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UPSCALING LOCAL CONTENT IN THE EDIBLE OILS SECTOR

AS highlighted by the 2020 Zambia Development Agency food processing sector investment profile, Zambia is faced with an increasing edible oil deficit which is serviced by imports of edible oils that are worth more than $200 Million per annum.

Edible oils are sourced mainly from vegetable products and in Zambia, the major oilseed used in the production of edible oils is soybeans which accounts for 60% of local production, cotton seed oil extraction accounts for 19% while sunflower oil accounts for 15%. The remaining 6% is sourced from minor oilseeds such as ground nuts.

While the country demands a total consumption of edible oils estimated at 120,493 tons per year, the Indaba Agricultural Policy Research Institute (IAPRI) estimates that in 2019 the total domestic production of edible oils stood at 40, 096 tons for the year annum recording a deficit of 80, 397 tons. Thus, the deficit is met by imports of the refined edible oil from the rest of the world with the Southern African Development Community (SADC) taking up 54% of the imports, the Asia Pacific Economic Cooperation at 27% and the Common Market for Eastern and Southern Africa (COMESA) at 19%.

Importance of edible oils to the economy cannot be emphasised. Every meal prepared in most households utilises edible oils. Whilst manufacturers source their oil seed raw materials such as soybeans and sunflower from local farmers, the farmed oilseeds are not enough to meet the local processors demand. Low production of raw materials utilised in the production of edible oils has thus led to the domination of crude oil imports in Zambia’s trade bill, nonetheless, imports of refined edible oil have also been on the rise in the recent past.

Apart from the vegetable oilseeds used in the production of edible oils, Zambia also uses palm oil in the edible industry. Crude palm oil is largely imported and locally processed into palm oil but has proven to be expensive to acquire.

Despite the large market and demand for edible oils, the potential for growth of the local supply of oilseeds is limited by little technical support and policy challenges. Several factors are identified as constraints to the upscaling of the production of oil seeds such as sunflower and soybeans used in the production of edible oils.

One of the major factors identified is that the Zambian Government has prioritised and put much focus on the production of maize through the input and marketing subsidies provided through the Farmer Input Support Program (FISP). Focus on maize has created little appetite for crop diversification by smallholder farmers into other high value crops such as soybeans which is nutritious and important in the production of edible oils. While the newly introduced electronic e-FISP voucher was discontinued, the flexibility of the e-FISP in terms of input choice helped to facilitate diversification into crops such as soybeans.

Another challenge faced in the farming and growing of soybeans is the lack of knowledge among farmers. Farmers have little knowledge on how to grow healthy soybeans plants with a high yield therefore, they tend to avoid it. Further, the cost associated with the production of soybeans is very high, coupled with poor infrastructure such as storage facilities which creates an entry barrier for smallholder farmers, most of whom heavily rely on the for inputs. Moreover, there is no ready market for farmers to sell their produce.

In addition to the relatively high cost of production for soybeans, soybeans products including cooking oil are subject to the standard value added tax (VAT) of 16%, making the locally produced cooking oil less competitive than imports from countries such as Kenya, and Tanzania, which have removed VAT on edible oil.

Rectifying the technical and policy issues for oil seed growers, require the Government and private sector to work together to understand and remedy the implementation challenges of the (e-FISP) and revert to rolling it out country-wide. Government intervention and support would reduce the cost of production of these oilseeds and make them attractive for local farmers to grow.

Additionally, addressing the high production and marketing costs will require that certain specific taxes on value addition such as VAT on refined oil will needs further scrutiny. Where economically viable, the government should consider making such products VAT exempt.

To reduce the costs on imported crude palm oil, local investments in the sector should be encouraged in order to move from a plantation to the establishment of a palm processing plant that will be able to meet the country’s demand for palm oil and greatly decrease imports.

Finally, to meet the gap in knowledge and information on how to successfully grow soybeans for processors, farmers and processors should actively look to work within associations such as the Zambia Association of Manufacturers to facilitate trainings specific for what farmers need to know to be able to successfully supply to processors.

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