Illovo Sugar Malawi Limited has said it wants to capture the growth opportunities which exist in regional African markets to benefit the company both from a price and long-term sustainability perspective.
The company’s public relations officer Ireen Phalula said this in response to an e-mailed questionnaire in the wake of the European Union (EU) policy reform to reduce sugar subsidies and introduce quotas on the EU’s sugar production levels.
Under the policy, EU reduced the level of production support extended to its domestic sugar industries which means existing EU domestic market quotas will be scrapped with effect from 30 September 2017.
Phalula, while admitting that the reforms will have a negative impact on margins earned on Illovo Malawi on sugar exports to the EU, said the company is banking hopes on global demand on sugar.
She said: “Low priced marketing environment in the EU, coupled with the logistics cost of accessing EU markets are certainly a concern to the company.
“However, the longer-term outlook for sugar is for global demand to increase at a steady two percent per annum with supply fluctuating depending on several factors and we (Illovo) operate in a region where demand for sugar is rapidly growing, in excess of two percent per annum, supported by gross domestic product (GDP) and population growth.”
She said the company goal of working towards being a market leader is premised on the group’s ability to supply more sugar to local and regional African customers in the offering they require.
However, economic experts have warned against the country’s overdependence on agriculture saying it is about time Malawi diversified outside agriculture.
Economics professor at University of Malawi’s Chancellor College Ben Kaluwa recently noted that the country has under invested in almost every sector and called for the need to invest more in the formal service sectors.
He said country needs to move out of the refinery sector to the secondary, tertiary and service sectors by being more involved in value addition and manufacturing.
Malawian sugar has enjoyed tariff-free access to Europe since the 1970s under various preferential trade arrangements and, up until 2009, African sugar producers received price guarantees for their product.
Even after the price guarantee was revoked, policy intervention by the trading bloc has kept EU prices comfortably above world prices. This was an attractive deal, and several African sugar producers banked heavily on trading with the EU.