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Cooking oil price hike on the cards

Government, oil manufacturers in blame game

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John Kapito

Ironic!

While the government is celebrating soya beans’ feat for topping the list of Malawi’s exports in the fourth quarter of the 2020-21 financial year, Edible Cooking Oil Association of Malawi says this has led to shortage of soya beans on the local market.

This, the association says, could lead to a rise in the price of cooking oil from November onwards.

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However, the Ministry of Trade seems to be surprised by the manufacturers’ position. It says the majority of local edible oil manufacturers rarely crush local oilseeds for production.

And Consumers Association of Malawi (Cama) has also weighed in on the issue. It has blamed the oil manufacturers for deliberately importing “expensive” crude oil as one way of externalising forex.

Cama has also blamed the government for “sleeping on the job” and letting manufacturers get away with impunity.

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During the fourth quarter of the 2020-21 financial year, soya beans raked in K53.7 billion, in the process contributing 27 percent to national exports.

However, the increased quantity of soya beans being exported has prompted Edible Cooking Oil Association of Malawi to warn that shortage of soya beans on the market due to massive export of the commodity could negatively affect local cooking oil prices in the coming months.

Chairperson for the association, Jayshree Patel, told The Daily Times at the weekend that, had the country not exported the bulk of its soya, it could have helped cushion cooking oil prices in the wake of a sharp rise in international crude oil prices.

Local edible oil manufacturers usually import crude oil from Brazil and Bangladesh.

Patel said the price of crude oil has skyrocketed by 120 percent in recent months, making it an expensive raw material for cooking oil.

She observed that most cooking oil firms had stocks of crude oil but the stocks would be running out between now and November this year.

She added that, by November this year, they would have no option but to buy crude oil— which is 120 percent more expensive than last year— as a raw material for cooking oil.

“When the current stocks of crude oil ran out, the price of cooking oil should also go up. Had it been that the country had enough soya [beans], we could have used it as an alternative raw material for cooking oil, thereby cushioning the price,” Patel said.

However, the Ministry of Trade has said it is incorrect and misleading to speculate that cooking oil prices could go up due to exportation of soya beans.

Spokesperson for the ministry, Mayeso Msokera, told The Daily Times that Malawi’s large edible oil producing companies rarely produce cooking oil from crushing local oilseeds.

He added that it is small producers and cooperatives in the industry that are involved in oil extraction from oilseeds.

“Secondly, we would like to reiterate that the ministry has the mandate to balance raw material needs of both the local producers and the need to promote exports. That is why the industries that combine imported crude oil with a small fraction of oil crushed from local oilseeds were given an opportunity to stockpile enough soybeans when the commodities were in excess supply on the local market,” Msokera said.

He said urged players in the local industry to invest in local value-addition by crushing and extracting oil from local raw materials rather than just importing crude oil from countries such as Brazil, a development that is draining the country’s foreign exchange and contributing to the exportation of jobs.

“The ministry is committed to supporting the industry through the necessary import and export regulations to safeguard their raw material needs if there is demonstration of significant local value addition investment and commitment.

“More value-addition also entails that the companies would continue to benefit from government incentives such as the Industrial Rebate Scheme, where other raw materials would be imported without payment of duty,” Msokera said.

Cama Executive Director John Kapito said edible cooking oil manufacturers in the country have no connection with local farmers and “deliberately” buy crude oil at expensive prices as one way of externalising forex.

He said the body has been asking the government to ban crude oil imports as the practice is exporting jobs.

“All they need to do is to give local farmers the assurance to grow soya and guarantee that they will buy the soya. But this has not happened as they [manufacturers] continue ignoring the farmer. When they buy from local farmers at all, they buy soya beans and groundnuts at below-market prices,” Kapito said.

According to him, crude oil prices are higher than soya beans and groundnuts prices, and that, therefore, no one should import crude oil into the country because they import it at expense prices in Brazil and Bangladesh.

“There is no crude oil assurance. In the end, Malawi Government has been sleeping on the job and these people have been allowed to lie about cooking oil prices,” he said.

Kapito said he would not be surprised if edible cooking oil prices rose by December this year.

All along, Malawi major forex earner has been tobacco.

President Lazarus Chakwera has been urging farmers and industry players to increase export products, instead of over-reliance on tobacco.

On April 20 this year, when he opened the tobacco-selling season at the Lilongwe Auction Floors, he told Malawians to accept that harsh reality that tobacco was a dying industry.

“What must be said and accepted is that our tobacco industry is dying, and we need an exit strategy to transition our farmers to crops that are more sustainable and more profitable,” Chakwera said.

He called on the Ministry of Agriculture to begin consultations with stakeholders and come up with the timeframe within which Malawi’s economy would be completely weaned off tobacco.

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