Edible oil makers in forex quandary

Zimbabwe’s edible oils manufacturers have reportedly relapsed into an acute foreign currency crisis amid revelations prices for imported crude cooking oil have shot up nearly 100 percent on the global market.

This explains the astronomical increase in the prices of cooking oil on the domestic market for much of the year, likely to result in market deficit if producers do not receive increased allocations on the formal market.

Zimbabwe faces acute shortage of soya beans and recently criminalised its side marketing by farmers and middlemen. As a controlled commodity, soya beans can be sold to the Grain Marketing Board or licensed contractors.

Such is the gravity of the situation that soya beans exports from Zimbabwe have also been banned. Offenders face a fine three times the value side marketed and possible jail term of up to two years if convicted.

Under the new regulations farmers should not store or move above 100 kilogrames without permission from GMB.

To illustrate the crisis of soya deficit in the country more graphically, which prompted the Government to introduce stringent trade regulations, Zimbabwe produced 51 000 tonnes over the five last years against demand of 241 000 tonnes.

Zimbabwe faces a serious forex crisis, due to its wobbly economy after nearly two decades of economic meltdown. This explains why it uses a special auction to allocate forex for imports only on a priority basis, to key areas.

And so, since the global price increase since late last year, oil expressers now require US$20 million, which is double the US$10 million they were receiving from the central bank’s auction market to meet domestic demand.

Industry players who spoke to this publication said the international price for crude cooking oil, which is imported and refined in Zimbabwe, have jumped from US30 cents to US69 cents on the Chicago Board of Trade.

Oil expressers Association of Zimbabwe president Sylvester Mangani, told Business Weekly in an interview this week that the allocations from the auction were no longer adequate since the sharp rise in global prices.

“This equates to movement from US$900 per tonne delivered to Harare to US$1 650 per tonne delivered to Harare. The increase is majorly attributed to the green fuel initiative of the United States of America (USA).

“They (USA) are converting more soya beans into biofuels after the new President (Joe) Biden came to power. Strong demand from China and India is also keeping supply to the market limited,” Mangani said.

The strong global demand has also seen prices of other oils from palm and sunflower rallying significantly over the past nine months. The prices have reportedly vaulted 85 percent during the period under review.

Demand for cooking oil in Zimbabwe stands at approximately 12 000 tonnes per month, the bulk of which must be imported because supply from the domestic market is only enough to last a single month.

The southern African country may see an upsurge of imported and refined cooking oil, if local producers continue to face acute shortages of forex, despite having excess bottling and refining capacity.

However, the utilisation of individual capacity depends on the operator’s efficiency and the availability of foreign currency to procure key raw materials, the major input of which is crude cooking oil and is mostly imported.

Zimbabwe has about five active producers of edible oils namely Surface Wilmar, Pure Oil, Cangrow, URL and Willowton. Each receives an equal allocation from the Reserve Bank’s weekly auction, on priority basis.

Following extensive investment in the industry over the last decade, Zimbabwe now has capacity to produce 1 100 tonnes per day of the basic commodity, which equates to three times the monthly national demand.

“Supporting imports of regionally grown soya beans to supplement the local crop will go a long way in proving a cheaper source of crude oil with local value addition,” Mangani added.

Industry players hope the decision by the Government, through SI 97 of 2021, restricting delivery of soya beans to contractors, is a good initiative that will activate the three only seed crushers.

“The Government has initiated a promotion of the soya beans programme, which will start giving good results in the coming year,” Mangani said, as new is now “being enforced on contract farmers restricting delivery to contractors”.-ebusinessweekly.c.zw