Pauline Etienne
21 November 2007
Port Louis — A spokesman for the private sector considers that the State Trading Corporation overstepped its limits. Direct negotiation is against fair competition and can have an impact on product quality.
Les Moulins de La Concorde said the flour chosen on the international market when the bid was launched corresponded to specific norms while there is no guarantee concerning he flour negotiated by the STC.
"We are back to square one, with the reintroduction of negotiations instead of transparent open bids," states the communiqué of Les Moulins de la Concorde (LMLC) published yesterday. This press release follows the conflict between this private company and the State Trading Corporation (STC) about the supply of flour on the local market.
After LMLC informed the STC that the price of flour would inevitably raise - because of the great increase in the price of wheat as well as freight - the STC started direct negotiations with international flour providers. (see inset)
For LMLC, this behaviour is simply not transparent and goes against the principles of fair competition. An economist from the private sector, who has wished to remain anonymous, is of this opinion. "It is undeniably a step backward because negotiations are clearly not as transparent as an open bid," says this source from the private sector. "If we had an independent commission on fair trade, there is no doubt that it would take severe actions against the STC."
Distorted competition regulations
For the economist, it is not normal that the client - here the STC - goes and looks for new suppliers after a whole process has been completed to invite tenders and the bid has already been made. "Is this in the norms of an open tender? I think this is the main argument of the communiqué."
The fact that the actions taken by the STC distort the competition regulations is not the only problem. The communiqué also points at the difficulty of ensuring a product of good quality. "Bids were made according to a certain quality of flour. Who will be able to check that the flour obtained for a cheaper price has the required quality?"
This issue is all the more important as people remember the Desbro and Amul episodes. The iron bars imported on the local market and the Indian brand of milk are two examples that the STC can't always make sure that norms of quality have been respected. "The way the STC behaved in the Desbro case brought a lot of problems such as a shortage in iron bars on the local market for quite a long time as well as an increase in prices," this well-informed member of the private sector remembers.
The STC tends to believe that it can step in each time there is a risk that prices will rise. Even when there is a difficult international context that makes it unavoidable to have price increases, the STC thinks it can interfere and make sure the population does not suffer too much. Even though the initiative may be laudable, it is a fact that this can be done to the detriment of quality in some cases.
Moreover, those products depend on the international context and the STC can't overlook this aspect. "The fact that there was only one bidder interested in providing flour to Mauritius shows that we have to better organise ourselves to face the country's specificities," the economist points out.
For him, the only way of preventing such "abuse of power" is to have a clear legal framework that would allow fair trade once and for all. The Competition Bill, discussed in Parliament yesterday, is expected to facilitate this sensitive issue.
Chinese flour
The STC is said to be interested in buying flour from China. The cargo should arrive in Mauritius next January but there has been no bid from the Chinese company. Moreover, this raises the issue of quality again as the storage might not be done in the best possible conditions - which could have consequences on the long-term conservation of the product. LMLC said that the increase would be by 52% while the STC made it clear that the new prices that would be applicable according to the LMLC proposal would rise by 73 %.
The conflict may not be over soon
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