Stakeholders in the oil palm industry says government’s decisions to reverse the 50 percent benchmark value on some imported products is apt, as it will make the industry more competitive against foreign products, thereby, bringing back jobs that were lost as a result of implementation of the policy.
After many months of agitation and pleas by the local oil palm industry, finance minister, Ken Ofori-Atta, announced in the 2022 budget presentation that government has reversed the 50 percent benchmark policy on selected goods, which, information from the Ghana Revenue Authority says, include both refined and crude palm oil products.
This, industry players say, will impact positively on the sector as it will put the industry on equal playing field with importers, considering the existence of the policy has made imported products cheaper than those locally produced, thereby, enticing price sensitive consumers to abandon made in Ghana vegetable oils for foreign ones.
For example, the cost of a 25-liter jerrycan of vegetable oil is produced locally at GH¢260 ex-factory price and sold on the market for GH¢265 inclusive of the duty, levies, VAT and logistics. But with the 50 percent benchmark policy, imported vegetable oils leave the port at GH¢230 and are sold to traders at GH¢255 for onward selling on the market at GH¢260.
Speaking in an interview with the B&FT, President of the Oil Palm Development Association of Ghana (OPDAG), Ing. Samuel Avaala said: “The suspension/cancellation of the implementation of the 50 percent benchmark discount policy on selected commodities imported is good news to the oil palm value chain and the Ghanaian economy for the following reasons: one, the ‘subsidy’ on imported vegetable oil and crude palm oil will be removed and the locally produced palm oil will be competing with the imports on a level playing field.
Two, it sends a good signal to current and potential investors in the value to chain. This will make the objectives of the Tree Crops Development Authority (TCDA) achievable – development and regulation of the value chain, enhance wealth creation, improved livelihoods of people in the ecological/rural areas(smallholders/outgrowers).”
He added that the reversal of the policy will promote import substitution, thereby, saving the economy of the exchange rate pressure it goes through yearly.
Also, in an interview with the B&FT, Managing Director of Wilmar Africa, Kwame Wiafe, said the reversal of the policy will bring the ailing local oil palm industry back to life to support the economy, as its application contributed to loss of thousands of jobs in the sector.
He further stated that reversing the policy will be an incentive to the local industry, as it will improve competitiveness across the value chain.
“Reversing the benchmark values for the oil palm industry will accelerate all the value chain of the of the areas in which Ghana has strong competitive advantage. If you take oil palm where we have capability to cultivate the crop and process it, the benefit for now is that it will accelerate development of the economy.
It will make imports of refined oil expensive and that is an incentive for anybody to enter into oil palm cultivation and the processors to buy whatever is produced in the country,” he said.
He added that, currently, the economy has 20,000 hectares of oil palm under cultivation which is producing 50,000 metric tonnes of palm oil a year. However, locally, a minimum of 200,000 metric tonnes of palm oil production is needed for the country to be self-sufficient. This means that, at least, 80,000 hectares of oil palm plantation needs to be cultivated.
“Already, these 20,000 hectares is employing a minimum of 8,000 staff directly. If that is multiplied by four, it means the plantation alone can create about 32,000 direct jobs,” he said.
Again, he added, the country spends between US$250-300 million on importation of refined vegetable oil, hence, assisting it to produce at full capacity can effectively end importation.
“If we are able to expand the industry to produce to capacity, it will end importation and the currency will even become stronger. The country has a refinery capacity of 500,000 metric tonnes and we need only 200,000. That means we will even have to find market for the industry outside the country and that will rather bring in foreign exchange,” he said.
