Tanzania is facing a huge deficit in the production of edible oil. The country depends on importation to meet the growing demand of consumable oil, with a large import bill currently standing at $294 million.
The East African nation imports 64 percent of its total edible oil requirements despite having a vast and promising production potential in palm oil and sunflower sub-sectors. According to the Tanzania Investment Centre (TIC), annual demand for edible oil stands at 500,000 tonnes, whereas the country’s supply is only 180,000 tonnes, forcing it to import 320,000 tonnes annually.
And with demand set to increase by to 700,000 tonnes over the next 11 years, the government is seeking investors in the oil processing sector to help bridge the supply gap, and reduce the huge import burden.
The demand forecast presents a viable investment case as it guarantees a growing market for investors in the nearest future.
Shortage in supply
Tanzania is Africa’s second-biggest producer of sunflower seeds.
The major sources of edible oil in Tanzania are a sunflower, palm, groundnuts, sesame, soya beans and cotton, while oilseeds are produced in almost all regions in the country.
The nation accounts for 35 percent of the continent’s output after South Africa which accounts for 46 percent. Despite the huge potential, the country experiences frequent shortages of cooking oil and rising retail prices.
In 2017, sunflower oil contributed about 40 percent of edible oil requirement of 330,000 tonnes, according to a Bank of Tanzania (BoT) research paper, the 60 percent deficit was plugged by imports.
The supply-demand gap can be attributed to two reasons. One, the government has not recorded much success in attracting investments for the oil processing sector.
More so, the country has imposed several duties on imports, including from neighbour countries in the East African Community (EAC). This hinders the free flow of goods (like edible oil) into the country.
The imposition of duties on imports from regional states has seen Tanzania locked in unresolved standoff and trade rifts with other EAC members. The country has also been accused of unfair trade practices, particularly by Kenyans.
The country imposed a 35 percent import duty on semi-refined and double refined edible oil and a 25 percent import duty on crude palm oil and another 25 percent on other forms of crude edible oils.
Nairobi contends that these duties are against the EAC Common Market protocol that provides for free movement of goods in the region.
Bridging the gap
Considering the fact that requisite raw materials are readily available locally, the Tanzanian government has been making efforts to get investments in edible oil processing. Last year, there were reports that the Tanzanian government, through TIC, was negotiating with prospective investors and encouraged them to establish cooking oil processing factories in the country.
The investors involved include the East Coast Oils and Fat; Mkoani Edible Oil and Detergent Limited; Murzah Wilmar E.A Industries and BIDCO.
Furthermore, the country’s deputy minister Anthony Mavunde revealed that the government was working in collaboration with the United Nations Food and Agriculture Organization (FAO) and the United Nations Industrial Development Organization (UNIDO), to develop a strategy intended to boost production of oilseeds designed to fill the deficit gap of cooking oil.