Ministry of Industry, Trade and Tourism has issued two sugar import licences for 20 000 tonnes, a development that runs counter to the Buy Malawi Strategy and may choke local sugar industry.
Already, two sugar manufacturers, Illovo Sugar (Malawi) Plc and Nkhotakota-based Mtalimanja Holdings Limited (MHL) feel this move could potentially kill the local sugar industry and result in massive job losses which could have ripple effects on the economy.
But consumer rights activist John Kapito yesterday said there is need for a competitive market, but noted the move may result in exportation of jobs to where imports will be coming from.
The ministry’s spokesperson Wiskes Nkombezi, who refused to comment on the potential effect of the move on the drive to buy local products, said there is no law that restricts government from issuing import licences.
Malawi Stock Exchange (MSE)-listed Illovo says the granting of sugar import licences comes at a time the company has over 260 000 tonnes of sugar for supply until the lean period ends in April next year against a domestic consumption of 160 000 tonnes.
In an interview on Tuesday, the company’s public relations manager Irene Phalula said the decision will also drain Malawi’s foreign exchange reserves.
“Illovo is one of the largest, if not the largest taxpayer in Malawi, and if our profitability is affected, it means we will no longer pay as much tax as we used to do,” she said, adding that they are aware government intends to issue more import licences.
MHL founder and proprietor Napoleon Dzombe yesterday said the move by government will kill the local sugar industry, result in job losses and drain foreign exchange.
“If government thinks there is a problem with the local sugar industry, they should call them to explain their concerns,” he said.
But Kapito said for a long time, the market has been controlled by Illovo which has been determining prices; hence, lack of competition.
“The repercussions and the problems associated with the monopoly although not bad is that we were unable to compare the prices as Illovo was not competing with anybody. So, consumers could have been paying a higher price, but it does not mean that when there is a monopoly prices are high,” he said.
One of Illovo Sugar (Malawi) Plc minority shareholders, Joe Maere, said the decision by the government is borne out of petty greedy.
“This decision will have disastrous repercussions as they are many people that depend on Illovo. Any harm that comes to this investment affects many Malawians and we want to ask the government to revoke the decision of issuing licences on sugar imports,” he said.
Sugar is one of the country’s foreign exchange earners and Illovo which has a 97 percent market share, employs about 9 500 people and about 2 300 smallholder farmers supply the commodity to the company. n