Illovo under fire for hiking sugar prices

CFTC Executive Director Lloyd Vincent Nkhoma

The Competition and Fair Trading Commission (CFTC), has recommended Illovo Sugar Malawi for prosecution for what it has labelled as “unjustifiable” hiking of sugar prices in October last year and has ordered that the prices of sugar should be reduced.

CFTC Executive Director Lloyd Vincent Nkhoma said the commission has arrived at the decision following its 67th meeting which was held on 21st August, 2023, to consider and adjudicate over cases of anti-competitive business practices and unfair trading conduct.

Nkhoma who was speaking during a media briefing in Lilongwe, said in January this year, CFTC commenced investigations against Illovo Sugar Malawi (ISM) plc on allegations of misleading conduct and unconscionable conduct.

He said the investigations were commenced following complaints which the Commission received from complainants in October, 2022 subsequent to the publication of a press statement by ISM informing the general public of a sugar price increase.

In the said press statement, ISM indicated that the reason for the price increase was to curb the conduct of smuggling sugar out of the country and it stated that the devaluation of the local currency resulted in a reduction in the cost of exports, including Illovo sugar and, as such, some traders in the neighbouring countries were smuggling the product from Malawi.

As a remedy to the problem, ISM resolved to increase the price of Illovo sugar to make the product expensive on the local market, and thus curb the smuggling of sugar into the neighbouring countries.

The commission said the complainants alleged that the reasons for the price increase were unjustified considering that they are not reflective of the economic factors prevailing on the market.

Nkhoma indicated that during consideration of the findings of the Secretariat, the Commission noted that ISM did not dispute that the company increased the price of sugar because it wanted to reduce illegal smuggling of sugar and did not dispute that the price increase was not as a result of production costs.

He further added that CFTC established that as much as the reasons for the price increase were communicated to the public through a press release, the reasons given were not justifiable and consequently and the increase substantially infringed on consumer welfare.

“The Commission reasoned that, if the reason for the increase was indeed meant to protect and control the availability of sugar in Malawi so that consumers in the end are protected, ISM should have engaged the rightful authorities to curb smuggling, and not take it upon themselves to increase the price of sugar under the notion of curbing smuggling which is not their mandate.

“The Commission also noted with concern that from the submissions it appeared that ISM benefited and took advantage of consumers by using a purported fear of shortage of their product on the market to effect unjustifiable increase of sugar price

“The Commission, therefore, found that, the reason for the price increase was unjustifiable, irrational and adversely affected consumers. In this regard, the Commission determined that the conduct by ISM was in contravention of Section 43(1)(g) of the CFTA,” said Nkhoma in a statement.

The commission has then recommended that Illovo Sugar Malawi should be prosecuted for violating S43(1)(g) of the CFTA and that the investigations report should therefore be submitted to the Office of the Director of Public Prosecutions (DPP) for prosecution.

The Commission further says it will issue an advisory note to the Ministry of Trade and Industry to ensure that the supply of essential commodities such as sugar are not shielded from import competition in situations where the domestic market benefits.

It has also recommended that sugar price be reduced.

“The Commission should issue an advisory note to the Ministry of Trade and Industry, as a policy holder, to compel ISM to reduce sugar prices taking into account that the Company does not have the mandate to control smuggling using price or any other means,” reads another part of CFTC’s statement.

In October last year, Brown Sugar price was hiked from MK1,200 to MK1,500 per Kilogramme while price for White Sugar was also increased to MK1,660 per Kg.

Illovo increases sugar prices