Edible oil sector challenges: Lessons from Tanzania
Published On May 6, 2021 » 1546 Views» By Times Reporter » Business, Columns
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TANZANIA, like Zambia, faces insurmountable challenges in its edible oil sector.
Imagine, in 2018, Tanzania produced 1.6 million tonnes edible oil, which represented a sharp decline by 75 per cent compared to 2017 production figures.
On the other hand, the country’s demand is estimated at 200,000 and 300,000 metric tonnes per year.
This therefore means that the country’s imports of edible oils amount to an estimated 48 to 50 per cent per annum.
Essentially, Tanzania produces edible oils mainly from groundnuts, sunflowers, palm oil, sesame, coconut, and cotton
The purpose of this article is to look at how Zambia can draw lessons from Tanzania on how it has been tackling its equally daunting challenges in its edible oil sector.
Hopefully, in next week’s article, this platform will look at how Zambia can address the prevailing high prices and other challenges in her edible oil sector.
As earlier alluded to, Tanzania has over the decades had an over-dependency on imports of major essential food commodities, such as sugar and edible oils.
To reduce this dependence and thereby foster its local industry, Tanzania’s Government resorted to imposing tariffs on imported edible oils at high rates, ranging from nine per cent in 2016 to 33 per cent in 2018.
This was part of an import substitution strategy, aimed to protect the local industry and thereby become self-sufficient in the domestic production of edible oils.
Tanzania’s case study reveals that the use of tariffs as the main tool to curb imported edible oils, and also foster the local edible oil industry has not yielded the intended outcomes.
Conversely, this caused price escalations of edible oils in domestic markets instead of boosting local production.
Think of it, the Government is tackling a multi-faceted problem by over-relying on a single tool to boost local production of edible oils.
Additionally, Tanzania’s edible oil sector is faced with multiple factors; the inability of the processors to source sufficient quality seeds at the right price.
Following on these supply dynamics have over the years been exacerbated by the prohibitive cost of manufacturing which has trickled down the value chain.
Essentially, Sunflower is the main source of edible oil production in Tanzania; It represents an estimated 38 per cent of the domestic production.
On the other hand, Tanzania is the second-largest sunflower seed producer in Africa, and is ranked one of the top 11 producers in the world.
Remarkably, Tanzania has had to grapple with a number of challenges; low productivity due to use of poor traditional seed varieties, poor farming practices, lack of quality processing facilities and outdated technology.
Over the last 11 years that I have been in farming as a business, I have been privileged to interact with farming peers in Tanzania.
A number of them have in the last six years bemoaned the cost of imported hybrid seeds.
Further, several small-scale farmers have over the years been hampered by inadequate access to finance.
This has resulted in inadequate supply of grains for edible oil production culminating into shortages of cooking oils and consequent high retail prices of edible oil products.
Thankfully, three to four years ago, the Tanzanian Government has been seen to consistently make interventions to increase smallholder farmer’s production.
These interventions include providing farmers with access to increased availability of hybrid seeds.
Thus, when production cost is minimised and yield is increased, and then domestically produced edible oils become competitive with imports.
The use of improved seeds and agronomic practices for edible oil seed production has over the last four years shown a tremendous increase in yields using minimum inputs.
This improvement in availability of relatively cheaper and high yielding seed varieties and other modern technologies have shown a trend in the reduction of costs of producing sunflower.
These have been critical in reducing edible oil imports and improving food security in Tanzania.
The seed intervention initiatives have been part of broad targeted reforms by the Tanzanian Government to increase the production levels, productivity and competitiveness of the edible oil sector.
The Tanzanian government, in 2018, further introduced value added tax (VAT) exemptions on importation of agricultural processing equipment and sunflower seed cake.
Notwithstanding this, the Tanzanian Government has maintained import tariffs on crude and refined palm oil at 10 per cent and 25 per cent, respectively, to further boost the competitiveness of locally produced sunflower oil.
On the supply side, the government has also emphasised the use of hybrid sunflower seeds, with a special emphasis of producing sunflower seed locally.
To further incentivise sunflower growers, the Tanzanian Government has encouraged contract farming to assure farmers with readily available markets for the edible oil products.
For comments e-mail: ntumbograndy@yahoo.com Mobile +260977403113 +260955403113

The author is the Managing Consultant at G. N Grant Business Consultant, a Chartered Certified Accountant (ACCA), a Master of Business Administration (MBA) holder, with a Specialism in Strategic Planning, and a candidate for the Herriot Watt University (Scotland) Doctor of Business Administration (DBA)

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