The Common Market for Eastern and Southern Africa (COMESA) is mulling a couple of measures to contain the runaway prices of refined vegetable oil in the region.
- The prices of vegetable oil increased substantially over 18 months from the beginning 2021 to mid-2022, by 50 to 100 per cent in foreign currency terms.
- According to Comesa Competition Commission, these increases have been much larger than the increases in the main input costs.
- Prices did not adjust downwards again to reflect the fall in input costs to their normal levels.
“These increases happened in the context of rising global crude palm oil prices and sea freight costs,” the Comesa Competition Commission in the report titled Vegetable Oil Value Chain in East and Southern Africa.
“The increases were larger than increases in crude palm prices (input) and, while crude palm oil prices decreased after the first quarter of 2022, prices in the region remained high through to the beginning of 2023, meaning a much bigger gap between the consumer prices and this major input cost,” the commission added.
The Commission’s notes that the prices of vegetable oil increased sharply from the beginning of 2021. Kenyan prices peaked at $2.78/litre, and in Uganda prices increased to $3/litre but from a higher starting point of $2/litre. In Zambia prices doubled, from $1.50 to over $3/litre.
In order to deal with the gaps, Comesa is recommending monitoring the changes in shareholding of the firms in the value chain for vegetable oil, including assessing the effects of mergers and the extent of common shareholdings. It says this can feed into improving merger review.
The body also calls for continuous tracking of vegetable oil and oilseed prices in the region with the national competition authorities, as part of price monitoring for the African Market Observatory, including improving product and country coverage and drawing on trade flows, market analysis and policies to advocate for appropriate policy package to develop the regional value chains to expand agriculture, increase investment and ensure competitive production at lower consumer prices.
With almost no production of oilseeds such as sunflower and soybean, Kenya’s vegetable oil production is reliant on crude palm oil imports. The port of Mombasa provides for a gateway for imports of crude palm oil from Indonesia and Malaysia.
Large scale refiners therefore typically have operations in Mombasa to facilitate inhouse transportation of crude oil from the port to their production facilities in inland areas such as in Nairobi.
