Trade Minister, Sosten Gwengwe, has said government is aware of the problems outgrower sugar producers are facing due to falling earnings from the crop.
He was reacting to concerns by Nkhotakota North lawmaker, Henry Chimunthu Banda.
Chimunthu Banda wondered if the government was aware that the share price for sugar and molasses payable to sugarcane farmers by Illovo’s Dwangwa Sugar Corporate has moved from K302, 000 per tonne in 2018/2019 season down to K253, 000 per tonne in 2019/2020 season and has reduced further to K225, 000 in the current 2020/2021 season.
He argued that the drop in prices is happening when prices for input such as fertiliser and herbicides have kept increasing.
According to the former Speaker of Parliament, Illovo attributes the drop in prices to the influx of illegal and imported sugar on the domestic market.
But Gwengwe said for a long time, Illovo Sugar Malawi Ltd was the only supplier of sugar in Malawi until recently, when the government supported the establishment of a sugar factory in Salima.
He said the establishment of Salima Sugar Company has enhanced the state of competition in the Malawian sugar market, which has substantially benefited consumers through stability in retail prices as well as offering an alternative choice.
Gwengwe said the retail price of sugar has reduced from an average of K900 in the 2017/18 financial year to K800 in the 2019/20 financial year.
“However, my ministry is aware that the country receives illegal imports of sugar through unscrupulous small traders along the borders with Mozambique, Zambia and Tanzania. This is negatively affecting the domestic sugar industry.
“To avert the situation, my ministry has been collaborating with the Malawi Revenue Authority (MRA) and the Malawi Police to monitor the borders to check smuggling of sugar. We have also taken deliberate efforts to sensitise traders along the borders to cease and desist from smuggling sugar into the country.
“Over and above this, Honourable members, you might also be aware that importation of sugar is licensable under the Control of Goods (Import and Export Licence) Regulations, 2020. As such, importation of sugar is restricted through that legal provision in view of the fact that the country produces enough sugar to satisfy its domestic demand as well as exports to other international markets. I am proud to tell you that Malawi is a net-exporter of sugar, and the import ban will continue to stand for the benefit of the local companies and out growers who supply sugarcane in the country,” he said.
According to Chimunthu Banda, from farmer’s perspective, the fall in shared revenue is a result of unfair trading practices and lack of transparency in the way revenue is generated and shared between farmers and Illovo.
But Gwengwe said the issue of trade agreements between Illovo and its outgrowers has been on his table a couple of times, and that government has taken steps to address the sticky issues.
Among other steps, Gwengwe said his ministry, through the Competition and Fair Trading Commission has reviewed the agreements and observed that there were a number of disputes arising from lapses in the implementation and execution of the signed contract.
He said, in view of that, CFTC recommended that there should be round table discussions between Illovo Sugar Malawi Plc and outgrowers to reach an amicable agreement on some of the existing disputes, which are largely commercial in nature.
He added that the Ministry of Trade is also encouraging out growers or their representatives to ensure that they read and understand terms and conditions of any commercial contract that they sign to avoid being duped.