25 May 2017

Zimbabwe: Cooking Oil Sector Rebounds

Zimbabwe's cooking oil manufacturers are now producing more than enough to meet domestic demand, creating opportunities for the export of surplus cooking oil, the Financial Gazette's Companies & Markets can report.

The increase in production by the sector has largely been due to a government ban on imports, which targeted several products including cooking oil. The ban was meant to protect local industries from cheap imports while also allowing local companies to resuscitate operations that had been affected by a hyperinflationary crisis which ended in 2009.

The import ban was made in June last year, despite opposition from regional countries which charged that it violated regional trade agreements.

Latest statistics from the Confederation of Zimbabwe Industries (CZI) indicated that the sector had recorded a 50 percent increase in production since the import ban, from around 12 000 metric tonnes per month to 18 000 metric tonnes of cooking oil per month.

National demand for cooking oil is pegged at 10 000 metric tonnes per month. This means the sector has surplus output of 8 000 metric tonnes monthly.

Leading South African firm, Willowton Industries, which used to export its D'Lite cooking oil brand into the country, was forced to open a production plant in the country to mitigate the effects of the ban. The factory is based in Mutare.

CZI president, Busisa Moyo, said Zimbabwe was now well placed to become a cooking oil exporter.

Moyo said most oil expressers were slowly reducing their prices due to a glut in supply, a move that was benefitting consumers.

"Cooking oil prices are slowly coming down because of the competition. D'Lite produced by Willowton used to be imported into the country for many years. As a result of the measures to the oil sector, Willowton decided to set up their factories here to produce within Zimbabwe. These are the positive results of the support measures. However, it means that competition within Zimbabwe in the cooking oil sector is now stiff because there is over-capacity. There is more capacity than demand. This has resulted in players reducing prices to compete. Competition is good," he said.

He said the challenge for manufacturers was to get their products into markets outside the country.

"There is clearly an oversupply. Yes, there opportunity to export but in order to export, we need to be competitive and in order to be competitive, we need to produce our own soya beans, cotton and sunflower seeds. We need our agricultural inputs to be cost competitive," he said.

Moyo is himself the chief executive officer of United Refineries Limited, which manufacturers a number of fast moving consumer goods, including cooking oil. Other players in the sector include Olivine Industries, National Foods and Willowton Industries.

These produce brands such as Roil, Sunshine, Pure Drop, Shoppers Choice, Olivine, Pure Cooking Oil and D'Lite.

Industry and Commerce Minister, Mike Bimha, who toured the Willowton plant recently, confirmed that the cooking oil sector was now operating at full capacity as a result of protective measures put in place by government.

"When we came up with SI 64 (Statutory Instrument 64 which brought about the ban), the whole focus was to support local producers against cheap imports. We did not ban but we sort of regulated on our basis to produce. And I think one of the beneficiaries of that instrument was the oil expressing sector. They were operating below 20 percent capacity utilisation at that time. But as a result of these measures, the majority of them are now operating at full capacity and making inroads into the export sector," said Bimha.

Zimbabwe

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