Reverse 50% benchmark value reduction on vegetable oils – local palm oil industry

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As the Finance Minister, Ken Ofori-Atta, prepares to deliver the mid-year budget statement sometime this month, the Oil Palm Development Association of Ghana is persisting in its plea for government to create a level playing field for local industry and importers by exempting vegetables oils from the 50 percent reduction on benchmark value, as the policy has created unfair competition for local players.

In April 2019, government effected the application of a policy that reduced the benchmark or delivery values of imports by 50 percent – with the aim of reducing smuggling and enhancing revenue generation at the ports. But this policy, well-intentioned as it is, has created a price war in the vegetable oil market and given importers an unfair advantage over local producers.

Prior to introduction of the benchmark value, 25 litres (the yellow gallon) of vegetable oil produced locally was selling at GH¢145 against GH¢150 for the imported ones. However, after introduction of the policy whereas locally produced vegetable oils are still selling at GH¢145, the imported ones are now selling between GH¢75 and GH¢120 – giving them advantage in pricing.

And because consumers are largely moved by price, the local products are no longer patronized – resulting in losses to the producers. Already, local producers have cut down on production due to low demand. It is for these reasons that the association says if the 50 percent benchmark policy is not reversed for the industry in the mid-year budget, some companies may soon have to lay-off workers to remain in business, as the entire value chain has been badly affected.

“We are not saying the policy should be cancelled. All we are saying is that the policy should be discriminative. It should discriminate in favour of products that are produced here in Ghana, otherwise people will bring the products and pay half-duty on them, and they come and compete with the locally produced ones on the market. They should pay the full duty on it, so that they can price it at a price that won’t be cheaper than ours,” Samuel Avaala, President of the Oil Palm Development Association of Ghana, told the B&FT in an interview.

Lack of political will due to GUTA threats

Mr. Avaala further revealed to the B&FT that the association has taken all necessary measures, including meeting President Akufo-Addo to discuss the negative effect of the policy on the local industry and he promised to address the situation – but threats from the Ghana Union of Traders Association (GUTA), whose members are mainly into imports, have stopped government from reversing the policy.

“We wrote a letter and sent it to the Ministry of Finance, Ministry of Trade, Ministry of Agriculture and copied the Economic Management Team. Then we requested to meet the president himself. So, in July 2019, the association members met with the president and explained to him our concerns. He listened to us very keenly and said we have a fine case, so he assured us that he was going to let his technical people act on the matter.

“Then, a little over a month ago, a letter came from Ghana Revenue Authority listing a number of commodities or products that were supposed to be exempted from the 50 percent benchmark value application, and palm oil was on that list. So, we were happy and quickly came out to thank the president for listening to us and taking that step. But shortly after that we got a rebuttal, saying the letter from GRA was fake. But our little investigation shows it wasn’t a fake letter.

“The reason is that as soon as that letter came out, GUTA came out strongly that they would vote accordingly if that decision was not reversed. So, we believe the letter was declared fake because of the threats from GUTA. So, now, we think government is caught between doing what it knows is right to protect the local industry and what GUTA wants,” he said.

Mr. Avaala says if the policy is not reconsidered and reviewed in the mid-year budget, local producers will have no option than to let workers go home to keep their businesses alive.

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