Dear Ladies and GentleMan, His Excellency Mr President, We thank you very much for giving us the opportunity to give this presentation to you on behal

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1 MOUNT MERU MILLERS LTD P O Box 7094, Arusha, Tanzania Tel : Fax : arvind@mountmeru.co.tz 1

2 Dear Ladies and GentleMan, His Excellency Mr President, We thank you very much for giving us the opportunity to give this presentation to you on behalf of local edible oil seed industry in Tanzania. This presentation is primarily on the Cotton and Sunflower oil industry. But benefits would also be for Safflower, Soya, Palm oil and other oil bearing seeds. Tanzania consumes some 200,000 tons of edible oil per annum. Of which 75% is imported, and 25% locally produced. The local edible oil sector (including the un-organised sector) is generating TSHS 55 billion for the economy and engaging over 1,000,000 rural people, primarily farmers. The imported edible oil industry is generating (value addition) TSHS 30 billion inclusive of taxes and engaging a maximum of people. Currently Edible oil is the second most expensive import after fuel. 2

3 Benefits of local edible seed oils as opposed to imported oil: Improved Human Nutrition Appendix 1 Rural Employment and Job creation- Appendix 2 Exports / Foreign Exchange Earner Environmental Protection Enhanced value addition ( related industries etc e.g. transport ) Capacity Utilisation (Revival of closed factories) Alternative Energy sources Bio fuels via Biomass Tax Benefits Kenya being a massive regional exporter of edible oil in the region may not favour local edible oil production. Uganda is implementing a massive edible oil project for exports eventually. 1. In 2003 they promised BUL vat deffetment on all their oil produced from their own farmers, 2. In 2008/09 budget they relived all agro processing industry from Corporate Taz/Income Tax. 3. In 2009/10 (THIS YEAR) they are expected to relive all agro processing industries using 70% or more of their raw material from farmers from VAT on all the final products, 4. Uganda is expected to be a NETT exporter of edbile oil by 2015, South Africa, Iran, Pakistan, India; Few examples of substantially more developed Agricultural Economies than Tanzania have higher duties on imported crude and refined edible oils. Europe has imposed a 5.75% blend of bio-fuels in its petroleum industry although the primary reason is to subsidise their farmers after the removal of agricultural subsidies (WTO). In effect higher edible oil prices years in the future. 3

4 Some 10% Taxation Benefits of last year Tax benefit to the government should have been in excess of 20billion per budget year. Local cotton farmers (Lake Zone) earned an extra 10 billion shillings in revenues due to the 10% tax. This was the biggest boost in a drought year when cotton production was almost 30% of the preceding year. Sunflower farmers benefited by an additional 5-10 billion shillings in revenues. Other oil seed farmers would have benefited greatly also e.g.: palm oil (kyela, kigoma) but we do not have the estimates. 4

5 Improved Human Nutrition: In Tanzania, the manual ram press appears to have the highest chance of success as a rural intervention to initiate small off farm enterprises, a start of the evolution of more value added domestic activities, edible oil, generated near the farm gate, and redistributed to households nearby ( 80% of the population being rurally located) the benefit of human nutrition is immense. This may not have a substantial national impact, it has substantial singular effect e.g. Kondoa, Galapo, Babati, Singida, Hydom. ( Manyara, Dodoma, Kilimanjaro, Singida, Iringa, Mbeya and Arusha regions among the many others) Local seed oil is generally free from fertiliser/ pesticides which are harmful to the human body even in trace amounts. The farm to consumption time is limited to 6 months (local oil seed) in comparison to imported oil can be up to 2 years, thus more fresh. Sunflower oil is a source of Vitamin E, and is low in saturated fat (less than 10%), and is high in mono saturated fats which gives healthier life. Sunflower oil naturally has a healthy fatty acid profile which is the key reason why sunflower oil is the No 1 choice of most doctors. 5

6 Employment Below chart shows employment generated by edible oils in 2006 Employment for sunflower and cotton seed per 1000 tons of oil Sunflower Cotton assumption Oil in tons Seed needed per ton of oil % oil in sunflower / 10% oil in cotton (refined) Area needed for agriculture sunflower 500kg per acre and cotton seed 667 kg per acre People employed per acre 2 2 we assume a minimum two people per acre Employment per 1000 tons of oil No of people employed for 1000 tons of oil 2006 production in (000's tons) 30 9 sunflower assumed and cotton from cotton production (cotton board) Industry employment Total employment

7 Employment 2006 ( edible oils) N o. o f P e o p le 500, , , , ,000 0 Palm(Imported) Cotton (Local) Sunflower (Local) Imported and local oils Notes : These are estimated figures but for a drought year, and also the Government had not imposed the 10% duty to protect farmers. 7

8 A more normal scenario for 2007 as shown below should be applicable Expected 2007 employment (edible oil) Palm( Imported) Sunflower (local) Cotton (local) Notes : Total employment should reach above 1,500,000 in 2007/8 8

9 Below chart shows comparison potential employment by various oil seeds. It is a clear indication of how much employment is being deprived. Employment potential ( 2010) Employment Palm oil Sunflower oil Cotton oil Note : The future employment scenario if we support local farmers 9

10 JOB CREATION Apart from direct employment of farmers and factories in the edible oil sector, there is a creation in some of the following sectors : Seed industry Transportation Energy and Utilities Animal Feed Industries Packaging Industry etc. 10

11 Foreign Exchange From Records that have been obtained from TRA, it shows that Tanzania has spent the following amount of money on purchase of edible oil and soap raw material ,355,323,810/= ,511,269,438/= ,140,315,749/= ,436,959,092/= ,713,855,049/= ,231,000,000/= ,297,363,224/= ,386,000,000/= It is quite clear from the data above that either TRA has made a mistake for 2004 records or something quite right has not been happening. The above figures are in Tshs and it is quite clear that over 280 billion shillings has been lost by the government in foreign exchange in 2007 only.on average edible oil prices have been going up every year by at least 15% and the Tshs has been depreciating against the USD by another 8% every year, henceforth the gap is only expected to increase. Apart from this if Tanzania is self dependant it has potential to export the same oil and it s by products. Our vision should aim to make Tanzania a net exporter of edible oil and an earner of foreign exchange. 11

12 Environmental Protection: Sunflower seed produces three main resources 1. Sunflower Oil 2. Sunflower Cake/De-oiled Cake 3. Sunflower Husk Oil is used for human consumption and the advantages have been given earlier. Sunflower Cake is used as a raw material to animal feeds. It is used due to its high protein content that is required by animals. The high protein content and due to the fact that sunflower is an agro-produced material makes it among the most ideal raw material of animal feeds. Infact Kenya is the largest buyer of sunflower cake/doc and all of it is used for animal feeds. A large volume of the same is exported from South and Latin America, Ukraine etc. to USA/Canada, Europe and Middle East. How this protects the environment is you do not have to graze your cows on the natural grass and other vegetation, the same energy is replaced by using animal feeds. The other most important thing is by using animal feeds you can plan on how to feed your animal depending on their productivity and output and the same ratios can be developed. 12

13 Moreover you do not have to depend on rain and local weather, it is an inhouse system that can be controlled by mankind. Sunflower husk is currently being used as an alternative to fuel. It is cheap, produces environmental friendly gases and helps the government from loss of foreign exchange. To give examples of a few factories in Tanzania who have shifted from fuel to partially or fully agro waste are: Mount Meru Millers Limited, A to Z Textile mills, Sunflag (T) Ltd Hans Nails and Fibreboard 2000 Ltd Tanga Cement Company Above are only few of the companies that have shifted from using expensive foreign petroleum products to environmental friendly natural agro waste. This is also an insight to Biodiesel. As mentioned earlier, it is becoming increasingly difficult to compensate farmers, hence EU has decided on a self sufficient programme which will help farmers without subsidizing and help the environment. They have done this by imposing a minimum ratio of 5.75% of bio- diesel to be blended into all white petroleum, in order to protect the environment and empower the farmers. 13

14 Enhanced Value Addition: To demonstrate this more effectively please follow the flow chart below which compares imported oil against local seed oil. We can clearly see that from refining upto consumption process, whether the oil is local or imported the same chain would apply. What is interesting is the number of people employed and the generation of employment that can be achieved if we could STOP importing edible oil and INCREASE local production of seeds. 14

15 Option 1 Fertilizer Seeds Tyres Diesel M achinery Electricity Farmers Transport Factory Tractors Cleaner Bodies W orkshop Production Edible oil to refinery Cake Option 2 Imported Oil Oil Solvent Extraction Plant De-oiled Cake Transport Anim al Feed Factory Transport Shop End user 15

16 Capacity Utilisation: Before independence the East African community as a whole was not dependant on imported edible oil, we had enough capacity to farm and produce oil from local seeds not only to suffice the local economy but to export to neighbouring countries like Rwanda, Burundi, Zaire (now DRC), Malawi etc It was in the early 80 s that Tanzania s dependence on imported oil increased when no protection was given to local farmers. Slowly one by one factory in the country started closing. The Tanzanians as usual are slow in fighting for their financial and commercial terms. Associated with some private individuals who had strong influence in the government were able to lobby the government to remove tax from imported oil so as to eradicate the local seed production. Associated with this was Malaysia/Indonesia s vision of being the largest exporters of edible oil. They compensated the large palm plantations and dropped the edible oil prices to as low as $180 in the late 90 s and early This caused a large collapse of local seed farmers not only in Tanzania but in many different parts of the world. Attached are reports from India, Pakistan, Iran, Tanzania, Kenya, South Africa conducted by FAO and some independent organisations which clearly show the long term effects of eradicating or KILLING FARMING AND FARMERS in your own country. 16

17 In Arusha for example to mention some of the factories that have been completely closed for some time are: Afro Multipurpose NSK Pallsons Consumer Industries Apart from closing some have not been able to increase their capacity or grow due to the policies of the government. The government is the people of Tanzania and if Tanzanians will not help themselves, DO NOT expect someone else will. The Minister of Finance imposed a 10% duty last year on imported oil in order to help small scale farmers and standalone soap manufacturers. The Government has initiated a positive feeling and approach NOW IT IS US TANZANIANS WHO HAVE TO INCREASE THE PRODUCTION OF EDIBLE OIL SEEDS IN ORDER TO PRODUCE HIGH QUALITY OIL FOR OURSELVES WE NEED TO STOP ACTING LIKE A SUPERMARKET FOR FOREIGNERS, WE NEED TO BECOME A INDUSTRIAL NATION, A SELF DEPENDANT AND INDEPENDENT NATION.. There is no doubt that we have got independence from the British colony, but we are still far away from becoming independent. We can only call ourselves independent when we are self sufficient and Tanzanian exports are higher than its imports. 17

18 CONCLUSION The government relives VAT from all agro processing industry that uses over 70% or more raw material produced locally for its products (both final and their by-products). In return take written commitments from agro-processors to increase production every year. Put taxes and quotas on amount of raw material that can be exported without value addition on individual basis and as a whole and encourage value addition with commitments from commodity traders to start putting up agro processing plants. Encourage the use of agro waste as a form of energy and BAN use of wood to be used in boilers especially for industries. 18

19 MOUNT MERU MILLERS LTD We thank you very much for giving us this opportunity to make our presentation on the benefits of Edible oil seeds locally planted and produced. 19