The Confederation of Economic Associations (CTA), the largest employers' organization in the country, is asking for a five-year exemption from Value Added Tax (VAT) in the cooking oil value chain in Mozambique to allow the incorporation of local production factors in 30%.

According to the Mozambican business community, the measure could boost the production of soya as a raw material to an average of 123%, from the current 51,759 tons to 370,350 tons in the fifth year.

For the CTA, the measure will boost local production and consequently reduce dependence on imports of crude oil for refining, thus reducing imports from 162,500 tons to 103,244 tons a year, and generating savings of 65 million dollars.

"Soybean production could grow by 123% in five years, from 51,759 tons to 370,350 tons, benefiting 250,000 producers and strengthening the national production chain," said CTA vice-president Maria de Assunção Abdula.

However, the Mozambican government is calling for caution, since in the view of the Ministry of Economy, specifically the National Directorate of Industry, the exemption requested may not protect the industry and could end up harming the companies that actually promote local development of the raw material.

Cited by AIMThe national director of industry, Sidónio dos Santos, warned that there are industries in the oil sector that benefit from the exemption and use it to import crude oil and refine it in the country, completely discarding the link with producers, a situation that doesn't benefit the state, local producers and even less the end consumer.

"I'm against the VAT exemption. We have to be careful because we have industries that simply import crude oil and don't have the integration component. If we were to withdraw VAT as such, who would we be benefiting? It's not just about exempting, the exemption must promote the local development of the raw material," said Sidónio dos Santos.

The government source denounced the fact that, at the moment, refineries are benefiting from the VAT exemption to import raw material for production, including soap and its packaging, to the detriment of other sectors. In this context, Sidónio dos Santos advocates that VAT be targeted specifically at industries with links to producers as a way of providing incentives.

"The current exemption isn't having an impact because there are industries that don't integrate with the population. But we recognize that there are industries with integration, and yes, the exemption should be aimed at them," he said.

The government has decided to extend the period of VAT exemption until December 31st, on transfers of sugar, edible oils and soaps, raw materials, intermediate products, parts, equipment and components, made by the national sugar industry. According to the Mozambican government, the measure aims to reduce the current cost of living in the country.

(Photo DR)