Cooking oil producers are struggling to access foreign
currency from the Reserve Bank of Zimbabwe (RBZ) and the interbank market,
which they need to import key raw materials, raising fears the country might
face fresh shortages of edible oils if the situation persists.
This also comes as banks have demanded cash deposits
upfront, at the going market exchange rate, to match the amount of foreign
currency cooking oil manufacturers may seek to buy from the interbank market.
But Reserve Bank Governor Dr John Mangudya poured cold
water on the claims by industry players that there was confusion and challenges
around access to foreign currency by the cooking oil producers saying the
companies know what to do, which they had always done in the past.
“These people know what they must do. They may be
misrepresenting facts. Isn’t it that they have been drawing down LCs (Letters
of Credit) from Afreximbank, including the fuel importers,” the RBZ chief said,
adding that there was no confusion over the issue.
If importers are to get forex on the interbank they will
need to fork out huge sums of RTGS dollars given that they will need to buy
hard currency at the market rate instead of the previous 1 to 1 allocations by
the RBZ.
Industry sources said last week that they had written to
the RBZ, through the Oil Producers Association of Zimbabwe, seeking
clarification on a number of issues, including the exchange rate at which they
should get the forex.
In their correspondence, cooking oil producers indicated
that some of their members had already run out of key raw materials, making it
impossible for them to produce one of the important items in the food basket.
The country currently requires an estimated US$250 million
for importation of crude oil and soya bean imports annually, which translates
to a monthly budget of US$20 million for the entire industry.
Official estimates show that the country needs about 2
million litres annually, but faces intermittent shortages due to foreign
currency challenges, as the country’s import bill continues to outstrip forex
inflows.
Local producers were responsible for meeting 95 percent of
domestic consumption, although Government last year allowed people with free
funds to import basics such as cooking oil following serious shortages.
The Herald Business gathered last week that cooking oil
producers were facing serious challenges getting foreign currency from the
Reserve Bank of Zimbabwe or the recently introduced interbank market.
In the 2019 Monetary Policy on February 22, 2029, the
Reserve Bank of Zimbabwe indicated that manufacturers would get forex through
letters of credit (LCs) or facilities guaranteed by the African Export and
Import Bank.
In his monetary policy statement last month Dr Mangudya
said foreign currency for key commodities including fuel and cooking oil, would
continue to be made available through LCs and or the central bank’s foreign
exchange allocations committee.
Industry sources said that cooking oil companies were now
in a quandary regarding access to the foreign currency they need to import
critical raw materials such as soya beans, crude soya bean oil and palm fats.
Further sources claimed that previously, and in instances
where the foreign currency was made available through RBZ, only selected
players would get large chunks of allocations while other firms received
nothing, which raised questions over fairness of allocations to the industry.
Efforts to get a comment from Oil Producers Association of
Zimbabwe (OSAZ) chairman Busisa Moyo
were not successful, as he was said to be out of the country.
Similar efforts to obtain comment from Finance and Economic
Development Minister Professor Mthuli Ncube, under whom the RBZ falls, and secretary
for finance George Guvamatanga also failed to yield results.
But Olivine Industries acting chief executive Sylvester
Mangani said after the MPS in February, they received further communication to
the effect that cooking oil producers would buy forex from the interbank
market.
“We have clarity on that; that we are supposed to get money
(foreign currency) on the interbank although initially, from the monetary
policy we were made to understand we would get it at a special rate from the
Reserve Bank of Zimbabwe because cooking oil is an essential product.
“Obviously, that is not the case anymore. We have had some
communication with the Reserve Bank,” he said.
Asked if they are able to get foreign currency from the
interbank market, Mr Mangani said cooking oil manufacturers were not getting
enough to sustain key imports.
“There is nothing trading on the interbank market, we are
yet to see meaningful activity on that market. There are just small volumes
trading, so whatever we are getting there cannot buy anything,” he said.
In January, Zimbabwe’s largest cooking oil manufacturer,
Surface Willmar, was forced to suspend operations over foreign currency
shortages.
The company, which last year acquired the country’s oldest
cooking manufacturer, Olivine Industries, makes Pure Drop cooking oil and the
Buttercup margarine and Olivine products brands.
Other than cooking oil, Olivine also produces margarines,
bakers’ fats, candles, soya chunks, beans, tomato products, curries and
mustards, chutneys and sauces, fortris juices, jams and marmalades, fruits and
jellies, industrial and other products.
As companies’ external payments liabilities kept ballooning
amid failure to obtain foreign currency for key imports, some manufacturers,
including oil expressers, started quoting prices in US dollars.
Another major cooking oil producer, Willowton, announced
this year that it would scale down production on the back of challenges in
securing foreign currency.
Major cooking oil producers in Zimbabwe include Surface
Wilmar, Olivine Industries, Willowton, Cangrow Trading, United Refineries and
Pure Industries. Herald
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