Appeal to drop import duty on oilseed

The SA Oil Processors’ Association (SAOPA) plans to make a formal application to have the 10% import tariff on edible oils reduced to make them more affordable to the poor.
Issue date: 07 March 2008

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The SA Oil Processors’ Association (SAOPA) plans to make a formal application to have the 10% import tariff on edible oils reduced to make them more affordable to the poor. “We will submit an application to the International Trade Advisory Committee (Itac) as soon as we have the information they require,” said SAOPA chairperson Razak Moosa. He explained that the price of cooking oil, soap and margarine has already started on an upward trend towards a 20% to 25% increase in price. As the rand weakens against the US dollar and the crude oil price increases, local selling prices will continue to rise. South Africa does not produce enough edible oilseed, so imports cover the shortfall. Import duties were introduced about 10 years ago when imported oil was cheaper than local oil, which discouraged farmers from growing oilseed.

“Now the cost of imported oil is very high, once the 10% import duty is tacked on,” explained Moosa. “The high price of imported oil gives local farmers a cushion – without the tariff. If we remove the 10% duty, imported oil would be cheaper and consumers would benefit. Can we allow a handful of people to benefit at the expense of millions of hungry people?” Gert Pretorius, chairperson of Grain SA’s sunflower and soyabean specialist committee, agrees. He said it’s the right time to drop the import duty. “Nobody is benefiting, not the producers or the consumers,” said Pretorius. The tax on imported seed goes straight to government and no-one sees it. We are prepared to have the import duty dropped on condition that it would not take years to re-instate it, should the need arise.” The price of sunflower seed produced by local farmers is determined on the SA Futures Exchange (Safex). World market prices for the product have risen by 40% over the past four months. Removing import duties would translate into oilseed trading at a lower price and that would trickle down to cooking oil, margarine and soap.

SAOPA also appealed to finance minister Trevor Manuel to reconsider charging VAT on margarine and on other basic food items. Moosa said that would be a better option than using subsidies that are open to abuse. “A further anomaly is that edible oil manufacturers have to pay VAT on imported edible raw materials, while the bottled product is sold VAT free. That means additional cash is required to meet VAT outlays, as SARS only refunds the amount later,” explained Moosa. The price of the raw product to produce margarine, as well as laundry and toilet soap – including the byproducts of palm oil – have risen by about 30% since December and doubled in the past year. Sunflower oil and blended cooking oils have sustained a 35% hike since November, driven by growing markets and bad weather in the world’s oilseed-producing areas. P roducers in Argentina, the US and Europe were pushing up prices after harvests were affected by heavy rain, while excessive snow in China has significantly affected the Chinese growers ability to meet market demands. Economic growth and consequent rising demand in Chinese and Indian markets means those economies can afford higher prices. B iofuels have also seen oilseed producers in Malaysia, the US and Europe converting their oils into biofuels. Africa is concerned for food security and can’t compete with the higher prices the developed world is prepared to pay for oilseed for biofuel production. – Robyn Joubert

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