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MOUNT MERU MILLERS MOUNT MERU MILLERS LTDLTD

P O Box 7094, Arusha, TanzaniaP O Box 7094, Arusha, TanzaniaTel : 250 4035Tel : 250 4035 Fax : 2544220Fax : 2544220EE--mail : mail : arvind@mountmeru.co.tzarvind@mountmeru.co.tz____________________________________________________________________________________

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Dear Ladies and Dear Ladies and GentleManGentleMan,,His Excellency Mr President,His Excellency Mr President,

We thank you very much for giving us the opportunity to give this We thank you very much for giving us the opportunity to give this presentation to you on behalf of local edible oil seed industry in Tanzania.presentation to you on behalf of local edible oil seed industry in Tanzania.

This presentation is primarily on the Cotton and Sunflower oil industry. But This presentation is primarily on the Cotton and Sunflower oil industry. But benefits would also be for Safflower, Soya, Palm oil and other oil bearing benefits would also be for Safflower, Soya, Palm oil and other oil bearing seeds. seeds.

Tanzania consumes some 200,000 tons of edible oil per annum. Of which Tanzania consumes some 200,000 tons of edible oil per annum. Of which 75% is imported, and 25% locally produced.75% is imported, and 25% locally produced.

The local edible oil sector (including the unThe local edible oil sector (including the un--organised sector) is generating organised sector) is generating TSHS 55 billion for the economy and engaging over TSHS 55 billion for the economy and engaging over 1,000,0001,000,000 rural people, rural people, primarily farmers.primarily farmers.

The imported edible oil industry is generating (value addition) TSHS 30 The imported edible oil industry is generating (value addition) TSHS 30 billion inclusive of taxes and engaging a maximum of billion inclusive of taxes and engaging a maximum of 50005000--1000010000 people.people.Currently Edible oil is the second most expensive import after fuel.Currently Edible oil is the second most expensive import after fuel.

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Benefits of local edible seed oils as opposed to imported oil:Benefits of local edible seed oils as opposed to imported oil: Improved Human Nutrition Improved Human Nutrition –– Appendix 1Appendix 1 Rural Employment and Job creationRural Employment and Job creation-- Appendix 2Appendix 2 Exports / Foreign Exchange EarnerExports / Foreign Exchange Earner Environmental ProtectionEnvironmental Protection Enhanced value addition ( related industries etc e.g. transport )Enhanced value addition ( related industries etc e.g. transport ) Capacity Utilisation (Revival of closed factories)Capacity Utilisation (Revival of closed factories) Alternative Energy sources Alternative Energy sources ––‘‘Bio fuels via Biomass’’‘‘Bio fuels via Biomass’’ Tax BenefitsTax Benefits

Kenya being a massive regional exporter of edible oil in the region Kenya being a massive regional exporter of edible oil in the region may not favour local edible oil production. may not favour local edible oil production.

Uganda is implementing a massive edible oil project for exports Uganda is implementing a massive edible oil project for exports eventually. eventually.

1.1. In 2003 they promised BUL vat deffetment on all their oil produced from their own farmers,In 2003 they promised BUL vat deffetment on all their oil produced from their own farmers,2.2. In 2008/09 budget they relived all agro processing industry from Corporate Taz/Income Tax. In 2008/09 budget they relived all agro processing industry from Corporate Taz/Income Tax. 3.3. In 2009/10 (THIS YEAR) they are expected to relive all agro processing industries using In 2009/10 (THIS YEAR) they are expected to relive all agro processing industries using

70% or more of their raw material from farmers from VAT on all the final products ,70% or more of their raw material from farmers from VAT on all the final products ,4.4. Uganda is expected to be a NETT exporter of edbile oil by 2015,Uganda is expected to be a NETT exporter of edbile oil by 2015,

South Africa, Iran, Pakistan, India;South Africa, Iran, Pakistan, India; Few examples of substantially more developed Few examples of substantially more developed Agricultural Economies than Tanzania have higher duties on imported crude and Agricultural Economies than Tanzania have higher duties on imported crude and refined edible oils. refined edible oils.

Europe has imposed a 5.75% blend of bioEurope has imposed a 5.75% blend of bio--fuels in its petroleum industry although the fuels in its petroleum industry although the primary reason is to subsidise their farmers after the removal of agricultural subsidies primary reason is to subsidise their farmers after the removal of agricultural subsidies (WTO). In effect higher edible oil prices years in the future.(WTO). In effect higher edible oil prices years in the future.

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Some 10% Taxation Benefits of last year Some 10% Taxation Benefits of last year

Tax benefit to the government should have been in excess of 20billion per Tax benefit to the government should have been in excess of 20billion per budget year.budget year.

Local cotton farmers (Lake Zone) earned an extra 10 billion shillings in Local cotton farmers (Lake Zone) earned an extra 10 billion shillings in revenues due to the 10% tax. This was the biggest boost in a drought year revenues due to the 10% tax. This was the biggest boost in a drought year when cotton production was almost 30% of the preceding year.when cotton production was almost 30% of the preceding year.

Sunflower farmers benefited by an additional 5Sunflower farmers benefited by an additional 5--10 billion shillings in 10 billion shillings in revenues. Other oil seed farmers would have benefited greatly also e.g.: revenues. Other oil seed farmers would have benefited greatly also e.g.: palm oil (palm oil (kyelakyela, , kigomakigoma) but we do not have the estimates.) but we do not have the estimates.

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Improved Human Nutrition:Improved Human Nutrition:

In Tanzania, the manual ram press appears to have the highest chance of In Tanzania, the manual ram press appears to have the highest chance of success as a rural intervention to initiate small off farm enterprises, a start success as a rural intervention to initiate small off farm enterprises, a start of the evolution of more value added domestic activities, edible oil, of the evolution of more value added domestic activities, edible oil, generated near the farm gate, and redistributed to households nearby ( 80% generated near the farm gate, and redistributed to households nearby ( 80% of the population being rurally located) the benefit of human nutrition is of the population being rurally located) the benefit of human nutrition is immense. This may not have a substantial national impact , it has immense. This may not have a substantial national impact , it has substantial singular effect e.g. Kondoa, Galapo, Babati, Singida, Hydom. substantial singular effect e.g. Kondoa, Galapo, Babati, Singida, Hydom. ( Manyara, Dodoma , Kilimanjaro, Singida , Iringa, Mbeya and Arusha ( Manyara, Dodoma , Kilimanjaro, Singida , Iringa, Mbeya and Arusha regions among the many others) regions among the many others)

Local seed oil is generally free from fertiliser/ pesticides which are harmful Local seed oil is generally free from fertiliser/ pesticides which are harmful to the human body even in trace amounts.to the human body even in trace amounts.

The farm to consumption time is limited to 6 months (local oil seed) in The farm to consumption time is limited to 6 months (local oil seed) in comparison to imported oil can be up to 2 years, thus more fresh.comparison to imported oil can be up to 2 years, thus more fresh.

Sunflower oil is a source of Vitamin E, and is low in saturated fat (less than Sunflower oil is a source of Vitamin E, and is low in saturated fat (less than 10%), and is high in mono saturated fats which gives healthier life. 10%), and is high in mono saturated fats which gives healthier life. Sunflower oil naturally has a healthy fatty acid profile which is the key Sunflower oil naturally has a healthy fatty acid profile which is the key reason why sunflower oil is the No 1 choice of most doctors.reason why sunflower oil is the No 1 choice of most doctors.

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EmploymentEmploymentBelow chart shows employment generated by edible oils in 2006Below chart shows employment generated by edible oils in 2006

Employment for sunflower and cotton seed per 1000 tons of oilEmployment for sunflower and cotton seed per 1000 tons of oil

SunflowerSunflower CottonCotton assumptionassumption

Oil in tonsOil in tons 10001000 10001000

Seed needed per ton of oilSeed needed per ton of oil 40004000 40004000 25% oil in sunflower / 10% oil in cotton (refined)25% oil in sunflower / 10% oil in cotton (refined)

Area needed for agricultureArea needed for agriculture 80008000 80008000sunflower 500kg per acre and cotton seed 667 kg per sunflower 500kg per acre and cotton seed 667 kg per

acreacre

People employed per acrePeople employed per acre 22 22 we assume a minimum two people per acrewe assume a minimum two people per acre

Employment per 1000 tons of oilEmployment per 1000 tons of oil 1600016000 3003030030 No of people employed for 1000 tons of oilNo of people employed for 1000 tons of oil

2006 production in (000's tons)2006 production in (000's tons) 3030 99sunflower assumed and cotton from cotton production sunflower assumed and cotton from cotton production

(cotton board)(cotton board)

Industry employmentIndustry employment 480000480000 270270270270

Total employmentTotal employment 750270750270

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Notes : These are estimated figures but for a drought year, and Notes : These are estimated figures but for a drought year, and also the also the Government had not imposed the 10% duty to protect Government had not imposed the 10% duty to protect farmers.farmers.

0

100,000

200,000

300,000

400,000

500,000No

. of P

eopl

e

Palm(Imported) Cotton (Local) Sunflower (Local)

Imported and local oils

Employment 2006 ( edible oils)

88 Notes : Total employment should reach above 1,500,000 in Notes : Total employment should reach above 1,500,000 in

2007/82007/8

0

200000

400000

600000

800000

Palm( Imported) Sunflower (local) Cotton (local)

Expected 2007 employment (edible oil)

A more normal scenario for 2007 as shown below should be applicable

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Below chart shows comparison potential employment by various Below chart shows comparison potential employment by various oil seeds.oil seeds.It is a clear indication of how much employment is being It is a clear indication of how much employment is being deprived.deprived.

0

500000

1000000

1500000

2000000

2500000

3000000

Empl

oym

ent

Palm oil Sunflower oil Cotton oil

Employment potential ( 2010)

Note : The future employment scenario if we support local farmers

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JOB CREATIONJOB CREATION

Apart from direct employment of farmers and factories in the edible oil sector, there is a creation in some of the following sectors :

Seed industry

Transportation

Energy and Utilities

Animal Feed Industries

Packaging Industry etc….

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Foreign ExchangeForeign Exchange

From Records that have been obtained from TRA, it shows that Tanzania has From Records that have been obtained from TRA, it shows that Tanzania has spent the following amount of money on purchase of edible oil and soap raw spent the following amount of money on purchase of edible oil and soap raw material.material.

2001 2001 –– 48,355,323,810/=48,355,323,810/=2002 2002 –– 54,511,269,438/=54,511,269,438/=2003 2003 –– 50,140,315,749/=50,140,315,749/=2004 2004 –– 29,436,959,092/=29,436,959,092/=2005 2005 –– 90,713,855,049/=90,713,855,049/=2006 2006 –– 142,231,000,000/=142,231,000,000/=2007 2007 –– 280,297,363,224/=280,297,363,224/=2008 2008 –– 190,386,000,000/=190,386,000,000/=

It is quite clear from the data above that either TRA has made a mistake for It is quite clear from the data above that either TRA has made a mistake for 2004 records or something quite right has not been happening. The above 2004 records or something quite right has not been happening. The above figures are in Tshs and it is quite clear that over 280 billion shillings has been figures are in Tshs and it is quite clear that over 280 billion shillings has been lost by the government in foreign exchange in 2007 only.On average edible lost by the government in foreign exchange in 2007 only.On average edible oil prices have been going up every year by at least 15% and the Tshs has oil prices have been going up every year by at least 15% and the Tshs has been depreciating against the USD by another 8% every year, henceforth the been depreciating against the USD by another 8% every year, henceforth the gap is only expected to increase.gap is only expected to increase.

Apart from this if Tanzania is self dependant it has potential to export the Apart from this if Tanzania is self dependant it has potential to export the same oil and it’s by products. Our vision should aim to make Tanzania a net same oil and it’s by products. Our vision should aim to make Tanzania a net exporter of edible oil and an earner of foreign exchange.exporter of edible oil and an earner of foreign exchange.

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Environmental Protection:Environmental Protection:

Sunflower seed produces three main resourcesSunflower seed produces three main resources1. Sunflower Oil1. Sunflower Oil2. Sunflower Cake/De2. Sunflower Cake/De--oiled Cakeoiled Cake3. Sunflower Husk3. Sunflower Husk

Oil is used for human consumption and the advantages have been given Oil is used for human consumption and the advantages have been given earlier.earlier.

Sunflower Cake is used as a raw material to animal feeds. It is used due to its Sunflower Cake is used as a raw material to animal feeds. It is used due to its high protein content that is required by animals. The high protein content and high protein content that is required by animals. The high protein content and due to the fact that sunflower is an agrodue to the fact that sunflower is an agro--produced material makes it among produced material makes it among the most ideal raw material of animal feeds. Infact Kenya is the largest buyer the most ideal raw material of animal feeds. Infact Kenya is the largest buyer of sunflower cake/doc and all of it is used for animal feeds.of sunflower cake/doc and all of it is used for animal feeds.

A large volume of the same is exported from South and Latin America, A large volume of the same is exported from South and Latin America, Ukraine etc. to USA/Canada, Europe and Middle East. Ukraine etc. to USA/Canada, Europe and Middle East.

How this protects the environment is you do not have to graze your cows on How this protects the environment is you do not have to graze your cows on the natural grass and other vegetation, the same energy is replaced by using the natural grass and other vegetation, the same energy is replaced by using animal feeds. The other most important thing is by using animal feeds you animal feeds. The other most important thing is by using animal feeds you can plan on how to feed your animal depending on their productivity and can plan on how to feed your animal depending on their productivity and output and the same ratios can be developed.output and the same ratios can be developed.

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Moreover you do not have to depend on rain and local weather,Moreover you do not have to depend on rain and local weather,it is an inhouse system that can be controlled by mankind.it is an inhouse system that can be controlled by mankind.

Sunflower husk is currently being used as an alternative to fuel. It is Sunflower husk is currently being used as an alternative to fuel. It is cheap, produces environmental friendly gases and helps the cheap, produces environmental friendly gases and helps the government from loss of foreign exchange. To give examples of a government from loss of foreign exchange. To give examples of a few factories in Tanzania who have shifted from fuel to partially or few factories in Tanzania who have shifted from fuel to partially or fully agro waste are:fully agro waste are:

Mount Meru Millers Limited, Mount Meru Millers Limited, A to Z Textile mills,A to Z Textile mills,Sunflag (T) LtdSunflag (T) LtdHans Nails and Fibreboard 2000 LtdHans Nails and Fibreboard 2000 LtdTanga Cement Company Tanga Cement Company

Above are only few of the companies that have shifted from using Above are only few of the companies that have shifted from using expensive foreign petroleum products to environmental friendly expensive foreign petroleum products to environmental friendly natural agro waste. This is also an insight to Biodiesel. As natural agro waste. This is also an insight to Biodiesel. As mentioned earlier, it is becoming increasingly difficult to compensate mentioned earlier, it is becoming increasingly difficult to compensate farmers, hence EU has decided on a self sufficient programme farmers, hence EU has decided on a self sufficient programme which will help farmers without subsidizing and help the environment. which will help farmers without subsidizing and help the environment. They have done this by imposing a minimum ratio of 5.75% of bioThey have done this by imposing a minimum ratio of 5.75% of bio--diesel to be blended into all white petroleum, in order to protect the diesel to be blended into all white petroleum, in order to protect the environment and empower the farmers.environment and empower the farmers.

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Enhanced Value Addition:Enhanced Value Addition:

To demonstrate this more effectively please To demonstrate this more effectively please follow the flow chart below which compares follow the flow chart below which compares imported oil against local seed oil. We can imported oil against local seed oil. We can clearly see that from refining upto consumption clearly see that from refining upto consumption process, whether the oil is local or imported the process, whether the oil is local or imported the same chain would apply.same chain would apply.

What is interesting is the number of people What is interesting is the number of people employed and the generation of employment employed and the generation of employment that can be achieved if we could STOP importing that can be achieved if we could STOP importing edible oil and INCREASE local production of edible oil and INCREASE local production of seeds.seeds.

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Option 1 Fertilizer Seeds Tyres Diesel Machinery Electricity

Farmers Transport Factory Production

Tractors Cleaner Bodies Workshop

Edible oil to refinery Cake

Option 2 Imported Oil Solvent

Extraction Plant

OilDe-oiledCake

Transport

AnimalFeed Factory

Transport

Shop

End user

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Capacity Utilisation:Capacity Utilisation:

Before independence the East African community as a whole was not Before independence the East African community as a whole was not dependant on imported edible oil, we had enough capacity to farm and dependant on imported edible oil, we had enough capacity to farm and produce oil from local seeds not only to suffice the local economy but to produce oil from local seeds not only to suffice the local economy but to export to neighbouring countries like Rwanda, Burundi, Zaire (now DRC), export to neighbouring countries like Rwanda, Burundi, Zaire (now DRC), Malawi etc…Malawi etc…

It was in the early 80’s that Tanzania’s dependence on imported oil increased It was in the early 80’s that Tanzania’s dependence on imported oil increased when no protection was given to local farmers. Slowly one by one factory in when no protection was given to local farmers. Slowly one by one factory in the country started closing. The Tanzanians as usual are slow in fighting for the country started closing. The Tanzanians as usual are slow in fighting for their financial and commercial terms. Associated with some private their financial and commercial terms. Associated with some private individuals who had strong influence in the government were able to lobby individuals who had strong influence in the government were able to lobby the government to remove tax from imported oil so as to eradicate the local the government to remove tax from imported oil so as to eradicate the local seed production.seed production.

Associated with this was Malaysia/Indonesia’s vision of being the largest Associated with this was Malaysia/Indonesia’s vision of being the largest exporters of edible oil. They compensated the large palm plantations and exporters of edible oil. They compensated the large palm plantations and dropped the edible oil prices to as low as $180 in the late 90’s and early 2000. dropped the edible oil prices to as low as $180 in the late 90’s and early 2000. This caused a large collapse of local seed farmers not only in Tanzania but in This caused a large collapse of local seed farmers not only in Tanzania but in many different parts of the world. Attached are reports from India, Pakistan, many different parts of the world. Attached are reports from India, Pakistan, Iran, Tanzania, Kenya, South Africa conducted by FAO and some Iran, Tanzania, Kenya, South Africa conducted by FAO and some independent organisations which clearly show the long term effects of independent organisations which clearly show the long term effects of eradicating or ‘KILLING FARMING AND FARMERS’ in your own country.eradicating or ‘KILLING FARMING AND FARMERS’ in your own country.

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In Arusha for example to mention some of the factories that have been In Arusha for example to mention some of the factories that have been completely closed for some time are:completely closed for some time are:

Afro MultipurposeAfro MultipurposeNSKNSKPallsons Consumer Industries Pallsons Consumer Industries

Apart from closing some have not been able to increase their capacity or Apart from closing some have not been able to increase their capacity or grow due to the policies of the government. The government is the people grow due to the policies of the government. The government is the people of Tanzania and if Tanzanians will not help themselves, DO NOT expect of Tanzania and if Tanzanians will not help themselves, DO NOT expect someone else will. someone else will.

The Minister of Finance imposed a 10% duty last year on imported oil in The Minister of Finance imposed a 10% duty last year on imported oil in order to help small scale farmers and standalone soap manufacturers. The order to help small scale farmers and standalone soap manufacturers. The Government has initiated a positive feeling and approach Government has initiated a positive feeling and approach ---------- NOW IT IS NOW IT IS US ‘TANZANIANS’ WHO HAVE TO INCREASE THE PRODUCTION OF US ‘TANZANIANS’ WHO HAVE TO INCREASE THE PRODUCTION OF EDIBLE OIL SEEDS IN ORDER TO PRODUCE HIGH QUALITY OIL FOR EDIBLE OIL SEEDS IN ORDER TO PRODUCE HIGH QUALITY OIL FOR OURSELVES’ WE NEED TO STOP ACTING LIKE A ‘SUPERMARKET’ OURSELVES’ WE NEED TO STOP ACTING LIKE A ‘SUPERMARKET’ FOR FOREIGNERS, WE NEED TO BECOME A INDUSTRIAL NATION, A FOR FOREIGNERS, WE NEED TO BECOME A INDUSTRIAL NATION, A SELF DEPENDANT AND INDEPENDENT NATIONSELF DEPENDANT AND INDEPENDENT NATION. There is no doubt that . There is no doubt that we have got independence from the British colony, but we are still far away we have got independence from the British colony, but we are still far away from becoming independent. We can only call ourselves independent when from becoming independent. We can only call ourselves independent when we are self sufficient and Tanzanian exports are higher than its imports.we are self sufficient and Tanzanian exports are higher than its imports.

CONCLUSIONCONCLUSION

The government relives VAT from all agro processing industry that The government relives VAT from all agro processing industry that uses over 70% or more raw material produced locally for its uses over 70% or more raw material produced locally for its products (both products (both final final and their and their byby--productsproducts). ). In return take written In return take written commitments from agrocommitments from agro--processors to increase production every processors to increase production every year.year.

Put taxes and quotas on amount of raw material that can be Put taxes and quotas on amount of raw material that can be exported without value addition on individual basis and as a whole exported without value addition on individual basis and as a whole and encourage value addition with commitments from commodity and encourage value addition with commitments from commodity traders to start putting up agro processing plants.traders to start putting up agro processing plants.

Encourage the use of agro waste as a form of energy and Encourage the use of agro waste as a form of energy and BANBANuse of wood to be used in boilers especially for industries.use of wood to be used in boilers especially for industries.

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MOUNT MERU MILLERS MOUNT MERU MILLERS LTDLTD

We thank you very much for giving us this We thank you very much for giving us this opportunity to make our presentation on opportunity to make our presentation on the benefits of Edible oil seeds locally the benefits of Edible oil seeds locally planted and produced.planted and produced.