MORE than ever before, Zambia’s policy makers and economic managers inevitably need to find a once-for-all lasting solution to the issues underlying the edible oil sector in Zambia including the root causes of the high cooking oil prices.
In the recent past weeks there have been rising speculations among stakeholders in the economy on the possible hike in edible oil prices in Zambia.
This follows the expiry of Statutory Instrument (SI) number 63 of 2021 which expired on 31 October 2021.
Many stakeholders have been asking themselves, what next after the expiry of this S.I 63 or what happens after its two month extension if anything?
Ironically, S.I 63 was intended to suspend customs and exercise duty on importation of edible oils, meant to help cushion the prices of cooking oil,
The suspension of excise duty meant that cooking oil was imported in the country and sold at lower prices.
Interestingly, this period was the heated general elections campaign period!
Essentially, prices of cooking oil had in the last one year up to about February 2021, prior to the August 12, 2021 general elections campaign period risen to unprecedented high levels of up to more than 100 percent.
On average, a two and half litres of locally produced cooking oil is currently fetching at around K115 from around K40 to K45 in 2019.
The question on the minds of many stakeholders has been, is the New Dawn Government going to sacrifice earning revenue by extending the suspension of excise duty?
If the Government decides to restate the excise duty, what would be the effect of excise duty on imported cooking oil? And what would be the ripple-effects on other sectors of the economy?
Of course, this is in addition to the raging talk in the economy on the move towards cost-reflective tariffs on fuel and electricity.
It should be noted that a significant hike in the cost of essential commodities such as cooking oil inevitably takes a toll on the general citizenry.
It’s no surprise that one of the key issues that the current ruling party leveraged on so well during their campaign prior to the general elections was the exorbitant cost of cooking oil.
The purpose of this article is to make a follow-up on the developments in the edible oil industry since the last series of articles in April earlier this year.
Thankfully, the country has a new Government in place and almost everyone is eagerly waiting and saying, what is that this Government is going to do differently in the edible oil sector?
Was suspending excise duty for a specified election campaign period the solution to the high prices of cooking oil?
Is the importation of cooking oil the lasting solution to Zambia’s edible oil crisis?
Therefore, President Hakainde Hichilema’s New Dawn Government should take a holistic -entire-value chain activity analysis as opposed to looking at the prevailing situation from a narrow point of view.
From my research in conjunction with think-tank research institutions and individual experts in the country, I have learnt that the edible oil sector in Zambia is fraught with a cheating culture.
Secondly, by April earlier this year, research revealed that there hasn’t been any thorough research that has been carried out in this sector.
Think of it, this is a heavily guarded sector!
Seed Crushers and everybody else is secretive and almost nobody is ready to give information to anybody including the Government!
That’s hair-raising, isn’t it?
Imagine, a national economy making decisions in such kind of a scenario: without reliable information, and the like.
That’s exactly what is prevalent in this sector!
What’s the long-term lasting solution to the high prices of edible oils in Zambia?
The first thing once again is to look at the entire value chain analysis of the edible oil sector in Zambia?
Why is the country being dependent on suspending excise duty to sustain a low price level in cooking oil?
It would never be an over-emphasis to state that Zambia consumes an estimated 120,000 metric tonnes of edible oil
To meet this demand, the country needs an estimated 800,000 metric tonnes of soya beans.
Remarkably, 70 percent of soya beans is grown by small scale farmers whose productivity is very low.
On the other hand, Commercial farmer’s production only accounts for 30 percent of the sector’s production.
In the 2020 farming season, an estimated 351,000 metric tonnes out of a demand of 800,000 metric tonnes was produced.
Following on, not all this 351,000 metric tonnes or indeed any other produce is converted into cooking oil.
Thus a small scale farmer on average produces one tonnes or less per hectare while a commercial farmer produces two-and a half tonnes per hectare
It’s important too to note that soya beans require various inputs, which are quite expensive.
These include a bag of 25 kilogram seed which is estimated around K750, fertilizer, inoculant, herbicides and fungicides plus the cost of land preparation and harvesting.
Look at this year’s 2021/2022 season, how many small scale farmers have had access to soya bean seed, inoculants, herbicides and fertiliser and what cost?
How many more scale farmers have received seed or any other farming inputs, this year than last year or any other planting season?
Indeed, they say doing the same thing and expecting different results is a sign of insanity!
What is Zambia doing differently this time? Is it ever going to be, excise duty suspended, lifted, subsidies, price hikes, imports and all that merry-go-round?
To add ‘the final nail to this coffin’ edible oil crushers complain of high electricity and fuel costs to process the edible oil.
It’s obviously an open secret that the cost of electricity and fuel in Zambia is quite high.
The only hope and once-and-for-all solution to Zambia’s high cost of cooking oil partially lies in the New Dawn pre-election pronouncements: Reducing the cost of fertiliser, seed and other farming inputs to small scale farmers.
Additionally, the Government should take more keen interest and encourage research in entire value chain analysis and walk-the-talk after doing the analysis.
For comments e-mail: email@example.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)