Benchmark policy reversal will grow local oil palm industry

November 22, 2021 / Comments (0)

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…as it will end unfair competition, create jobs

The local 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 implementing 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 refined palm oil products.

This, industry players say, will impact positively on the sector as it will put the industry on an equal playing field with importers, considering 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-litre 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 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 will be removed and locally produced vegetable 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 chain. This will make objectives of the Tree Crops Development Authority (TCDA) achievable – development and regulation of the value chain, enhanced wealth creation, improved livelihoods of people in the ecological/rural areas (smallholders/outgrowers).”

He added that reversing the policy will promote import substitution, thereby saving the economy from the exchange rate pressure it goes through yearly.

Also, in an interview with the B&FT Managing Director of Wilmar Africa, Kwame Wiafe, said reversing 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 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 chains of areas in which Ghana has a 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 for 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 need to be cultivated.

“Already, these 20,000 hectares are employing a minimum of 8,000 staff directly. If that is multiplied by four, it means the plantations alone can create about 32,000 direct jobs,” he said.

Again, he added, the country spends between US$250-300million on importing 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 become stronger. The country has a refinery capacity of 500,000 metric tonnes and we need only 200,000. This means we will even have to find market for the industry outside the country, and that will rather bring in foreign exchange,” he said.


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