Tuesday, May 28, 2024

CDEDI wants sugar prices reduced by 50%…pens MRA to probe transfer pricing

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The Centre for Democracy and Economic Development Initiatives (CDEDI) is still siding with Malawians on the calls to have sugar prices reduced even by 50 percent as Illovo Sugar Company has failed to refute findings from the humanitarian organisation on price transferring.

In a press statement signed by CDEDI Executive Director Sylvester Namiwa and made available to this publication, a
kilogramme of sugar should fetch between MK700 and MK800.

Namiwa says the call for Malawi Revenue Authority (MRA) to investigate Illovo Sugar Company on issues to do with transfer pricing is part of the ongoing “sugar prices must fall”

He said both in press and consultative meetings, Illovo Sugar Company has failed to dispute findings from CDEDI on the pricing of sugar which based on fair trade practices, Malawians are paying more than when the commodity is being exported to.

It is in records that Illovo Sugar Company is currently exporting industrial sugar at
US$500 per tonne to its sister companies in Mozambique and Zambia, where the sugar sells at US$850 while here at home the same sugar sells at as high
as US$1,250 per tonne.

“If the above information is anything to go by, we are being deprived an average of US$350 per tonne, translating to around US$36 million on the 100,000 tonnes the company exports annually. The US$36
million (about K38.3 billion at the current exchange rate) is comparatively on the higher side to the purported MK30 billion government collects from Illovo in taxes,” says Namiwa who adds that this warrants for a probe by the tax collecting body, MRA since CDEDI findings are collaborated by a presentation by the industrial sugar
users, who produced invoices as proof and that Illovo Managing Director (MD) Lekani Katandula, through an article on Nation Online dated April 5, 2023, confirmed that, indeed, they were exporting sugar below the local price.

As part of the inquiry, during the presentation of a preliminary report to the Trade and Industry consultative meeting held on July 18, 2023, chaired by Trade and Industry Minister Simplex Chithyola-Banda, a correction was made by Hon Paul Nkhoma on CDEDI’s presentation, indicating that according to the invoices, the exported sugar is sold at US$750, and not US$850 as presented by CDEDI.

Still Illovo Sugar Company, according to Namiwa, which was represented by its MD
and company secretary, did not dispute CDEDI’s submission and that the same was the case during the public hearing.

“It is against this background that CDEDI has requested MRA to investigate this apparent clear case of transfer pricing,” he said.

Namiwa says during both the public hearing and the consultative meeting by the Trade and Industry Ministry, CDEDI using Illovo’s annual report for the year-ending August 31, 2022, illustrated that Malawians are paying a lot more to buy sugar.

He says of all the companies that make up Illovo Sugar Africa, namely Eswatini, Malawi, Mozambique, South Africa, Tanzania and Zambia, it is only Illovo Malawi that posts supernormal profits.

“This is adequately explained by the fact that locally-consumed Malawi sugar is more expensive than the exported one,” he adds.

Given irrefutable facts that have never been disputed by the Sugar manufacturer, Malawians have set their ‘ eyes on Trade Minister Chithyola Banda to break the good news that sugar prices have been reduced.

Between Thursday July 13, 2023 and Friday July 14, 2023, Parliamentary Committee on Trade and Industry, led by its Chairperson, Paul Nkhoma, conducted a public inquiry into sugar pricing and production, during which a number of stakeholders in the sugar value chain presented their submissions and CDEDI was the first to present a case of transfer pricing against Illovo Sugar Company.

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