Cooking oil manufacturer, Surface Wilmar, says it is operating at 15 percent capacity owing to funding constraints that are inhibiting the edible oil processor from consistently importing critical raw materials.
The cooking oil-making firm which receives a significant part of its foreign currency from the auction system, says the Reserve Bank of Zimbabwe (RBZ) has been intermittently providing the requisite foreign currency.
According to Surface Wilmar, the obtaining minimal capacity utilisation at the firm has also been coupled with the country’s inability to produce sufficient cottonseed and soyabean for the oil manufacturing industry.
Soyabean has been in short supply for some seasons now, forcing the country to spend millions of dollars in foreign currency per year on the importation of crude for cooking oil.
Consequently, Surface Wilmar imports soyabean from regional countries like Zambia and 90 percent of its crude oil off the continent from as far as Argentina in South America.
High crop production costs of local soyabean have rendered the local crop uncompetitive, and the lack of competitiveness in Zimbabwe’s soya value chain has led the country to be a net importer of soyabean and related products.
Along with dwindling soya output, there has also been little production of cottonseed, which is an alternative for soyabean for cooking oil production.
However other cooking oil producers like the United Refineries Limited of Bulawayo have resorted to contracting farmers to complement the required amount of soyabean for their manufacturing.
Last year the company intended to cover 10 000 hectares with the crop under the grower’s network for the 2021-22 farming season to ensure local production of soyabean for crushing and manufacturing.
Having locally produced soyabean will shrink the demand for imported Crude Degummed Soya Bean Oil (CDSBO), which will lower the amount of foreign currency used to purchase cooking oil raw materials.
Soyabean is one of the most common crops with multiple benefits to the farmer, the industry, and the economy. However, the current demand for soyabean in Zimbabwe far outstrips supply.
During a recent tour to Surface Wilmar, executive chairman Narottan Somani, indicated that his company was largely dependent on foreign currency allocations from the RBZ, which if not supplied grounded operations to the ground.
“We are currently operating at 15 percent capacity utilisation, it all depends on RBZ how much money they give us, sometimes they give us money we run for 15 days sometimes they do not give us and we shut the plant for a month,” said Somani.
The government of Zimbabwe has lately added soyabean to controlled grains, confining the marketing of the product to the Grain Marketing Board (GMB) except in cases where running contracts are in place, a move seen as detrimental to agriculture.
Somani emphasised the need to come up with robust interventions that will ramp up soyabean production without much government control. He pointed out that synergies had the potential to grow the output of the crop.
“Government is trying their best but those efforts are not giving results and a new approach has to be taken now, if there are synergies formed and investment in the right direction then you can see the upside potential of agriculture in this country.
“The basic problem which is there is an investment, general investment into the agriculture sector, we need real investment going into the ground on agriculture”.
Increased soyabean production is necessary to meet an increasing domestic and global demand.
Over the years, Zimbabwe’s competitiveness in the soyabean market has sharply declined domestically and regionally due to low yields, and high production costs.
On the export front, Surface Wilmar exports cooking oil to Malawi and Mozambique while margarine exports mainly go to Zambia, Malawi, and Moçambique, and stock feeds are mainly going to South Africa and lint to Japan.
Industrial Development Corporation of Zimbabwe (IDCZ) owns 10 percent of Surface Wilmar while 90 percent is owned by SR Amando, an investment vehicle that includes the Somani family and Wilmar international.
The company says it has since minimised its exports given that RBZ retains 80 percent of the export earnings, which renders the business unviable since operations require more than 20 percent foreign currency to cater for operational costs.
“Today when we export there is a retention amount to be paid back to Reserve Bank, when we export $400 we get $80 back, now my raw material cost is more than $80, so how do I replenish that, so we target the local market,” said Somani.