The Consumers Association of Malawi (Cama) and an economist Betchani Tchereni have said the recent 35 percent hike in sugar price by local sugar making company, Illovo Sugar Malawi is unjustifiable.
Last week, the company adjusted prices of sugar upwards effective October 21 for the second time within the year, a decision attributed to illegal exports of the commodity, among other things.
In a statement, the firm said trends of parallel market, foreign exchange rates between the Malawi Kwacha and neighbouring countries’ currencies has made products from Malawi comparatively cheaper hence, creating room for illegal exports into the three neighbouring countries and beyond.
“This situation has created a risk that Malawi could run out of sugar and other products that are similarly being illegally exported therefore to mitigate this risk and ensure sustained supply, it was necessary that sugar prices be adjusted upwards.
“This will also help avoid much higher prices that would prevail if we run out of sugar and traders had to import sugar,” the statement reads.
According to the new prices, for example, a consumer will now be parting ways with K1500 to afford a packet of 1 kilogramme (kg) of brown sugar from K1100 and the consumer will let go of K1660 to purchase a 1kg packet of white sugar.
The last time the prices were adjusted upwards was in May at the back of rising production costs due to skyrocketing inflation and a 25 percent devaluation of the local currency.
But Cama Executive Director John Kapito said the reasoning is unrealistic.
Kapito is of the view that the government should have taken advantage of lower prices as an incentive to increase exports and earn the much needed foreign exchange.
“Prices must be dictated by the cost of production and it is sad that consumers will have to be punished with higher prices of sugar just because the government is unable to curb illegal exports of the commodity.
“We would have expected the government to put measures that would stop illegal exports but raising prices is dictatorship and effects of monopolies,” he said.
Malawi University of Business and Applied Sciences-based economist Betchani Tchereni said Illovo was taking advantage of its monopoly on the local market.
“If they had real competition I do not think they would have made that decision because even with lower prices this company made huge profits and with this development, it is only bonuses which will be a benefit for the company’s employees,” Tchereni said.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.