Sunday, February 18, 2018

Letters of credit averts cooking oil shortages

Livingstone Marufu
THE Reserve Bank of Zimbabwe continues to avail letters of credit to cooking oil producers to ensure there is enough supply of cooking oil in the country.
This comes as the oil expresser’s battle to supply the country with enough cooking oil amid foreign currency shortages.
Generally, most producers that import raw material have faced foreign currency challenges but the RBZ has intervened through various African Export Import Bank (Afreximbank) backed nostro stabilisation facilities.
Foreign payment backlogs were around US$400 million by year end but the central bank is said to be moving fast to reduce the backlog.
Last week, Oil Expresser’s Association of Zimbabwe president, Mr Busisa Moyo told The Sunday Mail Business that the association is managing to provide close to half of the foreign currency requirements while the rest is covered by the central bank through letters of credit.
Mr Moyo said the country needs two million litres of cooking oil per week but the oil expresser’s are only managing to produce about a million litres.
Oil expresser’s expect the situation to improve in the near future following the intervention by the RBZ.
“We require between US$2 million and US$3 million a week in order to produce two million litres we are only managing 50 percent of the required amount due to current foreign currency shortages.
“The other 50 percent is coming from the Reserve Bank through its letters of credit to various oil producers and this has averted potential cooking oil shortages over the last few months.
“Given the central bank’s intervention, the country has enough cooking oil requirements and we are not worried with cooking oil supplies,” said Mr Moyo.
The cooking oil sector requires at least US$8 million a month but has received US$3 million for foreign payments from the RBZ.
This has left a deficit of US$5 million a month, which is not so good for the industry.
But the cooking oil industry has been managing to meet demand and has gone further to reduce prices significantly since September.
Cooking oil was going for around US$4, 70 in September last year and went down to around US$3,60 in January this year.
“We continue to have some problems as far as the foreign allocations are concerned but we would like the RBZ to continue providing some funding for us to cover the foreign payment backlogs that we are still battling with.
“We are in discussion with the monetary authorities and we are confident that we will soon pay our telegraphic transfers (TTs),” said Mr Moyo.
Despite these challenges, the country has not had shortages in the last seven months.
It could not be established how much money the RBZ is considering to allocate to the cooking oil producers for foreign payments backlogs as the RBZ Governor Dr Mangudya was not answering his mobile phone by the time of going to print.