Illovo positive despite Kenya sugar import cap

Malawi Stock Exchange-listed sugar manufacturer Illovo Sugar (Malawi) plc says it is  hopeful of an increase in sugar quota despite the Kenya Government capping imports by 30 percent.

In an interview on Thursday in Blantyre, Illovo Sugar (Malawi) plc managing director Lekani Katandula said currently, the sugar manufacturer has a confirmed quota of 20 000 metric tonnes (MT) to the market.

He said: “Negotiations are indicating that this could be increased to 30 000 metric tonnes. If that happens, that would be a welcome development because it would allow us better access to the Kenyan market.”

Last month, the Kenya Government capped the amount of sugar that can be imported from the Common Market for Eastern and Southern Africa (Comesa) to 210 163MT as the government moves to tame influx of cheap sweetener following an outcry from local farmers.

Kenya’s Treasury Cabinet Secretary Ukur Yatani said in a Kenya Gazette notice that imports which exceed the set limit will attract 100 percent duty,  which is good news to farmers and local sugar processors.

Kenya is normally allowed to ship in 300 000MT of sugar annually from the Comesa member States to avoid dumping of cheap commodity into the country.

But Yatani said firms enjoying the duty-free status will have to meet the rules of origin of Comesa.

Kenya has been at loggerheads with neighbouring Uganda over sugar imports, with local traders arguing that the commodity coming from the landlocked neighbour originates from third party countries, compelling the Treasury to insist on rules of origin.

The wholesale price of sugar has dropped from $46.04 (about K37 000) last year to $44.20 (K34 000) for a 50 kilogramme bag.

However, on the export front, Illovo Sugar (Malawi) plc sells its sugar at between $900 (K702 000) and $300 (K234 000) per MT depending on the market.

In a good year, Illovo Sugar (Malawi) plc produces an estimated 300 000MT annually from its Dwangwa (125 000MT) and Nchalo (180 000MT), with the domestic market consuming almost half of the sugar produced.

For instance, last year, the sugar manufacturer sold 147 000MT on the domestic market, a decline from an average of 170 000MT sold on the local market in recent years.

The sugar is produced at $533 (K416 000) per MT, which is lower than the average value realised when it is exported.

Sugar is the country’s third largest export commodity after tobacco and tea. It accounts for 9.5 percent of Malawi’s total exports, according to the 2020 Malawi Government Annual Economic Report.