Local manufacturers of edible oils have reason to be concerned about reports that the government has handpicked a trader to import 125,000 tonnes of the commodity duty-free.
Their businesses will no doubt take a considerable hit from the relatively cheaper products in the market, adding to the woes inflicted by global supply chain disruptions and the region’s worst drought in 40 years.
The magnitude of the difficulties the 13 companies have to contend with is underlined by the fact that they are currently operating at about 60 percent of their installed capacity of 1.5 million tonnes of cooking.
But, as Business Daily columnist Jaindi Kisero warned in his article on Friday, the consequences of importing 125,000 tonnes of cooking oil duty-free to the economy would be even much more serious.
In addition to increasing the idle capacity at local factories, duty-free imports are likely to trigger more job losses and erode tax revenues.
The opaque manner the authorities have gone about approving the duty-free imports also raises eyebrows about corruption risks because it departs from the tradition of the Treasury or the relevant ministry issuing public notifications about such decisions.
If the government deems duty-free imports key to its plan to stabilise prices, it should float a competitive tender where the local manufacturers would be given an opportunity to participate as well.
While we don’t advocate protectionism, we believe that government policy shouldn’t kill the local industry either.
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