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Monday, 24 October 2016

Edita and Pepsi shut down production due to gov’t sugar seizures

Edita and Pepsi halt production on some lines after government seizes sugar stocks: Edita’s Beni Suef candy plant has been idle for four days after the government seized a three-week supply of sugar, said Edita’s chairman Hani Berzi in a call-in to Lamees El Hadidy’s Hona El Assema (runtime: 4:36). An order came down initially to confiscate the sugar and sell it to the general public, but an intervention by another agency reversed the decision, said Berzi. “Our sugar has been purchased legally through a certified long-term supplier, and I want to know what did we wrong,” he added. Investors have also been frantically calling the company to understand what’s going on, he tells Lamees, asking what message is the government sending to investors when it treats them like criminals instead of sitting down and discussing the issue with them. The story has crossed into the international press with a piece by Reuters’ Eric Knecht and Amina Ismail.

The news comes amid reports that Pepsico has also halted production on its factory as a result of sugar seizures, according to Al Masry Al Youm.

Trade and Industry Minister Tarek Kabil urged Prime Minister Sherif Ismail yesterday to order the seizures stop. The raids have been organized by the Supply Ministry under minister Mohamed Ali El Sheikh, government sources told AMAY. The sources added that the ministries of trade, supply, interior, justice and health met on Sunday to discuss the issue. As we noted yesterday, President El Sisi had ordered an increased crackdown on traders and merchants allegedly involved in price gouging amid the ongoing sugar shortages.

An emergency board meeting at the Federation of Egyptian Industries’ condemned the seizure of inventory and stocks of basic goods, Al Borsa reports, echoing the Egyptian Federation of Chambers of Commerce’s remarks last week.

Industry attacks profit-margin directive: The news came as industry turned on the Ismail government’s formation of a committee to set profit margin caps on the sale of basic commodities including sugar, Al Borsa reports. Both the FEI and the Chambers of Commerce called the move illegal. FEI head Mohamed El Sewedy called on the government to rely more on the Egyptian Competition Authority to monitor for price gouging. If the government was serious about setting price caps, it would have to first acknowledge that there is a separate parallel market rate and have the Central Bank of Egypt permit FX bureaus to issue receipts for FX bought at the parallel market rate, he says.

Prime Minister Sherif Ismail apparently told El Sewedy that the populist price caps would only be implemented when absolutely necessary. El Sewedy, traditionally a backer of government economic policies, maintained that the cabinet does in fact have the right to set prices for basic goods, despite his organization voting to call the move illegal. The Federation of Chambers of Commerce counters that the move would run counter to Article 10 of the Investment Law, which protects businesses from the government setting prices.

El Sewedy’s point about the impact of FX is echoed by Bloomberg in the latest take in the international press on the sugar crisis. “Traders have one of two options, either factor in the USD in the final price or give up the commodity altogether,” Senior Researcher at the US Department of Agriculture office in Cairo Mohamed Hamza told the newswire. “This is applicable to all imports, not just sugar, but because sugar is such a sensitive commodity, people can now feel it,’’ he said. Egypt consumes about 3 mn tonnes of sugar annually, but produces just over 2 mn tonnes, according to data from the USDA. The UN index of global retail sugar prices has risen 47% this year, on track for the biggest annual increase since 2009.

The Supply Ministry has hiked the price of sugar at subsidized retail outlets to EGP 7.00 per kg, up from EGP 6.00.Outlets affiliated with the Agriculture Ministry have no sugar on offer, while those falling under the Armed Forces and Supply Ministry do, Al Mal reports. (Al Borsa puts the price per kg at EGP 7.50). The news comes as the Armed Forces continue to plunge deeper into the basic goods game, announcing it would be clearing a third shipment of 500k boxes of infant formula through customs by week’s end for distribution at pharmacies, Al Mal reports.

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