Africa-Press – Malawi. Minister of Trade and Industry, Honourable Mark Katsonga Phiri says the government is open to granting more contracts to companies interested to join the edible cooking oil industry as one of the strategies of stabilizing the commodity’s prices, which have risen unreasonably in the recent past months.
Speaking to the media in Lilongwe in the presence of Minister of Information and Digitalization, Gospel Kazako, Katsonga Phiri, said the government has been monitoring the commodity’s international price index and it has been observed that some prices are irrationally set here in Malawi.
The Minister said this is surprising and unjust because the country produces some of the raw materials for edible cooking oil such as soya beans, sunflower and groundnuts.
“Government has been conducting surveys across the nation to investigate prices and it has been observed that prices are usually high in retail shops in urban areas yet in rural areas, prices of the same brand of cooking oil are relatively low.
“As such, the Ministry of Trade is open to foreign companies that manufacture cooking oil to approach the government and if they are eligible, they will begin operations to increase competition in the industry.”
Katsonga emphasized that this is not a move to control or destabilize the cooking oil manufactures who are already in business but rather to regulate to help Malawians live a comfortable life.
“This is a liberated market and businesses have the freedom to operate their way while following measures and regulations that have been put in place — because by the end of the day, they are there to help Malawians and not just make profits,” he said.
He added that this is an additional initiative because recently, the government negotiated with cooking oil manufactures to implement an approximate of 16.5% reduction of oil prices effective April 1, 2022.
Minister of Information, Kazako said the government will go above and beyond to cushion Malawians from the economic hardships and that includes preventing unjustifiable rising of prices of cooking oil.
“Even the government is very capable of manufacturing cooking oil but the idea is to let other people so that the economic status can improve,” Kazako said, while urging the youth to engage in various economic activities no matter how small because that is key to personal development.
Early this month, Consumers Association of Malawi (CAMA) made a demand to the edible cooking oil refiners to reduce prices on the market after Government removed the much-contested for value added tax (VAT).
VAT on cooking oil, which was reintroduced in 2020 was being used as a contributing factor to the increase in prices of the commodity and following constant pressure from the producers, the government obliged and scrapped it off on February 18 when Finance Minister Sosten Gwengwe presented his National Budget in Parliament.
Gwengwe had said the Ministry abolished the withholding VAT system because a number of taxpayers complained that it is affecting their business and thus the government saw merit in that.
And in his statement issued on March 1, CAMA Executive Director John Kapito said “for close to two years, the cooking oil producers informed and advised Government and consumers that prices of cooking oil went up in the country as a result of the introduction of VAT”.
And following the removal of the withholding tax CAMA was expecting the cooking oil producers to “immediately take necessary steps to reciprocate what Government has done” taking cognizance that the VAT “was the only singled contributing variable that the industry said was the reason for the current high prices of cooking oils in the country”.
He added that consumers will not accept any other reasons for failure to reduce prices and that they want to see the benefits after the removal of VAT on the commodity — but since then the commodity’s prices, just as others, keeping increasing.
During the pressure for government to remove VAT, CAMA provided information to the main reasons why the prices went up with statistics but the the cooking oil refining companies denied any of the figures that were presented — insisting that the prices went up with nothing else but the introduction of VAT.
“They accused Government for introducing the VAT which made many Malawians not to access the product especially in the rural areas. As a result, consumers attacked Government for introducing VAT as propagated by cooking oil refining companies.
“Government was pushed to the wall, they were ransomed at many times. We are happy that Government has decided to remove the VAT and with that we are expecting to see huge reductions on cooking oil prices as it was the only variable that the refining companies singled out to be the main reason why prices had gone up.
“There will be no reason for the refining companies to make delays in reducing the prices — they lobbied everybody in the country and consumers listened, agreed with them and believed their story.
“We do not expect the cooking oil refining companies to start coming up with any new excuses as to why the prices cannot come down.”
Kapito concluded by asking Government as well “to ensure that it is monitoring the behavior and character of cooking oil refining companies as consumers are now looking forward to reduced prices with immediate effect”.
Last year, following complaints from consumers over the rapid increase of prices for edible cooking oil, CAMA engaged with the refining companies to find out what has led to this trend, who indicated that the introduction of 16.5% VAT which government re-introduced in 2020 in the Parliamentary National Budget was the contributing factor.
Initially, CAMA had joined the condemnation of the VAT tax measure believing it was indeed through the re-introduction of VAT until when CAMA did its own analysis — which it agreed with the government for reintroducing the VAT system.
CAMA next undertook to engage with Malawi Revenue Authority (MRA), who clarified that the VAT should not be attributed to the reintroduction of VAT — but rather asserted what former Finance Minister Felix Mlusu announced in Parliament that cooking oil manufacturers needed not raise prices of their commodities since tax measures would enable them to claim the input VAT when a consumer purchased goods or services liable to VAT.
MRA said the prices of cooking oil shouldn’t have gone up as high as it did because of VAT but could have been as low as 10%. MRA further indicated that manufacturers — including those in the cooking oil business — enjoy tax for industrial materials that exempt them from paying import duty such as the crude oil.
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