The price of cooking oil in Zambia have started going up initially by about 20 to 25% following the end of the tax waiver that had been put in place were edible oil sourced from outside Zambia had import taxes and Value Added Tax – VAT suspended upto 31 December 2021.
This initial 25% price surge is largely on account of VAT at 16% that is being applied as well as cost of transport which has shot up following increase in fuel pump prices by over 20%.
There is also an added risk that cooking oil and other edible oil prices may go up by a further 25% as government clarifies if the excise duty waiver has also dropped off at end of December 2021. If the waiver drops off, the price of cooking oil will go up by a further 25%, with the cummulative increase adding up to over 40%.
A check by the Zambian Business Times – ZBT revealed that Finance Minister Dr. Situmbeko Musokotwane has included the suspension of excise duty on edible oils in the same 2022 statutory instrument – SI which was issued under suspension of excise duty on fuel. This however is not clear as no details were given but just a single sentence.
And edible oil industry contacts have told ZBT that there is need for clarity by Dr. Musokotwane as finance minister to confirm if the six months extended suspension of excise duty on fuel and the line reference to edible oils in the SI for fuel suffices. The minister needs to urgently clarify if the excise duty on edible oils has also been suspended for the next six months.
When contacted to share an industry perspective on the way forward, Crushers and Edible Oil Refiners Association – CEDORA Director Aubrey Chibumba told the Zambian Business Times – ZBT that prices of locally manufactured cooking oil are likely to go up by about 20% to 25%.
“If my cooking oil costs $100, am supposed to pay $25 dollars as (25%) duty, then VAT of 16%, this means that landed cost of cooking oil will go up between 16% plus 25% which adds up to 41%. For those that are importing packed refined cooking oil, prices would go up by that 41% but for locally manufactured cooking and edible oil, it would only go up probably around 20%-25%”, he said.
Chibumba told ZBT that there was an initial extension of the SI that temporarily suspended import duty on edible oils when it expired at end of October last year to 31 December 2021. The CEDORA Director has disclosed that prices of cooking oil are likely to go up by between 16% to 41% if the temporal suspension on import duty is not extended.
Government has in October 2021 temporarily suspended import duty on edible oils, which is 25% of the value of imported edible oils. The SI exempted edible oil importers from paying customs duty as well as Value Added Tax (VAT), which stands at 16%. This SI has since expired effective 31 December 2021.
CEDORA has indicated that this SI which expired on 31 December 2021 if not extended, will lead to cooking oil prices increases and final consumers would have to bear the cost.
The Zambian public is currently experiencing cost of commodities escalation in prices following the increase in prices of fuel, a key cost component in the manufacturing as well as transport sector and distribution sector. There is also pressure for wage increments that companies and local enterprises are facing as employees try to uphold and retain their spending power.
