The ManicaPost
John Sigauke Post Correspondent
The cooking oil story published in The Manica Post last week generates a ray of hope among Zimbabweans that it is very feasible to bring the economy back on the track again.
Cooking oil was one of the first products to be removed from the Open General Import Licence (OGIL) some two years ago. The removal produced tremendous results which are there for everybody to see today. The cooking oil industry has become a pacesetter in Government’s quest to boost local industry’s production capacity.
It was the success story of this sector that motivated the introduction of the Statutory Instrument 64 of 2016 which sparked riotous demonstrations on the both sides of the Limpopo River.
Today, the oil expressing sector is a proud employer of thousands of Zimbabweans. Locally produced cooking oil is currently occupying 95% of supermarkets shelves, a remarkable jump from 15% in 2014. The price of the local cooking oil has significantly dropped from $12 in 2009 to the current average of between $2.60 and $2.90 per two-litre bottle.
The cheap imports from South Africa and Botswana were exerting inequitable competition on the local oil pressers. However, government saw the potential in this sector and subsequently rendered its full support.
When government took the first step to protect the sector, there were needles outcries from the people who had been benefiting from status quo with some doomsters prophesying a massive shortage of the product. Nonetheless, the sector is now producing more than the estimated monthly national requirement of 7.5 million litres.
After the import restrictions, some of the foreign firms that used to export cooking oil here expressed interest to come and invest here. So far, there are four oil pressers in the country, namely ETG Parrogate, Surface Investment, Olive and United Refineries. The four oil pressers have a combined capacity to produce 20 million litres of cooking oil per month, which is more than double the national requirement.
However, the sad news is that the oil pressers are complaining about the shortage of raw materials in the form of mainly soya beans, cotton and sunflower seeds. They are currently importing crude oil which is costing them an arm and leg. The sector is complaining that South African companies were creating unfair competition when the local oil expressers order bulk crude oil from countries such as Brazil through South African companies.
They are allegedly being charged a price higher than that of fully packed oil. There are strong suspicions that the move is a ploy by South African companies to make local oil more expensive their imports.
However, all this can be avoided if the production of raw material was localised. The oil industry must take an active role in the growing of crops such as soya bean, cotton and sunflower, which are the major sources of crude oil.
Government has done its part through putting in place protectionism policies, some of which actually attracted brickbats and a near diplomatic stand-off with its southern neighbour. Cooking oil was the first product to benefit from import restrictions two years ago. Government also protected the sector through tariff regimes or heavy duty imposition on imported cooking oil. Government also placed crude oils on the critical list of import requirements.
The sector cannot continue to cry. With all this support, the sector must accept to be weaned so that Government focus is shifted to other sectors. It must pluck a leaf from other sectors which have taken an active role to support the production of their raw materials.
Prime examples are the National Breweries, Tobacco companies and lately the Grain Millers Association. All these entities have ventured into contract farming with farmers, even small scale farmers. For the first time, grain millers have also ventured in contract farming.
Contract farming pays dividends to the sector as witnessed between 2009 and 2014 when the sector gave minimum support to contract farming. That, support saw the supply of cooking oil increasing from 900 000 litres a month in 2009, to 3.3 million litres a month in 2013, before reaching 5.2 million litres in 2014. They must therefore amplify their efforts and interest in contract farming.
The localization of raw materials will benefit many other sectors in the value chain. The fertilizer companies will enjoy collateral benefits, so will be the transport, chemical and fuel companies among other companies in various sectors. Jobs will be created as well in all these companies. The local production of raw materials is even cheaper than importing.
The money being used to import crude oil must be deployed to the farming of soya beans, sunflower and cotton. This will reduce the trade deficit currently standing at $1.8 billion.
It will also reduce the outflow of cash which has partly caused the current liquidity challenge facing the country. Zimbabwe cannot continue to be a supermarket economy of other countries.
The oil expressers are currently importing close to 200 million litres of crude oil per annum. According to the Oil Expressers Association, the farmers need to grow 350 000 tonnes annually of cotton to produce 200 000 tonnes of seed for the manufacturing of 32 million litres of cooking oil per year. They also need to produce 300 000 tonnes of soya beans per year to produce 48 million litres of soya bean oil per annum. Currently farmers are producing 70 000 tonnes of soya beans per annum.
