Refined cooking oil manufacturers in the country under the banner of Edible Cooking Oil Association of Malawi (Ecoam) have lamented a drop in demand for the commodity following surge in prices.
The association has since issued a fresh call for removal of the 16.5 percent Value Added Tax (VAT) on cooking oil. The VAT was introduced in the 2020/21 national budget.
The group says this is posing a great threat to the industry where sales have gone down by about 50 percent in the past two months as local consumers are reportedly opting for smuggled cooking from neighbouring countries.
The association has also warned that, if the situation does not improve, there is a great risk of massive retrenchments in the industry.
Ecoam Chairperson Jayshree Patel issued the warning on Wednesday when addressing journalists on impact of the VAT on cooking oil.
“The financial losses are rising and companies cannot afford any more to hold on as there is no hope for the demand to grow with such imparity and exposure to unfair competition with smuggled oil,” she said.
An official from Mount Meru Millers Limited Satendra Salal said the sector was on the verge of collapsing.
But in a statement issued recently, revenue collector, the Malawi Revenue Authority, said the re-introduction of the VAT on cooking oil was not expected to result in price increases.
“When a commodity is exempt, the VAT that comes with input is absorbed as part of the costs on inputs. This, therefore, increases the cost of the product or production cost,” the statement reads.