Sugar shortage shows economic confusion

30.11.2016

Cairo grocer Bakr Atef has stopped selling sugar since authorities seized his stocks in September, accusing him of hoarding as a growing economic crisis angers Egyptians and raises fears of street protests.

"They are coming and taking any quantity they find. Even if you are selling just 10 kilos, they'll take it ... if they do this again and I lose my goods, it will shut my shop," said Atef, who insists he has done nothing wrong.

Egyptians love sugar, heaping large spoonfuls into their cups of tea. It is sold in government supermarkets as part of a massive food aid program for the poor.

But public uproar over sugar shortages has prompted the government to sweep the country, confiscating supplies from businesses it accuses of hoarding.

Sugar is the latest vital commodity to be thrown into crisis in Egypt this year. A row over regulations left the world's biggest wheat importing nation unable to obtain the supplies it needed on the global market, while a dispute over prices caused a shortage of rice despite a bumper crop.

The sugar crisis raises questions about President Abdel Fattah al-Sisi's management of the economy just as his government seeks to secure a $US12 billion ($A16 billion) loan from the IMF.

More austerity is expected as a condition for the loan, on top of tax and price increases, raising fears of a repeat of the street protests that drove two of Sisi's predecessors from office. A currency crisis has cut imports and caused large areas of business to seize up.

The sugar raids came to a head when authorities briefly seized 2,000 tonnes at confectionery maker Edita, one of the largest companies listed on the Egyptian stock exchange.

But while a shortage of US dollars has reduced imports generally, traders and grocers say the sugar crisis was self-inflicted - the direct result of the state's takeover of their sugar reserves and distribution network earlier this year.

Traders say that despite ample supplies in its warehouses the government is simply not getting the sugar out to the stores where ordinary Egyptians can buy it.

"The government suspects the traders of hoarding but it is actually the government that is hoarding the stocks," a Middle East sugar trader told Reuters.

Egypt consumes three million tonnes of sugar a year but produces just over two million tonnes, with the gap filled by government and private imports usually purchased between July and October.

Traders say the crisis began in August, when the Supply Ministry raided sugar factories nationwide and seized 250,000 tonnes - most of the reserves held by the private sector - to secure supplies for its subsidised food outlets after failing to procure its usual shipments on time.

That coincided with high prices on the international sugar market while a rapid fall in the Egyptian pound and a 20 per cent import tariff to protect local producers discouraged private importers from buying in the usual quantities.

With private sector imports low and stocks under government control, prices shot up, shelves went bare, and talk of a crisis dominated local media ahead of calls for a protest on Novernment 11 over deteriorating economic conditions.

Speaking in parliament this week, Supply Minister Mohamed Ali Meselhy said the government had responded to the crisis by increasing the amount of sugar sold at its outlets to 240,000 tonnes in October from 70,000 normally.

But merchants say this is not enough, because the government is not releasing the sugar it seized from the private sector in August and is stepping up its confiscatory raids.

Atef, the Cairo grocer, had just 350 kilograms at his supermarket when government inspectors took it all away.

When he produced receipts showing his sugar was obtained legally, prosecutors told him the goods would not be returned but he would be reimbursed at half the price he had paid.

Fearing further raids, merchants and retailers like Atef are no longer buying sugar, which makes the supply squeeze worse.


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