An oily race to fry an egg
If Kenya and Tanzania ministers for finance will have eggs on Thursday, they will have fried an entire industry in a lot of edible oil. The two countries facing a similar predicament of increasingly expensive cooking oil are going full blown in their budgets to allocate funds for all manner of seeds, land and locations for the new producers of government cooking oil.
The last time Kenya and Tanzania competed on a railway, Kenya was faster to derail into the wastelands of Suswa and no amount of trying to pull it out with meter gauge lines has been able to revive the once vibrant CoW Railway. Tanzania got the region.
This round Tanzania first announced they would put emphasis on large scale cultivation, directing regional commissioners to allocate over 150,000 hectares of land in their administrative areas for block farming activities. Tanzania Agricultural Research Institute (Tari) said their ministry of agriculture has selected Manyara, Dodoma and Singida regions as strategic areas for the production of quality seeds that will later be distributed to farmers countrywide.
In Kenya, the government first issued the controversial duty waiver on 125,000 tonnes of edible oils to compete with local manufacturers. In the budget, President Willam Ruto is promising to deliver 200MT of assorted seed of canola, sunflower, soya and 10,000 coconut seedlings and disburse Kes42 million to 840 farmers as loans in Kwale, Mombasa, Taita Taveta, Tana River and Kilifi counties under the National Edible Oil Crops Project.
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The budgets will be read the verdict will be out there for East African consumers, who currently are finding it difficult to fry an egg. Edible oils are a kitchen staple essential for most consumers. However, for the past few months costs have become prohibitive.
Last year, disruption in the global supply chain worsened the cooking oil deficit in the country, pushing up the cost of a litre averagely from Kes346 in February, Kes430 in March, Kes408 in April to Kes455 in June according to market intelligence firm, Research and Markets.
To arrest the situation, the government proposed importation of duty free edible oil to bring down the prices. Manufacturers, who are finding themselves in competition with a government that is not interested in playing fair have warned that this intervention will not work. They claim the cost of duty-free finished edible oil imports will be Kes240 cheaper than the cost charged by local firms for every 20-litre jerrycan, translating to only Kes12 per litre.
The reality is that the price of edible oil is a story of the fracturing free global market that has been seamlessly working for everyone. Tight supply chains, a ban on exports by Indonessia and the Ukarine war have all curtailed the flow sunoil exports and continued elevated prices of palm, soy, and sunflower oil.
The global challenges might however be easing with crude palm having undergone significant correction globally, which has eased prices in most markets. These edible oils; soybean, sunflower, corn oil, soy oil and palm oil amongst others are changing rapidly to cope with changing nature of supply and demand.
This erratic pricing is worrying governments who are faced with inflation that is out of their control. And as countries such as Kenya and Tanzania seek to extricate their economies from this shocks they are coming up against more organized and efficient private sector who understand market dynamics better and are not saddled with government rent seeking.
Population growth, urbanization and decades of economic growth have driven up the edible oil market`s growth in Kenya which is expected to progress at a CAGR of 13.37 percent in revenue and 4.75 percent in volume between 2023-2028, Kenya edible oil market 2023-2028.
