Transcript By Chilufya Sampa

Competition and Consumer Protection
Commission
Chilufya Sampa
Executive Director
Presentation Outline
 Are sugar prices really high?
 Prices as compared to the cost of production
 Comparison with region
 Why are prices high?
 What can CCPC do?
 conclusion
Are sugar prices really high?
 Sugar prices are high
 High prices not prohibited by competition law but excessive prices are.
 What constitutes excessive pricing?
 Charging prices that cannot be reasonably justified by the cost of making
the product/service available to consumer. This should include cost of
production, distribution costs, costs of capital (economic costs), etc
 if a company sustains profits higher than it could expect to earn in a
competitive market.
 Problem: no objective and universally recognized criterion exists in case-law to
determine what profits are “excessive”.
 Sugar prices are high, but are they excessive?
Are sugar prices really high?
 There is consensus among stakeholders that prices are higher
than they should be.
 MCTI 2010 : Zambia National Sugar Strategy recognises that sugar
prices in Zambia are “significantly higher than the regional market
price”.
 ODI 2010: “Although production costs are low, and Zambian sugar
exports are internationally competitive, Zambia still has very high
domestic sugar prices”.
 Thomson
Kalinda and Brian Chisanga 2014: “the price is
significantly higher than the cost of production”.
 African Competition Forum 2014: “millers therefore have the ability
to price domestic sugar at the highest price with high margins, even
when Zambia is a low-cost sugar producer”.
Prices as compared to the cost of
production
 Many researchers agree that the price of sugar in
Zambia is unreasonably high. This means the prices
cannot be justified by the cost of production. See
papers cited above.
 The ACF research has confirmed this assertion.
 Research shows that margins are low at distribution
and retail levels.
 This means prices are hiked at the factory gate.
Comparison with region
 Again researchers agree that sugar prices in Zambia
are higher than the region; see MCTI 2010, ODI 2010
and Kalinda and Chisanga 2014.
 ACF 2014 finds that only Kenya was more expensive
than Zambia in their sample.
 The Commission’s own survey has revealed that
Zambia is more expensive than Zimbabwe, Botswana,
Malawi, Tanzania, South Africa and Namibia.
 All in all, sugar prices in Zambia is more expensive
than in the region and world, see ODI.
Why are prices high?
 Studies show that costs of production in Zambia are among the lowest in the world.
 Costs of doing business in Zambia are higher than most countries in the region and
globally. However, studies show that margins at distribution and retail levels are very low.
 This shows that high sugar prices cannot be attributed to high cost of doing business.
 The most probable reason cited by researchers is lack of competition, both domestic and
foreign. See MCTI 2010, ODI 2010, etc.
 The Commission thinks that the sugar sector in Zambia is highly productive but lacks
competitive efficiency.
 The lack of healthy competitive rivalry, both domestically and foreign drives prices
upwards.
 Domestic competition is impaired by dominance while foreign competition is impaired
by policies and regulations that stifle imports, e.g. Vitamin A fortification n requirement
and bureaucratic import procedures.
What can CCPC do?
 The CCPA No. 24 of 2010 prohibits abuse of position of economic
power including excessive pricing.
 The Commission is very concerned with happenings in the sugar sector
and has intervened in the past including the highly quoted 2009
investigation.
 Proving excessive pricing is highly complicated and very difficulty.
 This is complicated by lack of objective and universally recognized
criterion in case-law to determine what constitutes excessive pricing.
 The Commission does not make decisions on its own investigations. In
an event that the Commission conducts an investigation, the decision
will be made by a autonomous body.
4/8/2015
Competition and Consumer Protection
Commission
8
Conclusions
 Sugar prices are high in Zambia as compared to most
countries in the region and world.
 Sugar prices cannot be justified by the cost of
production as Zambia is highly productive.
 There are policies and regulations which stifle foreign
competition such as fortification and burdensome
import procedures. Such should be amended.
The end
Contact :
Executive Director
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Tel: +260-211-222-787
Fax: +260-211-222-789
Email: [email protected]
Website: www.ccpc.org.zm
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