* Ministry to revoke licenses of those found indulging in the price manipulation
* CFTC to fine a minimum sum of K500,000 and a prison sentence of five years
By Patience Longer, Daniel Siame, MANA & Duncan Mlanjira, Maravi Express
As sugar is now readily available on the market following resumption of production at both Illovo Sugar Malawi and Salima Sugar Limited, Ministry of Trade & Industry and Competition and Fair Trading Commission (CFTC) have issued stern warnings to distributors and wholesalers found engaging in price manipulation schemes in their bold stance against unjust price practices.
Advertisement
Soon after Illovo Sugar closed their production season awaiting the next season after maturity of its sugarcane at their estates of Nchalo in Chikwawa and Dwangwa in Nkhotakota, it was proved that distributors and wholesalers were hoarding the commodity to create its scarcity.
The distributors and wholesalers were then overcharging the commodity to retailers, who in turn had to factor the same to consumers creating a scenario where the price of 1kg of sugar skyrocketed by over 150%.
Some shops were restricting purchase to a maximum of two packets
A memo by Illovo Sugar Malawi that circulated widely on social media last month indicated that 1kg of brown sugar was at K2,300, up from K2,000 and K43,241 for a bale of brown sugar and K48,674 for refined sugar.
Some traders were selling the commodity at as high as K4,000 and above per kg and as the supply is stabilising, some traders are selling at K2,500.
Salima Sugar’s is at K2,200 but traders are pegging it at the same 2,500, justifying that distributors and traders are still manipulating the prices.
Following a comprehensive investigation revealing the connivance between certain distributors and street vendors to inflate sugar prices unfairly, thereby burdening consumers across the country, the Ministry and CTFC thus have fired the warning shots.
Speaking in an interview on Wednesday in Lilongwe, public relations officer (PRO) for Ministry of Trade & Industry, Patrick Botha underscored government’s commitment to ensuring fair market practices and protecting consumers from exploitation in the country.
Patrick Botha
“We are quite serious with this issue as Malawians have struggled to access sugar for the past few months for the essential commodity,” he said. “Now that the situation is stabilizing, we cannot condone that some companies should hide behind the street vendors to maintain the status that almost led to a crisis.”
Botha added that if anyone is found indulging in the malpractice, the Ministry would revoke their licenses while CFTC PRO, Innocent Helema said distributors and wholesalers found committing the offence, will be fined a minimum sum of K500,000, and attract a prison sentence of five years.
“As provided for under the Competition and Fair Trading Act, you may be aware that Parliament recently passed the Competition and Fair Trading Bill which, when assented will correct a lot of unfair and anticompetitive business conduct in the country,” he said.
Some of the changes in the Consumer & Fair Trading Act (CFTA) include definitions and concepts and when announcing the development, Helema said the prevailing CFTA does not include some key definitions and concepts in the regulation of anticompetitive business practices (ABPs) and unfair trading practices (UTPs).
Innocent Helema
“Further, the CFTA does not have updated definitions of some relevant terms in the regulation of ABPs and UTPs. For instance, the CFTA narrowly defines the term ‘Consumer.
“For this reason, vulnerable groups such as contract farmers who do not fall within that definition are not effectively protected from UTPs.
“Excessive pricing of products and services has been one of the most prevalent conduct by businesses. Unfortunately, the CFTA does not have provisions specifically prohibiting excessive pricing.
“Buyers, especially those involved in buying farm produce, go scot-free under the CFTA when they buy produce at unjustifiably lower prices or enter into contracts they do not plan to honour.
“The CFT Bill has addressed all these gaps accordingly,” Helema said.
Also contained in the changes is the suitability and independence of Commissioners, and Helema said “as adjudicators of cases, commissioners of the CFTC are not thoroughly subjected to scrutiny of Parliament once appointed, to determine their suitability and qualification for their office”.
“Similarly, their independence as adjudicators is not guaranteed in the current law. The draft Bill has, therefore, proposed that, as a way of ascertaining their suitability and enhancing their independence, their appointment and removal from office be subjected to the scrutiny of the Public Appointments Committee of Parliament.”
On framework for fines and penalties, Helema said under the CFTA, “when the Commission finds an errant enterprise, it has been imposing fines”.
“However, in 2023, in the CFTC vs Airtel Malawi Limited case, the High Court ruled that Section 51 of the CFTA does not empower it to impose fines — thereby weakening its regulatory mandate.
“In addition, the CFTA does not provide for aggravating and mitigation factors for the Commission to consider in coming up with fines and/or orders. The CFT Bill has ably included the power to levy administrative fines taking into account the aggravating and mitigating factors.”
Helema further said the current CFTA provides for voluntary notification of mergers and acquisitions — which means mergers having potential harm to competition process and consumer welfare could be effected without seeking the CFTC approval.
“The CFT Bill has made notification of mergers and acquisitions mandatory based on determined thresholds,” he said.
Advertisement
Trade manipulation is rampant due to Meanwhile, poor law enforcement is what nurtures vendors and other unscrupulous individuals to rob from people as had been the case with sugar in recent times.
According to a research findings presented by Churches Action in Relief & Development (CARD), in partnership with Christian Aid and Lilongwe University of Agriculture & Natural Resources (LUANAR), revealed that poor law enforcement is what nurtures vendors and other unscrupulous individuals to rob from farmers.
At the research’s presentation at district executive committee (DEC) meeting in Mchinji during the week, LUANAR’s director of centre for agricultural research and development, Innocent Pangapanga Phiri, stressed that lack of capacity of the existing local and central government structures provide room for vendors to offer unaccepted price of farm produce.
“Vendors are buying agricultural commodities at lower price, a notable example being maize,” he said. “Government set K650 as starting price for the produce but vendors are buying at K410 which is exploitation of the farmers.
“With such prices, farmers cannot graduate from poverty,” he said and on his part, Mchinji District principal nutrition & HIV/Aids officer, Davie Panyani, hailed the research findings as a whistle blower for relevant stakeholders to develop policies that will deter such vendors’ tendency.
“The research findings have been presented on time, and as Mchinji District Council, we will incorporate these findings in our development plan to ensure swift action has been taken.
“Currently, we are intensifying climate-smart agriculture as the first pillar of MW2063 vision, and ensure that people are graduating from poverty line,” he said.
Thus CFTC’s decision to amend the CFTA that also took cognizance that the fine of K500,000 was too little such that the unscrupulous traders would easily afford to pay it and continue with the malpractices.
Advertisement