LILONGWE-(MaraviPost)-The Centre for Democracy and Economic Development Initiatives (CDEDI) on urging Malawi Revenue Authority (MRA) to investigate Illovo Sugar Company on issues to do with transfer pricing.
This is part of the ongoing ‘sugar prices must fall’ campaign.
Addressing the news conference on Thursday, July 27, 2023, in the capital Lilongwe, CDEDI Executive Director Sylvester Namiwa said, Illovo Sugar Company is reaping Malawians heavily by exporting sugar below the local price.
Namiwa adds, “The citizenry may wish to recall that between Thursday, July 13, 2023, and Friday, July 14, 2023, the Parliamentary Committee on Trade and Industry, led by its Chairperson, Hon 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.
“During the hearing, we were the first to present a case of transfer pricing against Illovo Sugar Company, as illustrated below: We find it interesting that Illovo 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”.
He added, “The US$36 million (K38.3 billion) is comparatively on the higher side to the purported MK30 billion government collects from Illovo in taxes.
“The above statement was collaborated by a presentation by the industrial sugar users, who produced invoices as proof”.
“When this matter was brought to the public, the Illovo Managing Director (MD) Mr. Lekani Katandula, through an article on Nation Online dated April 5, 2021,
confirmed that, indeed, they were exporting sugar below the local price.
“However, during the presentation of a preliminary report to the Trade and Industry consultative meeting held on July 18, 2023, chaired by Minister of Trade and Industry Hon 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”, says Namiwa.
He added, “Nonetheless, Illovo, which was represented in at meeting by its MD and company secretary, did not dispute CDEDI’s submission. 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”.
“Malawians may also wish to know that 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,” said Namiwa.
He observes, “It is also important to inform Malawians that during both the public hearing and the consultative meeting by the Ministry of Trade and Industry, CDEDI, using Illovo’s annual report for the year-ending August 31, 2022, illustrated that Malawians are paying a lot more to buy sugar.
“Meanwhile, Malawians’ eyes are now on Hon. Chithyola Banda to break the good news that sugar prices have been reduced. Going by our analysis, a kilogram of sugar should fetch between MK700 and MK800!”
MRA is yet to respond on the matter.