It is not my plan to fuel the intense debate on tax discrepancy on imported refined, unrefined or semi-refined palm oil that held up Members of Parliament during the 2018/2019 budget session.
I am trying to shed light on why we are not seeing growth opportunities in this crop. Palm oil is one of the most widely used vegetable oil and a common ingredient in many applications comprising biscuits, margarine, breads, instant noodles, cereals, lipsticks, candles, chocolates, shampoos, ice-cream, and detergents.
The applications of palm oil are thus quite diverse. It is this demand which supports the expansion of the global palm oil market.
But given this market opportunity what is holding palm oil sector behind in Tanzania notwithstanding its potential and paybacks for the nation as whole and for households in particular? Palm oil, which is made from the fruits of the African oil palm, also known as Elaeis guineensis, has become a major, global agricultural commodity.
The oil palm thrives well in the humid tropics where it often forms an important basis for local economies, both as an export and as a raw material for local industry.
Tanzania is among counties with favourable areas suitable for palm oil farming but it seems that there has not been a serious strategy on oil palm industry.
As a result, although with huge potential to be major exporter of the oil palm, it is estimated that Tanzania imports at least 400,000 tonnes of palm oil annually despite its potential to grow different oilseeds.
It is not the aim of this opinion to jog your memory back to few months ago when we all read about heated debate and argument on import tariffs on refined or semirefinedpalm oil and what seemingly taken as war between government agencies on the matter.
Research shows that palm oil farming, grounded on small-scale farming could be a leading foreign exchange earner. In Ghana for example, the then colonial government believed that the local smallscale farming system was stronger economically than large plantations.
In Ghana, plantations did not make much impact on agricultural production during the colonial period. But during 1960 and thereafter a serious effort by the government started to promote the oil palm industry.
This was successful because it was viewed as strategic crop and therefore was steered by various government strategies and programmes that if critically examine eight national development plans; issues to relate to oil palm were articulated and put out strategically.
Ghana’s know-how and perhaps drawing from Indonesia and Malaysia palm oil sector, supports the World Bank’s proposal, who once argued that to decrease poverty especially among many rural based communities in countries with humid tropic climatic conditions, palm oil farming, if well supported as a commercial crop, can play an important role in furthering economic development and can also secure a rising standard of living for the rural poor.
I am not certain if it was thoughtful or it was an oversight that palm oil is not among strategic priority crops identified recently despite its great potential.
Perhaps such an oversight could be reasons why we do not have a master plan to transform this sector. Learning from others, research shows that more than a decade ago, palm oil crafted from our region and taken to Indonesia and Malaysia that is now a major exporter has been described as nature’s gift to Malaysia and Malaysian gift to the World which defines the blessings of palm oil to Malaysia.
If Tanzania wants to exploit the full potential of the palm sector there is a need to find the right strategies and right drivers that will help to change small-scale village oil palm farming and palm oil processing into more commercial and sustainable cultivation and production.
Notwithstanding solid growth potential of its edible oil potential in farming ground nuts, sunflower, sesame, cotton and palm oil grown across Tanzania, production capacity of edible oil handling is small matched to prevalent demand, which is assessed at between 300,000 and 400,000 tonnes a year.
Much of the demand gap is presently met by imported edible oilmostly palm oil, with imports accounting for 60 per cent of all edible oilsand between 55 per cent and 70 per cent in the case of sunflower oil.
The government is keen to reduce Tanzania’s dependence on imported edible oil by boosting domestic oil seed production and downstream oil processing capacity.
The Minister for Industry, Trade and Investment during 2018/2019 fiscal budget session once said, Tanzania will continue to import at least 70 per cent of the edible oil and there is nothing Tanzania can do until when the local production can meet the total demand. The minister went further to say that legislators should motivate farmers to cultivate more crop producing edible oil to ensure raw material for local industries.
Not many people recognise particularly those fortunate to air their views on political related and other platforms that serious agricultural improvement whether small or large scale doesn’t need politics. Speaking on palm oil sector, while I am not disregarding other edible oil sources, the following is my outlook.
The most important technical challenge that we need to deal with to the palm oil sector is perhaps the large productivity gap between the actual and achievable yields of palm oil.
Failure to have a robust strategy on this area, we will not get anywhere. How to deal with improvement of productivity of smallholders is a greater test amongst the palm oil production by small holders. There is no need to deceive ourselves that rushing to encourage farmers to cultivate more palm oil is the lasting solution.
Studies shows that the palm oil sector is faced with rising cost of production and this is combined with deteriorating real price of palm oil in the market.
Althoughthe current prices look attractive in real terms, sector analysis shows that palm oil prices have declined by about 2.3 per cent annually since 1950, from about 1,600 US dollars (in 2007 terms) to a long-term average of about 400 US dollars per tonne of oil currently.
Costs of inputs based on analysis further indicates that it has rocketed over time, particularly for fertilizers which now constitute more than 50 per cent of the total production cost of palm oil.
To conclude, while private promoters could have the financial resources and capacity to address the productivity gaps, the smallholder sector that constitute majority of our farmers needs urgent help to improve their productivity and production practices.
As mission to revive oil palm sector underway, there is a need to think on how to give the right training and technical support and extension service and management inputs, while contemplating to have “mashamba darasa” in place over the targeted areas before fully engaging in cultivations in big farms.