Cooking Oil manufacturing companies to retrench workers

...Complain of 50% drop in sales due to VAT ...

Edible Cooking Oil Association of Malawi (ECOAM) has announced that cooking oil companies will start retrenching workers due to the financial loss arising from government’s decision to uphold a 16.5% Value Added Tax (VAT) on cooking oil.

This was announced on Wednesday afternoon during a press briefing by the association at Amaryllis Hotel in Blantyre.

According to ECOAM’s Chairperson Jayshree Patel, cooking oil manufacturers cannot afford to survive as there is no hope for the industry to grow with such working conditions and unfair competition with smuggled oil from Mozambique.

“All member companies of cooking oil will commence retrenchment in the month of March due to 50% drop in sales. The financial losses are rising and companies cannot afford to hold on anymore as there is no hope for the demand to grow with such impurity and exposure to unfair competition with smuggled oil,” she said.

During the briefing, Patel wondered as to why Minister of Finance could maintain such a high taxation on cooking oil when it has a massive negative impact on poor people who will now be forced to purchase the product.

“This decision will affect the poor Malawians because they will be forced to pay a lot for our products. It’s sad that government through the Minister of Finance and the Malawi Revenue Authority have resorted making quick money at the cost of poor Malawians livelihood and survival with good health,” she added.

She also revealed that Ministry of Finance has imposed a 3% Withholding Tax on the prices of Soya which is purchased from farmers without the VAT.

“If this 3% Withholding Tax continues, Malawi farmers will sell their products to Zambia and Zimbabwe, denying our industry whose total installed capacity to crush Soya is 500, 000 Metric Tons per annum. And with this position, Malawi will lose out drastically not only through the closure of local industries but the huge amounts of forex after value adding to the local gold like Soya,” she explained.

According to a document seen by Malawi24 written by Ministry of Finance and addressed to ECOAM, the said VAT on cooking oil cannot be reversed midway through the budget considering that the legal instruments were already passed by Parliament.

The Ministry was responding to ECOAM’s request to government to have the tax reversed on Refined Cooking Oil.

“I wish to advise that the 16.5% VAT has just been introduced on refined cooking oil following passing of the 2020/2021 budget. Kindly note the VAT cannot be reversed midway through the budget considering that the legal instruments were already passed by Parliament. “However, we have taken note of the concerns and the team in the treasury in consultation with other key ministries will review how the VAT on cooking oil has performed as part of the 2021/2022 budget review process,” reads the letter signed by the Secretary to the Treasury Chauncy Simwaka.

Meanwhile, people continues to smuggle Cooking Oil from the neighboring Mozambique as the Mozambican government removed VAT on the product.