Domestic price of Zambian sugar is very high

A STUDY conducted by the Overseas Development Institute (ODI), Britain’s independent think tank, has revealed that the domestic price of Zambian sugar is very high compared to other producing nations in the developing world, which impacts negatively on consumers.

But Zambia Sugar Plc marketing director Rebecca Katowa said the retail price of sugar in Zambia is a general reflection of cost of doing business.

ODI programme leader for business and development Karen Ellis said independent statistics showed that Zambia has one of the lowest sugar production costs in the world, at US$169 a tonne compared to the world average for sugar producing nations which is currently at US$263 a tonne.

Ms Ellis said at a workshop on measuring economic impact of competition in Zambia that the production of sugar in Zambia is highly efficient.
She said over 60 percent of total sugar produced in 2007 was exported because production costs were internationally competitive.

“The European Union is an attractive market for many efficient African Caribbean Pacific sugar producing countries such as Zambia, because the EU price is significantly higher than theirproduction costs,” she said.

Ms Ellis said despite some new entrants in the market in the last decade, one firm dominates the production of sugar in Zambia with a 93 percent share.

She said the Zambian market is protected from external competition by non-tariff import barriers.

“The requirement for potential sugar importers to obtain import permits through a bureaucratic and non-transparent process was cited by some as one kind of barrier,” she said.

Zambian requirement are that all sugar sold on the local market must be vitamin A fortified.

Ms Ellis said many stakeholders outside Government and the sugar industry consider fortification to be a mechanism for protecting the local sugar market from competition.

She said the sugar industry contributes considerable tax revenue to Government, adding that the industry in 2007 contributed about US$7.9 million of corporate tax on profits.

Reacting to the finding, Mrs Katowa said the company‘s production cost a tonne was higher at US$504 than the projected US$169.

She also said the company is faced with high distribution costs but they ensure the price of sugar in Zambia is uniform despite paying 16 percent value added tax, from which other sugar producing nations are exempt.

“Zambia is a high cost producer in terms of structure. We have embarked on the expansion programme aimed to grow our business and reduce the cost of sugar.

“Zambia Sugar may be a dominant player in the market, but we don’t have the monopoly in people’s pockets,” she said.

source: lusakatimes