Illovo Sugar (Malawi) plc says it exports sugar at prices below the cost of production and over two times compared to that sold on the domestic market due to fluctuating global prices.
Illovo Malawi managing director Lekani Katandula’s explanation in an interview on Thursday followed a leaked commercial invoice dated September 8 2020 between Illovo Sugar (Malawi) plc and Coca-Cola Kwanza Limited of Tanzania, which showed that the Malawi Stock Exchange-listed sugar manufacturer sold bottlers sugar to the Tanzanian firm at $397.66 (K314 000) per metric tonne (MT).
But on the local front, Illovo Malawi charges Castel Malawi Limited, local producers of alcoholic and non-alcoholic beverages $906 (about K716 000) per MT.
Katandula said while prices on the export market range from $300 (about K237 000) to $900 (about K711 000) per MT, the same is sold at $900 on the domestic market.
This, he said, is due to increased sugar supplies on the global market, which leads to falling prices, a situation worsened by subsidies in larger sugar producing countries such as Brazil, making it difficult for the firm to negotiate for better prices.
Said Katandula: “For the time being, we accept that the domestic market is consistent and the export market varies, but even so, we are able to recover our production costs and cover our costs while at the same time. We are able to generate forex for the country.
“Economically, it is beneficial for us to continue exporting while managing our cost of production at low levels.”
With this pricing, it means that Castel Malawi is buying the same quantity at 2.28 times more than their Tanzanian counterparts.
In a separate interview, Castel Malawi chief financial officer David Nicolas confirmed on the prices, saying they are a deterrent to competition and affect its sales prices.
He said: “We find this to be strange. We have been lobbying Illovo for better prices and we are still engaging them.
“As it is, we cannot import sugar as it is against the laws, but that does not allow us to be competitive against Coca Cola products coming from Tanzania.”
However, Katandula refused to comment directly on Castel Malawi’s issues, saying he is barred by a confidentiality clause in their contract, but said they sell to Tanzania, which is a residual market where sugar is not part of the special agreements and does not have protection on duty.
He said the agreement was terminated last year after price volatilities.
Consumers Association of Malawi executive director John Kapito said that Malawians are now paying high prices for Castel products partly because of the higher sugar prices.
Castel Malawi, which bought Carlsberg Malawi Limited, is rated as one of the top 10 taxpayers in the country and employs at least 1 000 people.
However, the firm has been making losses for the past three consecutive years.