Dar es Salaam — The use of improved variety of sunflower seeds has lifted production, thus renewing hopes that Tanzania will soon become independent in production of cooking oil, a new study has shown.
Tanzania imports about 60 percent of its cooking oil requirements, spending up to $250 million in the process. The study by Dalbergin in collaboration with Southern Agricultural Growth Corridor of Tanzania (Sagcot), Agricultural Markets Development Trust (AMDT), Agriculture Non-State Actors Forum (Ansaf) and Tanzania Agricultural Development Bank, has revealed that the sunflower sub-sector was undergoing notable transformations following the government’s decision to offer tax incentives. Funded by the USAID, the study – which was conducted earlier this year, has revealed that the tax incentives have encouraged industrial investments in the sunflower oil production as well as tariff changes to privilege domestic sunflower production.
Titled ‘Progress Review of Industrialisation in Tanzania’s Sunflower Sector,’ the study says the 2017/18 tax and trade reforms introduced VAT exemption on agricultural processing equipment, which covers solvent extraction and refining equipment that is necessary to producing competitively. At the same time, VAT exemption on sunflower seed cake came into effect to improve the economics of sunflower processors while the decision to maintain the import tariff on palm oil – at 10 percent for crude palm oil and 25 percent for refined palm oil – also played a pivotal role in improving competitiveness.
“These tax and tariff changes have transformed the entire sector by prompting investors to pursue hybrid seed, processing and other investments in the sunflower sector. The seed sector has responded first by importation of hybrid seeds and now local production of such seeds has started,” the report reads. Sunflower processors are investing in more than 50,000 metric tons of processing capacity and they are demanding more sunflower from farmers who continue to gain a steady income.
This has been possible after Tanzanian companies have invested over $200,000 (about Sh450 million) in growing hybrid seeds in Tanzania. In 2019, the report reads, 50 metric tonnes of hybrid seeds were produced locally. This is in addition to 243 metric tons of locally-produced improved sunflower variety popularly known as ‘Record.’ Widespread adoption of improved seed is one important driver of increased production of sunflower oil in Tanzania making Tanzania one the largest producers of the crop in Africa. The study further reveals that private investment in seed multiplication has cut the price of high-yielding hybrid sunflower seeds by 60 percent thus increasing productivity drastically.
Chief executive officer for Sagcot Centre, Mr Geoffrey Kirenga, says industrializing Tanzania’s sunflower sector helps the country compete in international markets, creates jobs and transforms the economy.
“This approach can serve as a model for other value chains in Tanzania and inspire other countries pursuing industrialization by industrializing the sunflower sector, and replicating this success in other value chains,” he says.
The study, however, says the sub sector still faces a number of challenges, including the inability of processors to source sufficient quality seeds at the right price; reduced off-take of sunflower seed cake by feed manufacturers as well as nuisance fees and taxes.
“For the sunflower sector to be competitive, there is a need to promote further investment in improved sunflower seed multiplication, remove VAT by zero rating crude and refined sunflower oil, to maintain current import duties on crude and refined palm oil imports and to maintain VAT exemption for machinery to improve competitiveness,” it reads.
April 20, 2020