Oil producers reel under liquidity crunch

08 Sep, 2019 - 00:09 0 Views
Oil producers reel under liquidity crunch Mr Busisa Moyo

The Sunday News

Dumisani Nsingo, Senior Business Reporter 

THE country is likely to experience severe cooking oil shortages soon as manufacturers struggle to raise sufficient funds for the procurement of strategic raw material.

Oil Expressers Association of Zimbabwe (OEAZ) chairperson Mr Busisa Moyo said the industry’s production capacity has experienced a significant drop due to lack of adequate finance to strategic raw material and consumables.

“We don’t have enough ZWL (Zimbabwean dollar) currency for key bulk raw materials like soya beans, cotton seed, crude soya beans, palm fatty acid and animal tallow. Secondly, we still can’t access adequate foreign currency on the inter-bank market for ancillary materials like caustic, tonsil and packaging,” he said.

The country’s edible oil producers are Chiseller, Pure Oil Industries, Surface Investments, United Refineries Limited, Olivine Industries, Wilmar Oils International and Willowton and Mount Meru. The industry requires US$20m letters of credit but the Reserve Bank of Zimbabwe has over the past few years failed to meet this demand. 

The country 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. The industry is also being hampered by the prevailing power outages in the country and a low soya bean yield this season would add to its woes.

“The industry is now at 15 to 25 percent capacity due to power shortages, low disposable incomes, low output from local agriculture as cotton and soya were both very low in output,” said Mr Moyo.

The target for the 2018/19 season had been pegged at 100 000 being achieved through the involvement of the private sector led value chain expansion supported by Government programmes such as contract farming, joint-venture farming, smallholder farmer education and development. 

However, 59 000 tonnes was achieved this season slightly lower than the previous season were 60 000 tonnes was attained.

Mr Moyo said for the country to meet its soya bean production target there was a need for the Government to increase its support to contract farming with financial institutions also buying into the programmes.

“Farmers linked to contract growing should be supported by Government, banks and other private equity funders,” he said. 

In the 2021/22 season the sector expects production to reach 240 000 tonnes satisfying the current installed capacity and exporting 72 000 tonnes of soya meal.

@DNsingo 

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