European Union reforms to hurt sugar forex

Irene Phalula

MALAWI SUGAR: The country’s forex earnings from sugar could suffer a knock if the European Union (EU) goes ahead to implement its recent sugar reforms, The Daily Times has established.

The EU negotiators recently agreed on sweeping changes to the bloc’s Common Agricultural Policy (CAP), which involved liberalising sugar production and cutting subsidies to the largest farms.

The development means quotas for sugar and cereal based sweeteners are to end in 2017. Malawi is one of the countries exporting sugar to the EU under the ‘quota system’.

The removal of quotas is expected to result in an oversupply of sugar in the EU which may pull down prices. Illovo Malawi spokesperson Ireen Phalula confirmed in an email response to The Daily Times that the move by the EU may result in falling prices.

“The effect will be a possible excess of sugar in the EU which will drop prices. Any drop in prices will impact export earnings for Malawi outside of our current EU contracts,” said Phalula.

Sugar is Malawi’s second biggest foreign exchange earner after tobacco, wiring into the country millions of dollars annually. The EU is one of the biggest buyers of Malawi sugar with some exported to regional markets.

Phalula said the company is well positioned to sustain its business come 2017.

“Illovo Sugar Malawi Ltd has, as one of its core strategies, to be internationally competitive as a low cost producer of sugar. World sugar prices are historically cyclical and being an efficient producer we are well placed to sustain our business in this phase of the cycle.

“Our main market will always be our domestic market and we will ensure it is well supplied first. Any excess sugar we will look to placing in regional markets. We see a solid future for Illovo Sugar Malawi Ltd supported by a high quality product and efficient agricultural and production processes,” said Phalula.

With top forex earner, tobacco facing a blurred future, threatened by a vigorous global antismoking campaign, authorities at Capital Hill have all the reasons to get worried as they search for ways to boost exports to raise more forex to support the fragile kwacha.

Finance Minister, Ken Lipenga could not be reached yesterday to comment on the implications of the EU move on the local economy and what the country would do to hedge against its adverse impact.

 

About the Author:

Taonga Sabola – who has written posts on BNL Times.


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