Govt ‘should reduce duty on oil’

2008-02-15 00:00

Amid spiralling food costs, with consumers already reeling, further increases in cooking oil, soap and margarine are set to rise by 20% to 25% within a few weeks, which will push these basic commodities out of the reach of more people.

If the rand continues to weaken, further increases are expected and more people will face poverty, starvation and malnutrition, noted Razak Moosa, chairman of the South African Oil Processors Association (Saopa).

Saopa has appealed to Finance Minister Trevor Manuel to reduce the 10% import duty on edible oils and oilseeds so that these savings could be passed on to consumers.

Considered among the basket of goods from which the government calculates the consumer price index and thus inflation, the higher cost of cooking oil, margarine and soap will essentially affect poorer consumers more dramatically than their more affluent counterparts.

The by-product of palm oil is used in toilet and laundry soap, while baking fats and confectionary fats are consumed in breads; the broader impact of increased raw material costs has a knock-on effect on these prices.

“South Africa does not produce enough oilseeds and imported edible oil covers the shortfall. Just as other foodstuffs like rice, mealie meal etc do not have VAT, the Minister should remove the VAT on margarine. Consumer organisations and others should also request our Finance Minister to make food affordable to the poor, by removing import duties on essential raw materials for manufacture of food products and any VAT thereon,” said Moosa.

“This is a better way than subsidies, which can be abused if not properly monitored.

“A further anomaly is that edible oil manufacturers have to pay VAT on imported edible oil raw materials, whilst the bottled product sold is free of VAT and additional cash is required to meet VAT outlays before SARS refunds the amount.”

As with other commodities, local farmers price sunflower seeds on the South African Futures Exchange (Safex) in line with world markets, which have risen over 40% in the past four months. Removing import duties on edible oil and oilseeds would translate into lower prices on oilseeds traded on Safex and therefore on cooking oil, soap and margarine.

— WR.

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