Illovo Sugar (Malawi) Limited has said the European Union’s (EU) decision to reduce the price of buying their sugar will limit the quantity they export to the lucrative EU market.
The Malawi Stock Exchange (MSE)-listed sugar manufacturer said sugar is now being sold at ex-mill price of below $300 (about K168 000) per tonne. Last year Illovo sold 88 000 tonnes of raw and specialty sugar to the EU market.
Said Illovo Sugar (Malawi) Limited managing director Ray de Allende: “This is an unfortunate development because since the start of Illovo [Sugar] Malawi Limited in Malawi, we have been exporting to the EU market. If we look at the prices now, the selling price is below our cost of production.”
“Even though we have a duty-free pact, the removal of guaranteed prices will be so much felt by the sugar processing companies who send their sugar to the EU market. Some industries could even collapse.”
He said the development has forced the company to start searching for new markets in deficit sugar producing countries.
Allende said they have engaged the Ministry of Industry and Trade to help in removing the blockage “which prevents us from selling sugar in Kenya”
He said: “To us, this is a missed opportunity because right now, Kenya produces about 600 000 tonnes of sugar but requires supplies for the remaining 200 000 tonnes of sugar.”
EU revealed plans to scrap off sugar quotas beginning 2017, a development which government and the Sugarcane Growers Association of Malawi said was an issue of great concern.
Currently, EU member States are limited to supply a maximum of 13.5 million tonnes of sugar, but consume 17 million tonnes a year as the African, Caribbean and Pacific (ACP) and least developed countries (LDCs), including Malawi supply up to 3.5 million tonnes through their quota-free, duty-free access to the EU market.
Earlier, Minister of Agriculture, Irrigation and Water Development Allan Chiyembekeza said “while stakeholders are scared about the uncertainty of the EU market beyond 2017, we should start thinking about how we can capitalise on the Tripartite Free Trade Area [TFTA] which opens up the opportunity for the African market.”
Sugarcane Growers Association of Malawi president Frighton Njolomole estimated that Malawi would likely lose about 10 percent of its sugar exports to the EU.