Impose 20% tax on palm oil importation

The economy stands a chance of raising approximately US$20million annually if government is able to impose a 10 percent adjustment tax in addition to the 10 percent ECOWAS Common External Tariff (CET) on importation of crude palm oil (CPO), B&FT has been told.

Being a major net importer of the CPO,the country's domestic consumption is pegged at about 370,000 metric tonnes of palm oil in refined and crude form, and imports 260,000 metric tonnes of palm oil. Over the past six months, about 48,000 tonnes of sub-standard palm oil has been illegally imported into the country without appropriate duties.

Nigeria, the largest producer of palm oil in Africa, produces 930,000m/t of CPO and consumes 1,430,000mt -- and has decided to protect the palm industries by imposing import adjustment tax of 25% in addition to CET tariff of 10 %, making 35% duty on importation of CPO. A total of 525,000 m/t of CPO is imported by Nigeria to supplement local production.

Gangadhar Shetty, Head of Sales and Marketing of the Ghana Oil Palm Development Company Limited (GOPDC), in an interview with the B&FT said the import adjustment tax of 10% not only brings additional revenue to government annually, but also discourages import of CPO and encourages investors to develop the oil palm plantations.

To encourage and promote the palm sector, he proposed that no waiver should be considered for palm oil importers and refineries; and said government can decide to use the additional duty revenue to strengthen agricultural research organisations.

“With appropriate duty the palm sector will be able to attract investors to invest on backward integration -- plantations which in the long run will increase local production of CPO and reduce the importation of the CPO. “Local farmers and investors need to be encouraged to invest in palm plantations, and this will only be possible when duty protection is enacted by the government," he said.

Mr. Shetty added: “We believe that government and the key stakeholders of this nation have the same clear objectives and intention at heart, which is to ensure the local farmers and Industries continue to operate in a conducive environment that will not only increase employment but also enable the stimulation of demand for locally manufactured products and thus lead to a growth in the Industrial sector".

He explained that the country's CPO industry is facing a mammoth issue that is draining the economy of much-needed revenue and affecting local plantations, to the extent of some being on the brink of collapse.

Mr. Shetty said government can play an important role by lending its support to theoil palm sector in various forms as the country is blessed to be a part of the African continent, the original Oil Palm tree region.

Current forecasts anticipate that the country is being faced with a net deficit of up to between 20,000 and 100,000 tonnes of the commodity, estimated at about US$35million annually, following slippages in production of the product.

The commodity is the fifth-largest crop in the country in terms of area planted after cocoa, maize, cassava and yam. Approximately 305,758 hectares of plantation is being cultivated nationwide, with an additional 20,000 hectares needed to meet local demand.

ECOWAS accounts for 4.6% of the world population with 336 million, and 2040 forecasts reckon on more than 600million people -- demanding urgent revival of the palm segment to meet the growing demand for the oil. In the last four decades, all the countries constituting today’s ECOWAS community generated 48% of the world palm oil production.

Nigeria was in first position on the world production chart, its share of total world production being 39%. However, in 1987, ECOWAS member-states’ production accounted only for 12.5 % despite a 55% regional production increase. In 2014, ECOWAS’s relative production estimates still follow a bearish trend and represent no more than 2.7 % of the world crude palm oil production.

Palm oil and palm kernel oil production (CPO and PKO) represent 75% of the overall vegetable oil production in ECOWAS.

Recent consolidated statistics show that the whole palm oil sector employs about 3.5 million people across ECOWAS, and benefits indirectly more than 30 million Africans.

These facts and figures reveal the existence of a huge development opportunity for the vegetable oil commodity chain in Africa and ECOWAS.

This translates to direct employment under the Palm segment in Ghana, approximately 290,000 people, and benefits indirectly more than 2.45 million Ghanaians.

World-wide demand, including regional demand, is also increasingly offering the possibility of exporting oil palm from Ghana.

Favourable conditions exist in the country for expansion of both large-scale and smallholder oil palm production and processing. In addition to the requirements for CPO, there is great potential for value-added and downstream activities.

The palm oil industry is an extremely important component of many Ghanaian livelihoods; ranging from small-scale growers, artisanal processors to estate labourers and large-scale mill and plantation owners

Ghana is a very competitive location for oil palm development, compared to its immediate neighbours and the top global producers.

While developing local capacity for breeding better planting material, new high-yielding varieties developed elsewhere can be accessed and utilised through government-to-government facilitation to double the country’s yield.