CAMA demands immediate reduction of sugar prices by 25%
CAMA Following the verdict by the Competition and Fair Trading Commission (CFTC), that determined that the reason for the sugar price increase by Illovo Sugar Malawi “was unjustifiable, irrational and adversely affected customers, Consumers Association of Malawi has demanded the company to effect the product’s price by 25% with immediate effect.
A statement from the consumer watchdog, dated September 7, CAMA said it was the one which lodged the complaint with CFTC asking it “to conduct a public enquiry into the unfair pricing of sugar in the country”.
“The contentious matter before our appearance to the Commission was in regard with the high pricing of sugar, which Illovo Sugar had illegally adjusted by 25% in October, 2021 — under which they cited that the increase was to control the smuggling of sugar to neighboring countries, an increase that negatively affected consumers as they could no longer afford the prices. 
“The sugar increase had nothing to do with any increases in production costs but purely to control and reduce smuggling of sugar across the borders of Malawi — an activity outside the mandate of Illovo Sugar Malawi,” said the statement from CAMA Eexecutive Director, John Kapito.
He stressed that “border control activities are managed by the State through institutions such as the Police and other border enforcement agencies.
“As a consumer organization, we found that the reason for such a huge increase was unfair and unjustifiable as it was not related to any production costs of sugar to warrant any price increases of a basic product like sugar, by such a high margin.
“And that the purpose for the increase was insensitive and outside the mandate of Illovo Sugar Malawi. We must admit the sugar price increase was cruel and hurtful to poor consumers.”
Kapito disclosed that CAMA appeared before the CFTC over the complaint, saying the consumer body “also requested Government through CFTC to open up the sugar market in order to remove the current market dominance abuses by Illovo’s, which are hurting consumers”.
Thus CAMA is demanding the immediate reduction of sugar prices by 25%, which it contends that “Illovo Sugar Malawi has illegally been collecting from poor consumers” and that the company should “refund all the illegal revenues collected under this illegal sugar price increase from October 2021”.
CAMA applauded the CFTC for conducting the public hearings, saying the determination “will assist many poor Malawian consumers that were negatively affected by this unfair and unnecessary price adjustment since they could no longer afford the high sugar prices”.
“Our appeal also goes to producers like Illovo Sugar Malawi to stop using their market dominance to hurt poor consumers. We are also appealing to Government to continue supporting regulatory bodies like CFTC with increased funding in order to assist the protection of poor Consumers,” Kapito concluded.
In its report circulated on August 29, CFTC said it commenced investigations against Illovo Sugar Malawi in January this year having received a complaint in October.
This was after Illovo had issued a press statement indicating that the reason for the price increase was to curb the conduct of smuggling sugar out of the country.
“The said statement 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 sugar to make the product expensive on the local market, and thus curb the smuggling of sugar into the neighbouring countries.”
CFTC highlights that 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”.
“In addition, the reasons stated by ISM were not related to the company’s cost of production of sugar. The Complainants submitted that the conduct by ISM substantially infringes on the welfare of consumers in the country, particularly during a period of already prevailing economic hardships.”
The Commission further says it took note that Illovo “did not dispute that they increased the price of sugar because they wanted to reduce illegal smuggling of sugar”.
It was also noted that Illovo “did not dispute that the price increase was not as a result of production costs [and] in its assessment, the Commission 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, 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 [and] in view of the foregoing, the Commission resolved as follows:
- That ISM should be prosecuted for violating S43(1)(g) of the CFTA. The investigations report should therefore be submitted to the Office of the Director of Public Prosecutions (DPP)for prosecution;
- The Commission should issue an advisory note to the Ministry of Trade & Industry to ensure that the supply of essential commodities such as sugar are not shielded from import competition in situations where the domestic beneficiaries under the Control of Goods Act are abusing their dominant positions or engaging in unfair trading practices; and
- The Commission should issue an advisory note to the Ministry of Trade & 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.
