In the 1st of June 2015 edition of Business & Financial Times, a statement attributed to the recently inaugurated Oil Palm Development Association of Ghana (OPDAG) was issued on the palm oil industry, calling on government not to impose any import adjustment tax on imported palm oil.
It is most unfortunate that the Oil Palm Development Association of Ghana took the view of suspending duty protection on oil palm to favour the importers and refineries -- completely undermining the interests of farmers. A larger number of the actors in the palm sector are not in line with the view of the OPDAG.
Such a landmark decision was taken without larger representation from major actors in the palm sector such as out-growers, private holders and farmers.
The
Association’s statement as issued in the paper is very worrying since it seeks
to defeat the tax-measure’s objectives and focus. Proper consultations were
made with the larger segment of the stakeholders.
This is not the first time
that the association has been in existence: it failed twice in the 1990’s
because of the selfish interest of multinationals in the Association at the
expense of indigenous companies. Government must seriously not acquiesce to the
selfish interests of those multinationals in the industry that want to use our
country as a dumping ground for their produce.
Many
oil palm entrepreneurs are calling on authorities to introduce fiscal measures
to protect the industry so as to attract genuine investors and rural dwellers
into the sector. If authorities do not implement the fiscal measures, actors in
the industry will pay lip-service to the industry to the detriment of the
economy.
The much talked about concept of more import and less export cannot be
over-emphasised. Factors such as strong imports or US$ demand to meet import
bills and large fiscal and current account deficits all continue to undermine
the economy.
Imports create employment for the
exporting country and take away employment in the importing country. Importing
a metric tonne of crude palm oil into Ghana displaces one farmer from his/her income.
There must be strong fiscal discipline to protect the palm oil sector.
It is very obvious that every
country should try to protect their local agric industries by imposing the additional
duty which can derive positive economic and social benefits for people and
communities.
There are some companies that
have open commitment to source the 300,000 tonnes of palm products from Africa,
which will be possible only by framing polices to favour the palm sector’s growth
and not favour the importers. Companies operating in Nigeria are liable to pay 25%
IAT, and Ghana’s palm sector actors’ demand for 10% IAT is very valid.
Many of oil palm entrepreneurs are
totally convinced that IAT on CPO will have positive impacts on the palm
sector, farmers, outgrowers, smallholders, and create additional revenue for
government. Any decision not to protect the Palm sector will eventually affect
the local farmers and indigenous companies.
Protection via duty is needed to
bring up production to close the gap between production and demand. Ghana has
deficit of CPO, hence policy needs to be framed to increase the production of
CPO and not other way around by suspending the duty protection.
Oil palm
plantations raise the living standards of rural people by providing employment
to thousands and alleviating poverty. Palm plantations, Schemed smallholders, Independent
Farms, Outgrowers and Individual farmers create employment in the palm segment
for more than 290,000 people.
Refineries required to refine the
current crude palm oil production of the country may not engage more than 200 workers.
This shows that plantations create employment for the teeming youth to halt
urban drift.
This simple and undisputable fact calls for more government
intervention and financial support for the plantations. Currently, CPO and
Refined Palm Oil are traded on the international market with little price
difference -- hence the refining process will hardly save any precious foreign
currency.
Therefore, an increase of CPO production needs to prioritised
Symboil and Sri Ghana Limited,
which are located in the Western and Eastern Regions of Ghana respectively, are
foreign companies actively engaged in developing oil palm plantations.
They
have been in the country for only a few years but have managed to acquire over
5,500 hectares of land for oil palm plantation development. Others just operate
their refineries and complain about land acquisition in Ghana.
The country must
encourage such genuine investors who will brace all odds and are prepared to
assist the country to meet its short- and long-term development objectives in
the oil palm sector.
Statistical facts
Current production – 135,000 tonne (App
US$96million)
Employment generation -- 290,000
Import -- 260,000 mt (Value --
App US$185million)
Potential to reach the production of more
the 400,000 tonnes (US$284million)
Employment potential -- More than
900,000
Why Import Adjustment
Tax is needed in the Palm Oil sector
1.
With implementation of IAT, the price of CPO in Ghana will increase
proportionally with FFB price, which benefits farmers who are largest actors in
the palm segment.
2.
Average yield of CPO per hectare for plantations in the Far East is 5.5 metric
tonnes in comparison to 2.5 to 3.0 metric tonnes in nucleus estates of Ghana,
even after practicing best plantation procedures.
This yield disparity is due
to the rainfall pattern and soil structure. In Malaysia rain is evenly
distributed throughout the year, whereas in Ghana for 4 months plants will not
see a drop of rain.
3. With
50% low yield and high cost of infrastructure, maintenance and electricity, it
would be very difficult for local farmers to compete with CPO imported from the
Far East without the duty protection.
4.
Nigeria imposed a 25% Import Adjustment Tax in addition of 10% of CET, making
35% net duty to protect the palm sector. Ghana, being a net importer and 3rd-largest
producer of palm oil in Ecowas after Nigeria and Ivory Coast, requires government
intervention to protect the palm segment -- which generates employment for more
than 290,000 people.
5. Without
the duty protection the palm plantation sector tends to be unattractive.
6. Palm
Mills are unable to pay better prices to out growers, small holder and makes
business unattractive to them.
7. If
adequate protection is not given to the palm sector, Ghana will risk losing
local production of 135,000 tonnes that needs to be replaced by imports --
which will cost the country more than US$95million and also risk eliminating
the livelihoods of 290,000 farmers.
8. The
current duty rate is discouraging new investors from choosing the palm segment.
New investors prefer to invest in countries which empower the sector with duty
protection.
9. Ghana
is a growing economy and demand for the vegetable oil will keep rising, and as
such the nation needs to support the sector to increase domestic production
with the right policies and incentives.
10. Investors that
have invested in refineries will be forced to consider the option of going for
plantations.
11. The Import
Adjustment Tax (IAT) of 10% will bring in Additional Revenue of Approximately
US$20million annually.
12. The IAT
will help discourage importation of CPO and boost domestic production.
13. The increased
opportunity for domestic oil palm production will encourage foreign direct
investment into oil palm plantations.
14.
Furthermore, government can channel part of the IAT revenue into R&D for
High Yield Oil Palm planting materials to increase potential output of the oil
palm plantations.
15. In the longer-term,
once the demand/supply gap is bridged, Ghana can become a net exporter of crude
& refined palm oil products to further increase its Foreign Income
Reserves.
Ultimate benefits to Ghana:
Employment potential for more
than 900,000
Food
security of the country
Development of agric sector
Development of rural areas
Poverty eradication in rural
areas
Employment for rural masses
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