The European Union (EU) sugar price reforms and elimination of country specific quotas had a positive influence on exports, with the country still shielded from competition that will prevail when the EU market is fully liberalised.
This is contained in a paper titled Trade Impacts of EU-ESA EPA transitional period on Malawi sugar exports authored by Yalenga Nyirenda, Abdi-Khalil Edriss and Horace Phiri of the Department of Agricultural and Applied Economics at the Lilongwe University of Agriculture and Natural Resources (Luanar).
The renunciation of the Sugar Protocol between European Union (EU) and African, Caribbean and Pacific (ACP) countries in 2007 initiated a gradual reform process that will culminate in a reciprocal Duty Free Quota Free non-preferential access for all sugar producers in September, 2017.
This means that Malawi, alongside other sugar producing countries, will lose a significant portion of their export market in 2017 when the EU ends production quotas for its 19 members.
EU member States are limited to supply a maximum of 13.5 million tonnes of sugar but consume 17 million tonnes a year as the ACP States and least developed countries (LDC) such as Malawi supply up to 3.5 million tonnes through their quota-free and duty-free access to the EU market.
“Contrary to expectation, the EU-ESA EPA transitional period had a positive effect on Malawi’s sugar export. Thus, even with the relatively lower sugar prices following the removal of price guarantees, Malawi was still competitive on EU sugar market.
“In addition, the EU is still implementing production quotas for EU producers and maintains tariffs against non-preferred suppliers,” reads the paper in part.
Since the denunciation of the Sugar Protocol in 2007, the value of earnings from sugar exports to the EU has taken an upward trend with the highest earnings being recorded in 2011/12 at $131 million and with exports destinations from Malawi sugar increasing to 12 EU member States, according to the paper.
But as Malawi loses its portion of the export market in EU, Illovo Sugar Malawi Limited has said it wants to capture the growth opportunities which exist in regional African markets to benefit the company both from a price and long-term sustainability perspective.
The company’s public relations officer Ireen Phalula told The Nation in April that in the wake of the European Union (EU) policy reforms on sugar, the company is banking hopes on global demand of sugar.
She said: “Low priced marketing environment in the EU, coupled with the logistics cost of accessing EU markets are certainly a concern to the company.
“However, the longer-term outlook for sugar is for global demand to increase at a steady two percent per annum with supply fluctuating depending on several factors and we (Illovo) operate in a region where demand for sugar is rapidly growing, in excess of two percent per annum, supported by gross domestic product (GDP) and population growth.”
However, economic experts have warned against the country’s overdependence on agriculture saying it is about time Malawi diversified outside agriculture.
So far, according to the paper, Malawi is one of the low cost producers of white sugar in Africa.
Sugar, is one of Malawi main foreign exchange earners alongside tobacco and tea.