Harare – United Refineries, one of the 4 oil processors in Zimbabwe said it is limping along despite prevalent market vagaries. The company operates an 8000 tones per month oil seed crushing and processing plant in Bulawayo, which is its main line of business.
The company’s processing capacity makes it the second largest processor in Zimbabwe by production after Surface Wilmar, which however, has since mothballed operations.
Concerns abound over the outlook prospects of the industry given the wave of operations suspensions sufficing from forex shortages and suspension of imports restrictions statutory.
The industry demanded at least $25 million a month in forex to adequately supply the local market before the policy reversal in respect of cooking oil among other goods, late last year.
This policy reversal implicitly means enhanced competition for local players and given the high cost base impacted in part by low capacity utilization as a result of shortages in forex powered inputs, competiveness is further eroded.
Local producers have failed to source adequate inputs as government could not avail the demanded forex.
Out of the $25 million demanded by oil processsors per month, government managed to avail only $10.9 million a month leaving out a gap of $14.1 million. Other players with outside exposure who managed to get credit facilities to bridge the gap eventually reached unsustainable levels.
Surface Wilmar, producers of Pure Drop and Olivine cooking oil brands and the country’s largest producer cited failure to settle a credit facility to the tune of $11 million.
“We have stopped our operations because the company has not been getting adequate foreign currency and this has led to the ballooning of our obligations with our foreign suppliers who has since indicated their intention to stop supplying the raw materials” said the company in a statement announcing its suspension of operations.
To make matters worse government last year increased the producer price of soya bean which is utilized in edible oil production. This would also naturally result in upward price revision to processor who demand 150000 tonnes of the 300000 tonnes demanded per annum. Zimbabwe only produces 50000 tonnes of the commodity.
For URL, diversity seems to have come in handy with the group now playing in a number of sectors. The company now produces soap, cosmetics, salad cream, stock-feeds and cooking oil under popular brands in the Southern Region of Zimbabwe.
IN 2017 URL re-launched its old lines of Image Soap, Fresh Health Joy and Vogue, Roil Mayonnaise and Olive oil brand taking advantage then of government’s protectionist policies and refurbished facilities.
On reviving some of its old lines, URL in 2018 relaunched into the region, supplying some of its products to Namibia while targeting Malawi and Botswana. Despite the huge ambition, these efforts have been dragged by the debilitating economic situation in Zimbabwe.
In an interview with Equity Axis, group CE Busisa Moyo said production is still viable but we have to move towards normal predictable market dynamics to bring back confidence. He said centralised control and congealed monopolies of any commodity including currency always results in loss of confidence, abuse of power and inevitably corruption real or perceived.
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