Why cooking oil prices may not stabilise soon
What you need to know:
- The shortage of edible oil, which has been blamed on high global prices of unrefined palm oil, is acute after some producers were forced to suspend production four months ago, leading to a sharp rise in domestic prices
Dar es Salaam. Tanzanians may have to wait a little longer before prices of cooking oil stabilize as manufacturers grapple with shortage of raw materials from local and foreign sources, The Citizen has learnt.
The shortage, which has occasioned a rise in global prices of crude palm oil, has been so acute that some producers have been forced to suspend production for a period of four months now.
Currently, a five-litre can of sunflower cooking oil fetches between Sh33,000 and Sh40,000 in major shops across Dar es Salaam, a massive jump from only between Sh20,000 and Sh25,000 about six months or so.
Similarly, that of refined palm oil fetches up to Sh25,000, up from about Sh18,000 six months ago.
“The major challenge that local producers are grappling with is raw-materials and not taxation,” the deputy minister for Industry and Trade, Exaud Kigahe, told The Citizen yesterday.
Tanzania’s annual cooking oil demand currently stands at 600,000 tonnes.
But, locally-produced raw materials only produce 250,000 tonnes.
This leaves a deficit of 350,000 tonnes which is covered by imports.
The ministry of Agriculture, Mr Kigahe said, was undertaking a sensitization programme to encourage farmers to use high-quality seeds to raise their sunflower production.
Also being considered was the introduction of contract farming system in the sunflower sub-sector.
“That way, we will be able to produce the remaining 350,000 tonnes in the next two to three years,” he said.
A source at the East Coast Oil Mills who did not want to disclose his name said their company had suspended the cooking oil refining section due to a rise in operation costs, occasioned by high tax charges and global market prices.
“For the past two months, we have completely stopped production of cooking oil as we buy time to monitor global prices,” the source said.
G&B Soap Limited’s chief executive officer, Mr Godliving Makundi, shared similar sentiments.
“Rising global prices, coupled with high taxes and other running costs, have forced us to suspend our refinery and opt for importing refined ones,” he said.
He said it costs them $1,200 (about Sh2.7 million) to buy a single tonne of refined cooking oil from Malaysia and India while transporting the same costs another $50 (about Sh115,600).
As a result, he said, his company was selling a 20-litre can of imported cooking oil at Sh77,000 while a 10-litre one fetched Sh40,000.
“We have sold all the cooking oil that we have ordered the previous time and we have placed another order from Malaysia but I don’t think the price will be the same. It could have risen again,” he said.
Mr Makundi said the government should reduce the 25 percent tax on crude oil to enable them to import and refine it locally.
According to him, the process to come up with edible oil from crude oil is very expensive because one needs to refine, bleach, separate, do the fortification and pack in containers.
But the government says ministries of Industry and Trade, Investment, Agriculture and that of Finance and Planning would meet to deliberate on issues pertaining to taxation before the government tables its 2020/21 budget in Parliament.
He said the government had provided more permits to import cooking oil to bridge the gap during the past few months, noting however that the exercise was being made complex due to the Covid-19 pandemic. The pandemic, he said, was affecting transport logistics.
“But we believe from June or July prices will go down because that’s the time farmers will start harvesting their sunflower,” said Mr Kigahe.
A survey in some retail and wholesale shops shows that the 20-litre can was now fetching up to Sh90,000 while a 10-litre fetches Sh45,000.
A wholesaler who runs a shop at Africana known as Mama Samuel said the prices of cooking oil have been going up almost every succeeding month during the past one year or so.
“The edible oil I have in stock is in 10-litre containers, which I sell at Sh45,000 per container….One year ago, I used to sell same for only Sh28,500,” she said.
In the Ubungo and Tegeta areas, a 20-litre can of cooking oil fetches between Sh88,000 and Sh91,000.
That is a rise from the previous price of between Sh57,000 and Sh60,000.
Tanzania spends around $80 million (about Sh184 billion) per year on importing assorted cooking oil brands from countries such as Malaysia and Indonesia, as well as from some neighbouring countries.
