Illovo, Simama in trade malpractices
Illovo Sugar Malawi (Limited) and Simama General Dealers have been found in gross violation of the Competition and Fair Trading Act apparently prompting sugar price rise and hence infringing consumers’ rights.
In a press release issued by the Competition and Fair Trade Commission (CFTC) on Thursday signed by CFTC acting executive director Charlotte Malonda, the trade and consumer protection authority says Illovo has since been ordered to comply with the laws by being transparent in its trade practices.
“It was established that small sugar wholesalers [in Karonga] are blocked by Simama General Dealers to buy sugar directly from Illovo through various tricks including non-disclosure of information to other wholesalers about procedures for paying for sugar orders and in some cases providing false information about sugar non-availability at the Distribution Centre.
“The Commission established that as a result of this, small-scale sugar wholesalers are forced to buy sugar from Simama General Dealers or Pezani General Dealers (which is an affiliate of Simama General Dealers) at a price higher than the ex-factory price. Consequently, the wholesalers sell to retailers at a price higher that the price they would have charged if they had bought the sugar directly from Illovo. Consumers therefore end up buying sugar at a price higher than the normal market price,” says the press statement in part.
However, Illovo Sugar Malawi public relations officer Ireen Phalula was not immediately available for comment in regard to the issued orders.
But earlier in March, while responding to an e-mail on allegations by traders from Karonga of monopoly in the sugar industry, Phalula said it was completely false and probably made out of ignorance of the Illovo distribution system.
However, the statement by the CFTC says the design of the sugar distribution system that Illovo adopted is generally prone to abuse by warehouse administrators and, therefore, requires Illovo to put in place a fool-proof monitoring system.
The commission also established that Simama General Dealers was able to manipulate the system for its own undue advantage because the sugar distribution system is characterised by information asymmetries.
The commission further notes that the agreement that Illovo Sugar (Malawi) Limited signed with Simama had also been signed with four other warehouse administrators for warehouses in Mzuzu, Lilongwe, Balaka and Limbe.
The distribution of sugar is a matter of public interest. Early last year the country experienced an acute shortage of sugar which saw its price more than double on the market. Illovo blamed the shortage on lack of foreign exchange and consequent uncontrolled export of the commodity to neighbouring countries.
