Mozambique: Cooking oil imports in Q1 almost halve after VAT exemption ended

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Mozambique: Cooking oil imports in Q1 almost halve after VAT exemption ended

10:15 CAT | 16 Aug 2024

FILE - For illustration purposes only. [File photo: AIM]

According to official data Lusa compiled on Friday, Mozambique’s cooking oil imports almost halved in the first quarter of the year compared to the same period in 2023 after the end of the VAT exemption.

According to foreign trade data from the Bank of Mozambique, the country imported a total of $58.1 million in cooking oil in the first quarter of 2023, purchases that fell by more than 40% in the first three months of this year, to $34.7 million .

Mozambique’s government said in March that the end of the VAT exemption on oil and soap, applied since the end of 2023 after 15 years, is to be maintained, claiming that domestic companies have not taken advantage of the opportunity.

‘We’re not going to give VAT exemption again,’ said the minister of industry and trade, Silvino Moreira, when questioned by journalists in Maputo on the sidelines of a public event.

‘The opportunity that the government gave unfortunately didn’t benefit the consumer. And we want the industry to realise that it has to work,’ he said.

Entrepreneurs in the sector went public in December to say that the end of the VAT exemption regime in 2024 for these national products would jeopardise the future of these industries, encouraging the importation of cheaper products without the same quality, in addition to the increase in prices that has since been seen for these basic food basket products.

Last May, Mozambican businessmen advocated a support programme to increase the incorporation of national raw materials in the oil and soap industry, products that have lost their VAT exemption since 31 December 2023, assuming that this would save $300 million in foreign purchases.

‘This would reduce imports by around $300 million. In other words, we would be generating an additional demand of 300 million from local industry, which could lead to more investment in the agricultural sector, resulting in additional sectoral growth of 6%,” said the president of the Confederation of Economic Associations of Mozambique (CTA), Agostinho Vuma.

Speaking at the opening of the 19th Annual Private Sector Conference (CASP) in Maputo, in the presence of the president of Mozambique, Filipe Nyusi, Vuma pointed out the constraints caused by the withdrawal of the VAT exemption on these two products, acknowledging that the dialogue to change the measure with the ministries of Industry and Trade and Economy and Finance has been ‘fruitful’.

‘This is essential because, although VAT is a tax paid by the consumer, companies often lose competitiveness because this rate [percentage of tax applied] makes their products more expensive. That’s why we believe there is room to set up a programme of incentives to replace the 80% of raw materials imported with products of local origin,’ he said.

The CTA’s proposal, said Vuma, involves ‘renewing the tax incentive of VAT exemption on the transfer of cooking oil and soaps’ but coupling this with the ‘obligation for industries to increase the incorporation of local raw materials in their production process from the current 20% to 60% in two years’.

Source: Lusa