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Wednesday, 3 July 2013

Zambia Sugar is Sweet!

Zambia Sugar Plc is growing significantly. It recently announced that that production exceeded 400,000 tonnes for the first time, for the financial year ended 31 March 2013. It increased its domestic sales for the year increased by 10% to 159 000 tons. In what appears to be a rebalancing, its sales to EU markets decreased to 121 000 tons in the year, whilst exports into regional markets increased by 23% to 104 000 tons. The firm’s operating profit improved from ZMW307 million in the previous year to ZMW316 million in 2012/13.

The company was accused earlier this year of tax evasion and price fixing. The accusations followed a damning report by ActionAid which accused Zambia Sugar of evading paying millions in tax earlier this year. Zambia Sugar, the leading sugar producer in Zambia, is a subsidiary of Illovo Sugar, which is owned by multinational food company Associated British Foods (ABF).

According to ActionAid ABF has been evading paying billions of kwacha in tax. Zambia Sugar allegedly uses an array of transactions that has resulted in more than a third of the company’s pretax profits being paid out of Zambia into sister companies in Ireland, Mauritius and the Netherlands. Since 2007 ABF’s Zambian subsidiary had paid less than 0.5% of its $123m pretax profit in company income tax. The main company tax rate in Zambia is 35%.

Zambia Competition Commission was allegedly looking into these claims according to VP Guy Scott. At the time Mr Scott reported the matter to the ZCC for Zambia Sugar "using their monopoly to overprice their product" engaing various "vices of tax evasion". But that case seems to have gone quiet.

Chola Mukanga | Economist | Writer
Copyright © Zambian Economist 2013

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