Thursday,20 September, 2018
Current issue | Issue 1316, (20 - 26 October 2016)
Thursday,20 September, 2018
Issue 1316, (20 - 26 October 2016)

Ahram Weekly

Behind the sugar crisis

There are various reasons behind the current sugar shortages in Egypt, with the government working hard to solve them, writes Nessma Ashraf

Al-Ahram Weekly

“The sour crisis” – this is the nickname that has been given to the new crisis that is now taking over Egypt, the shortage of sugar. If you are living in Egypt you will have heard of the crisis or suffered from its effects. The Egyptian market has seen major shortages of sugar, and its price has been increasing in every governorate.

“I can’t seem to find sugar in any of the small supermarkets I go to. I have to drive to hypermarkets, and in some cases I can’t find it there either,” said Shaimaa, a middle-class Cairo housewife.

The sugar industry is one of the oldest in Egypt and goes back to at least 710 CE. Egyptians were the first to build a refined sugar industry in the ninth and tenth centuries, and part of this production was exported to Europe. Sugarcane is the main source of refined sugar and the sole source for the molasses industry in Egypt.

Egypt’s production of sugar prospered during the era of Mohamed Ali and his descendants. The establishment of the first sugar factory in the country was in Al-Hawamdyia by the Egyptian Refining Company in 1881. After the 1952 Revolution, the sugar companies were nationalised and became public-sector companies.

Egypt’s production was dependent on sugarcane until 1982 when the state had to find alternatives since there was not enough sugarcane to meet the country’s needs. Sugar beet was chosen as an alternative, notably because sugar beet water consumption is less than that of sugarcane. In 1982, the first factory for sugar beet refining in Hamul in the Kafr El-Sheikh governorate was established, where it contributed to total sugar production.

Qena, Sohag and Aswan are now the main areas of sugarcane cultivation. In Aswan there are two large refineries Kom Ombo and Edfu, while sugar beet is mostly grown in the northern Delta in Kafr El-Sheikh and Nubariya. In recent years, sugar beet has extended southwards to Beni Sueif, Fayoum and Dakahliya, the later starting sugar production after the establishment of the Belkas factory in 1997.

Qena comes top in sugar production today, having about 56 per cent of sugarcane production in Egypt, while Aswan comes second with about 33 per cent of sugar production. Kafr El-Sheikh is the only governorate producing sugar beet and sugarcane.

Egypt was self-sufficient in sugar and used to be one of the main exporters until 1974. But despite increases in production, the country now suffers from a shortage of local production to cover the demand for sugar because of the increase in population and the rise in standards of living. Sugar consumption has been increasing, and sugar is one of the subsidised items provided by the government for people on limited incomes, the others being flour and cooking oil.

According to a UN FAO report in 2008, Egypt came seventh in the world’s sugar-consuming nations in 2007, its share reaching 1.7 per cent of total world consumption of sugar. Egypt now imports about 2.6 million tons of sugar a year to meet domestic needs, and this reflects increasing consumption per capita. It now has a high level of consumption among the African countries at around 22 kg per capita/year in 2007.

Egypt consumes about 3.2 million tons of sugar annually, but produces just over two million tons, leaving a gap of slightly over a million tons a year for imports. With the continued increases in cultivated areas and increasing capacities of sugar beet factories, domestic production has increased, and imports of sugar began to decline to reach 385,000 tons in 2000.

However, since 2002 imports have begun to increase again because of increases in population and in demand. Brazil is the top exporter to Egypt, while the EU takes second place.

SUGAR SHORTAGES: Egypt is now facing major problems with limited sugar availability. The Egyptian market has been facing a shortage of sugar in supermarkets and hypermarkets, and sugar prices have been in constant fluctuation.

Adel, a middle-aged Cairo resident, said that “prices are becoming crazy. It is hard to find sugar at the subsidised price of LE5 per kg as it is snapped up the second it arrives at grocery stores. Now I have to buy it from supermarkets or on the black market at a price of LE12 per kg.”
There are three aspects to the problem. The first is related to the ongoing foreign currency crisis, as the difficulty of finding dollars or other foreign currency for imports has made it hard for private companies to import sugar. There is also the high price of sugar on the international market and the large amounts of sugar used by soft drinks companies, increasing demand.

According to Yasmine Khodari, a professor of development at the British University in Egypt, “a major part of this problem is related to the dollar crisis. The inability to acquire hard currency and the restrictions set by the government on its use have made it hard for private companies to import sugar due to the shortage of US dollars on the Egyptian market.”

The increases in the price of US dollars against the Egyptian pound have led to prices for imported goods to increase as well. To help solve this issue, the Ministry of Supply and Internal Trade decided on 13 October to grant private companies the sugar they needed from the government via the Holding Company for Food Industries.

The ministry decided several weeks ago that government sugar should be limited to the Holding Company for Food Industries in an attempt to control prices. But this aggravated the crisis and led to the disappearance of sugar from supermarkets and a run on the market for sugar.

The country also witnessed a campaign, “The People Demand,” led by TV host Amr Adeeb for the major food companies and hypermarkets to decrease food prices by 20 per cent over the next three months in a bid to help families strained by the major increases in prices.

Khodari said the campaign was “definitely a good move to help the middle and lower classes who are being affected by the increases in prices. This is a good opportunity for people to purchase commodities at a reasonable price, helping them to manage over the coming months. But after that an increase in prices is unfortunately inevitable in the current situation.”

It is not only people who are being affected by the rises in sugar prices. Confectionary companies are as well. One company owner who spoke on condition of anonymity said that “this is another crisis like the previous crises we have faced. However, this one has hit closer to home than most. Distributors are taking advantage of shortages of sugar to increase prices, forcing us to increase our prices as well.”

 “I have been forced to increase my prices by 20 per cent,” he added. As a result, some people are using saccharine as a substitute for sugar because of their inability to find sugar in the marketplace.

One pharmacy owner in Nasr City said that “the demand for diet sugar has quietly increased since the crisis started. I have had customers telling me that they have been looking for sugar and have been unable to find any. So they come in to buy diet sugar as a substitute,” despite its high price of LE25 per kg.  

Mohamed, a Cairo resident, said “the government keeps on saying that there is enough sugar until February, but I have been looking for over two days and I can’t seem to find any.”

REASONS FOR THE CRISIS: A major factor in the crisis has been merchant’s attitudes. Some merchants have been refusing to sell what is left of their stocks, waiting for prices to rise before putting it on sale.

According to one grocery store owner in New Cairo, “I get sugar from one of the big wholesalers in the area, and since the crisis started my supply has decreased. I am not really sure if he actually has a limited supply, or if he is keeping it back in the hope of an increase in prices.”

The government is currently working hard to discourage merchants from holding back sugar in order to sell it later at increased prices on the black market. The police have been able to detect more than 4,000 kg of sugar held by traders. Some low-income citizens have also sold subsidised sugar at more than double the regular price and for as much as LE12 per kg.

Ibrahim, a bus driver, said “I know people in my neighbourhood who get sugar at the subsidised price and sell it to others at LE11 or LE12 a kg.” Abed, a middle-income security guard, confirmed that in the new cities surrounding Cairo prices at grocery stores, supermarkets and on the black market had hit LE12 a kg. He blamed this on merchants’ greediness and the failure of the government to prevent exploitation.

People panicking over the lack of sugar has made them buy more than they actually need, intensifying the crisis. One supermarket worker in Cairo said that “the sugar supply has declined, but people’s consumption has increased. A person who used to buy two kg of sugar now buys four.”

Grocery stores and supermarkets operated by the government and selling sugar at LE5 per kg have witnessed stampedes. “People are rushing here because of our low prices, unlike at the other grocery stores that sell sugar at high prices,” one worker said. “Our supply is the same and did not change, but now we are selling out within five days.”

Hassan Kamel, chair of the Holding Company for Food Industries, said that “the government is working hard to solve the issue as soon as possible. It has imported a further 200,000 tons of sugar, and the effects of this will soon be felt.” He added that “the Ministry of Supply will import another 100,000 tons by November. The first 50,000 will be here in the first weeks of November, while the rest will be received by end of November.”

Asked about the performance of the company in managing the crisis, he said that “we pump 6,000 tons of sugar into the market daily and about 180,000 tons per month.” People should not panic, he said, since this would not help. Instead, they should only buy what they need. “I don’t believe there is any family in Egypt that cannot get a kg of sugar,” he added.  

Kamel told Al-Ahram Weekly that the dollar crisis had had a major impact on the situation, but that “the sugar crisis is not exclusive to Egypt.

There is an international shortage of sugar, due to the rise of the sugar price in the international market.” The cost of sugar per ton on the international market when packing and shipping expenses were included had reached $625, he said.

The FAO said last week that international food prices had increased in September to their peak since March 2015, with sugar at the top of the list. It said that sugar prices had increased by 6.7 per cent in September, with bad weather conditions in Brazil, the world’s biggest producer and exporter of sugar, affecting the international market for sugar.

Kamel said “the problem of sugar distribution will be properly investigated,” with the supply police and Consumer Protection Agency working hand in hand to curb violations and sanction any trader using the current crisis to his advantage.

“The police will make sure that trucks reach wholesaler warehouses and that the sugar is distributed and sold at the correct prices,” he said. The crisis should be over by the end of November, if not before, he said.

The writer is a freelance journalist.

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