Domestic sugar prices exceed exports—study

Malawi’s domestic sugar prices remain higher than export prices, a gap the Common Market for Eastern and Southern Africa (Comesa) attributes to market conditions and government policies governing the sugar industry, a new study has revealed.

The study, conducted jointly by 21-member Comesa and the University of Johannesburg’s Centre for Competition, Regulation and Economic Development, found that limited competition contributed to domestic sugar prices being about 85 percent higher than export prices.

The report, which also drew input from the Competition and Fair Trading Commission, said foreign currency shortages and the depreciation of the kwacha have constrained access to imported sugar and production inputs.

Graph. | Comesa/Centre for Competition, Regulation and Economic Development

It noted that most authorised sugar imports originate from Comesa and Southern African Development Community (Sadc) markets, where traders benefit from duty waivers, influencing pricing dynamics in the domestic market.

Reads the analysis in part: “Millers generate higher prices for sales of sugar in the domestic market compared to the export markets as millers are protected from competition in the domestic market due to the existing legislation and policies.

“Industrial customers revealed that in periods where they are allowed to import sugar, the landed cost of the sugar is cheaper than the domestic prices of sugar.”

Under the Control of Goods Act, sugar imports require government permits and are generally allowed when local millers cannot meet domestic demand, limiting access to competing regional supplies.

The analysis further indicated that the Sugarcane Industry Act puts in place a comprehensive legal regime to regulate and control the growing and sale of sugarcane and any other sugar-producing crop and the manufacturing, refining, marketing and disposal of sugar and sugar products, including by-products.

Malawi has two sugar manufacturing companies, with Malawi Stock Exchange-listed Illovo Sugar (Malawi) plc producing between 221 190 metric tonnes (MT) and 279 278MT from 2019 to 2024, while State-owned Salima Sugar Company’s output rose from 5 000MT to 21 000MT during the same period, according to the analysis.

In a written response on Tuesday, Illovo Sugar (Malawi) plc managing director Ronald Ngwira said the challenge remains the exchange rate used to reach these conclusions, as the company cannot source its inputs at the official rate.

“Malawian sugar, although at the official rate, still leaves the border every day because at the parallel rate, we remain the cheapest compared to our neighbours.

“Most businesses are sourcing materials at around K3 600 to K3 800 to the dollar, which makes the cost of production in Malawi the highest.”

Consumers Association of Malawi executive director John Kapito said in an interview on Tuesday that although Malawi’s high sugar prices reflect its dominant local position, export commitments and high production costs, opening the market could lower prices but risk jobs, sugar supply and forex earnings.

“We would appreciate lower sugar prices, but Malawi must first address the high cost of production, including electricity, interest rates and transport, if local sugar is to become more affordable,” he said.

The findings come as domestic sugar consumption rose from 142 716MT in 2019 to 246 432MT in 2023, before declining to 227 017MT in 2024.

During the same period, sugar exports fell sharply from 125 546MT in 2020 to 29 449MT in 2023 as domestic demand increased, production was affected by climate-related shocks and export controls were introduced in 2022.

Centre for Social Concern economic governance programme officer Agnes Nyirongo observed that Malawi’s challenge is to build a sugar industry that can produce enough to satisfy domestic demand at competitive prices while maintaining a regulatory framework that allows alternative supplies to enter the market when necessary.

Ministry of Industry, Trade, Digitisation and Tourism spokesperson Patrick Botha was yet to respond on how the government is going to protect local industries while protecting consumers.

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