licence to a foreign trader to supply 20,000 metric tons of brown sugar, which prompted Illovo as well as Salima Sugar to engage the Ministry of Trade & Industry that the move would destabilize the local industry.

He said their concerns was that Illovo employs thousands of people who uplift their families’ livelihood; and also that the smallholder farmers who supply them with raw materials also are at risk of slipping back to poverty.

“And when this came out in the open, the target was on Illovo’s sugar prizes with some alluding that the imported sugar is going to be lower than ours — which is not a true reflection on the ground,” he said.

The Parliamentary Committee was led by chairperson, Paul Nkhoma (MP for Kasungu North North East), whose delegation included deputy chairperson, Thoko Tembo (Neno North) and former Minister of Trade, Mark Katsonga Phiri (Neno South) as well as former Minister of Finance, Joseph Mwanamvekha (Chiradzulu South).

On his part, MP Nkhoma said they are still on the fact finding mission having taken note of the concerns from trade stakeholders supporting government’s calls for Illovo to reduce prizes of its sugar.

“Some of the members of the Parliamentary Committee infiltrated into the trading centre to verify what we have been appraised by Illovo and the traders we were taken to,” he said. “We will then compile a report of recommendation to all relevant stakeholders.”

In his public statement last week, CAMA Executive Director, John Kapito  said Illovo Sugar Malawi “is a monopoly after Government imposed restrictions on the importation of sugar”.

He alluded that this made Illovo “to become the only dominant sugar manufacturer and trader in the country at a time when consumers were looking for a competitive alternative supply of sugar”.

“Unfortunately, Illovo has over the years abused its market dominance by exploiting consumers with unrealistic exorbitant high prices. Illovo’s market abuses and malpractices have gone unchallenged by Government for a long time since the policy of Government was to grow this local industry and create employment and insulating Illovo Malawi from any elements of competition through the ban of any sugar imports.

“However, Illovo has refused to reciprocate the offers from Government by offering unaffordable sugar prices and at certain times creating unnecessary scarcities while making supernormal profits at the expense of poor consumers.

“Price comparisons of sugar in the region continue to show that Illovo Sugar Malawi is the highest in the region and one wonders why the Malawi prices are almost double compared to those in neighboring countries given the incentives Government has given to Illovo Sugar Malawi.

“Consumers appreciate the contributions that Illovo creates in the economy and which should include lower prices of sugar, which unfortunately many Malawian consumers are currently not accessing and are unable to buy and afford sugar because of unreasonable high prices.

“It has shown over time that Illovo is only interested in exploiting the poor consumer and abuse the market in any way they choose because they have absolute control of the market with no competition.”

Thus Kapito called on the Ministry of Trade “to open up the market and allow other traders to bring in the sugar at lower prices if Illovo is unwilling to reduce its sugar prices”.

He also requested the Competition & Fair Trade Commission (CFTC) to conduct public hearings on the conduct of Illovo, saying the profits it has declared over the years “are a true reflection of overcharging and market abuse and this calls for immediate thorough investigation and with heavy penalties”.