Zimbabwe: Oil Making Industry Capacity Drops to 35 Percent

cooking oil

Capacity utilization in the cooking oil manufacturing industry has plunged to below 35 percent largely due to failure to secure adequate foreign currency to import raw materials.The manufacturers have since approached the Reserve Bank of Zimbabwe to lobby for an increase in foreign currency allocation to prevent further drop in capacity utilization in the oil processing industry.

This is despite the fact that cooking oil manufacturers are on top priority on the central bank's foreign currency list.

Due to declining exports, particularly from October last year, local banks' nostro accounts have been depleting, a situation which has caused delays in making foreign payments and the cash shortages in Zimbabwe, as the banks use the same account balances to import cash.

"We approached the RBZ so that maybe they could increase our foreign currency allocation, but there has been little joy maybe because the central bank is under pressure at the moment.

"Our raw material situation of late has been poor and there has not been much production since the beginning of the month.

"At the moment as an industry we are running at less that 35 percent from about 60 percent that we reached when the forex situation was still stable," Oil Expressers Association of Zimbabwe president Sylvester Mangani confirmed to The Herald Business in an interview yesterday.

He said the cooking industry is optimistic of good times ahead considering that the tobacco marketing season will start in the first quarter of the year.

In bid to avert raw material shortage, cooking oil producers also have plans to venture into corporate farming to minimise importation of crude oil currently estimated at 20 million litres annually.

A proposal to Government has already been made and the new farming venture is expected to reduce importation of crude oil by 60 percent while minimising the country's heavy import bill.

Zimbabwe's cooking oil producers have over the past two years registered a dramatic rebound in production levels and also lowered prices, which helped ward off competition from imports.

Local cooking oil producers have also gained significant market share, but the biggest challenge has been raw material supply, which saw them resorting to crude cooking oil importation.

Mr Mangani earlier said cooking oil producers will establish model farms to boost soya bean production.

Previously, the country used to produce upwards of 200 000 tonnes of soya-beans, but only about 25 000 tonnes is being produced at the moment.

Subdued local production of soya beans left cooking oil producers with no option but to import crude oil.

Mr Mangani said tobacco will bring a temporary relief to the liquidity crisis as it brings in foreign currency.

"Shortages of our most critical raw material due to failure to make foreign payments was the major reason why the country experienced some cooking oil shortages recently, but some cooking oil companies have since got back to their normal production levels," said Mr Mangani.