Majority sunflower processing factories have ceased production due to acute shortage of raw materials in the country.
As a result, the price of sunflower oil in the market has skyrocketed, with a five-litre container of natural sunflower oil currently trading at 24,000/-, a 71 per cent price rise from 14,000/- about two months ago.
"There is absolutely no sunflower oil due to scarcity of seeds for processing," Matzingo Enterprises Managing Director Jovine Matzindiko told the 'Daily News' in Dar es Salaam yesterday, adding that his Itigibased processing factory has stopped production due to raw material scarcity.
He said unreliable market had discouraged farmers from growing sunflower but remained optimistic that with rising prices, coupled with readily available markets, more farmers will embark on sunflower growing.
Speaking at the one-day entrepreneurs' exhibitions at Karimjee grounds on Thursday, Mr Matzindiko decried capital deficiency as a critical impediment to small business operations.
"We need between two and five tones of seeds for processing daily, for instance, but getting capital for sufficient raw materials annually remains our serious problem."
The exhibitions marked the official launching of Empowerment Dar es Salaam (EMPADAR) Club, an organisation that brings together Dar es Salaam based small and medium entrepreneurs who have undergone business training under BDG programme by Tanzania Private Sector Foundation.
Sources within the edible oil industry, however, say that prices of oil seeds produced in the country have almost tripled, thanks to the government resolve to scrap Value Added Tax (VAT) on edible manufacturers using locally produced seeds in their processing and production of cooking oil.
"It will take about two years for the manufacturers to feel the impact (of removing VAT) on their products but already sunflower producers are reaping the benefits through increased prices," Arusha-based Mount Meru Millers Business Group Director Atul Mittal told the 'Daily News,' recently.
Following the tax changes, the farm prices for sunflower seeds have increased to over 1,000- from the normal 350/- per kilogramme.
Finance and Economic Affairs Minister Mustafa Mkulo, moving the 2010/2011 national budget in Dodoma last June, announced the zero rated VAT to replace the 18 per cent VAT on oil manufacturers using locally produced oil seeds.
The tax changes have had huge positive impact on the industry, with oil manufacturers seeing the processing season prolonged to January because of increased availability of raw materials.
The increased use of locally produced seeds by industrial manufacturers seems to have exerted pressure on small scale processors. The tax relief came last year amid reports that the local edible oil processing industry was on the verge of collapse, bowing to intense competition from imports.
The local investors attributed their collapse to the government decision to waive tax on imported oils while subjecting the local producers to heavy taxation. The VAT of 18 per cent made locally produced oil more expensive than imports.
Cheap edible oil imports, most bearing fancy names, advanced packaging material and subsidies from governments of their countries of origin, imposed serious threat to local factories.
The local edible oil sector, including its informal division generates 55bn/- for the economy and engages over three million rural residents, primarily farmers.
Some 500,000 families rely on oil seed farming sector, with the edible oil sector mainly based on sunflower even though cotton, simsim, groundnuts and soya also contribute.
Available data show that oil extracted from sunflower seeds by local processors contributes 40 per cent of the national cooking oil demand.