Mozambique Sugar Prices Soar 12.5-38% After VAT Introduction, Impacting Essential Needs

Sugar prices in Mozambique have surged by 12.5-38% since January 2024, following the introduction of a Value-Added Tax (VAT), according to reports from the World Food Programme (WFP) and the National Sugar Distributor. The substantial price increase has raised concerns about the affordability and accessibility of this essential commodity, particularly for vulnerable populations.

The VAT exemption on sugar, cooking oil, and soaps, which had been in place since 2007, was eliminated earlier this year. While the government aimed to protect the domestic industry and reduce the impact on consumer prices, the cost of the covered products in the market increased by over 10% during the implementation, despite the average annual inflation being around 7.6%.

The National Sugar Distributor reported increases ranging from 12.5% to 38% across different sugar products since the start of the year. Illovo Sugar (Malawi) plc, a major sugar producer in the region, made the decision to raise prices, with a 1-kilogram packet of sugar now costing consumers significantly more.

Why this matters: The sugar price hike in Mozambique is part of a broader urgent crisis affecting Southern Africa, as reported by the Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN). The steep increase in the cost of this essential commodity has serious implications for the population's ability to meet their basic needs and maintain food security.

The WFP's assessment of the situation highlights the impact of the sugar price increase on the coverage of essential needs in Mozambique. As the country grapples with the consequences of the VAT introduction, policymakers and stakeholders are faced with the challenge of balancing economic considerations with the welfare of the population, particularly the most vulnerable segments of society.

Key Takeaways

• Sugar prices in Mozambique surged 12.5-38% since Jan 2024 after VAT introduction.
• VAT exemption on sugar, cooking oil, and soaps was eliminated earlier this year.
• Prices of covered products increased over 10% despite 7.6% annual inflation.
• Sugar price hike is part of a broader crisis affecting Southern Africa.
• Price increase impacts population's ability to meet basic needs and food security.