Relief as edible oil prices start dropping in Tanzania after tax measures

Dar es Salaam. The government’s zero rating of import duty on crude palm oil is starting to have an impact as local processors say the decision has reduced the burden on them and that its benefits have started to be felt by final consumers.

Presenting the budget for the financial year 2022/23 in Parliament last month, the Finance and Planning minister, Dr Mwigulu Nchemba, announced, among other issues, that the government would zero rate crude palm oil starting July 1, 2022 in a deliberate effort to reduce the burden on local processors for the general good of Tanzanian consumers.

Before the new development, crude palm oil used to attract an import duty of 25 percent which was set up in 2018.

“This measure is intended to protect consumer welfare against skyrocketing price, enhance economic growth, employment creation and value addition,” Dr Nchemba said in a move that became legally-binding after the endorsement of the Finance Act, 2022. And, in line with that, the Chief Executive Officer for East Coast Oils and Fats Limited which is a subsidiary of Mohammed Enterprises Tanzania Limited (MeTL) Group, Pradip Shah said they have started to import crude palm oil at zero tariff rate and that Indonesia - which is the main source of the product - has lifted their export ban.

“It has been very tough for us since 2018 when the government raised import duty for crude palm oil to 25 percent while other East Africa states remained with zero. So we were less competitive in the market. We lost an export opportunity to Burundi, Zambia and Malawi,” Mr Shah told a delegation of officials from the East African Business Council (EABC) which visited the factory on Monday.

The EABC is currently on a tour of factories in Dar es Salaam.

He said with the Covid-19 pandemic, Indonesia had stopped production and applied an export ban. However, the country has resumed production though prices are relatively higher at $1,950 per metric tonnes since December 2021 compared with $650 in 2018/ 2019.

The trade and policy advisor at EABC, Mr Adrian Njau said the visit to Dar es Salaam-based industries was aimed at establishing understanding on whether they utilize their capacity and how they can meet local and export demand for the product.

“We also seek to understand policy and non-policy challenges which they face so that we can convince policymakers to mitigate or remove them to protect local industries within the EAC,” he said.

Meanwhile, available data show that edible oil prices have started to decrease, with a random survey showing that per litre costs between Sh7,000 and Sh7,500 from Sh8,000 to Sh9,000.

The deputy minister of Investment, Industry and Trade, Exaud Kigahe was recently quoted by The Citizen’s sister paper, Mwananchi, as saying that the prices were falling due to several reasons including the government’s efforts to encourage even small-scale manufacturers to increase production as well as the removal of import tariffs.

“The Government’s goal is to ensure that more recovery is available and to encourage domestic production so that availability of the product is no longer a problem. It [the product] should also reach consumers at affordable prices,” he said.

The 2019/20 National Agricultural Census Sample Report released by the National Bureau of Statistics (NBS) show Tanzania has the potential of raw materials which can meet only 45 percent of local edible oil demand and the remaining is imported.

Meanwhile, the EACB Chief Executive Officer, Mr John Bosco Kalisa urged the EAC partner states to increase the Common External Tariff of imported Edible oil to 40 percent to enable the EAC local producers to sustain and expand their market through the utilization of idle production capacity.

The finding indicated that the installed capacity of the refined oil production of the EAC edible oil manufacturers stood at 3.151 million metric tons which is 51 percent production capacity utilization of resources.

According to Njau they are visiting several industries from edible oil, cement, and leather, to sugar among other products which are important and very volatile in price change.