Illovo Sugar Malawi earnings decline by 75% affected by country’s ailing sugar industry

MALAWI – Illovo Sugar Malawi, the Malawian subsidiary of pan-African sugarcane grower and sugar producer has reported a 75 per cent decline in its earnings to K2 billion (US$2.7m) in the six months ended February 28 2020, from K8.1 billion (US$11m) recorded in the previous period.

The firm’s revenue, however, increased from K62.4 billion (US$84.8m) to K73.5 billion (US$99.9m) during the same period last year.

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The firm attributed the decline in earning to challenging operating and market conditions, including informal sugar imports and logistical challenges, reports the Nation Malawi.

Export sugar revenues were also below expectation mainly as a result of logistical challenges arising from rehabilitation works currently taking place at the port of Nacala in Mozambique.

According to the Malawi Stock Exchange (MSE)-listed sugar manufacturer, “Domestic sugar sales have been on a downward trend against a background of the on-going influx of both formal and informal sugar imports’ from neighbouring countries, a development which is having a severe impact on the portability of the company and revenue generated by growers.”

The informal imports which are competing unfairly in the market have led to Illovo offering farmers low prices for their produce.

Recently the Ministry of Industry and Trade of Malawi launched investigations into allegations of low prices offered by the sugar manufacture to smallholder farmers.

The ministry’s spokesperson Mayeso Msokera confirmed that the ministry has received submission of concerns from Sugarcane Growers Association of Malawi (Sugam) on the declining prices.

“The matter is under review and currently a fact-finding investigation is underway to gather sufficient information from all the parties including Illovo Sugar Milling Company,” he stated.

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Sugam executive secretary Geoffrey Nkata highlighted that in 2018, the company was buying a tonne of sugarcane at K302,290 (US$411), which is a 22 percent decline from the K235,658 (US$320), per tonne being offered now.

He said: “This [sugar cane price decline] is despite the fact that the prices of other inputs such as labour, fertilisers and chemicals keep rising. The implication is that the smallholder sugar cane farmers will not make any returns on their investment.”

Nkata, however, said farmers acknowledge that Illovo has been offering lower prices because of lower international sugar prices coupled with smuggling of sugar into the country by unscrupulous traders.

In addition to advocating for better prices for farmers, (Sugam) has appealed to government to fast-track the review of the Sugarcane Industry Bill in a bid to protect growers.

In an interview with Malawi News Agency, Sugam chairperson Frighton Njolomole said the sugar cane industry has been operating without a regulatory framework which was posing a threat to farmers.

He said in the absence of the Bill, the sustainable growth of smallholder sugar cane production is being compromised each year.

Sugar is Malawi’s third foreign exchange earner after tobacco and tea.

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