The Importance of CPO Exports in the Sub-Saharan Africa’s Overall Palm Oil Market

In 2020 Malaysian palm oil exports performance to the Sub-Saharan Africa region showed a tremendous improvement with a 34.09% jump in export volume from 2.015 million MT to 2.702 million MT. In terms of value, this represents a 60.2% increase from RM4.938 billion registered in 2019 to RM7.909 in 2020. Despite earlier concerns about the lack of demand due to the Covid-19 pandemic, the countries in the SSA region have imported more Malaysian palm oil than they have ever had in the past. One significant factor that contributed to that massive increase is the staggering jump in CPO/CPL exports by 85.45% compared to the year before.

In the past ten years, the refining industry in Sub-Saharan Africa has expanded rapidly due to increasing demand from a growing population and better economic conditions. The availability of Malaysian CPO at lower export taxes further expedite this transformation. In terms of percentage, import of Malaysian CPO/CPL in 2011 constituted merely 4% of total MPO import. However, the percentage of CPO imports has increased to more than 40% of total palm oil imports in the past few years. The latest available data from MPOB (Jan-Mar 2021) indicated that CPO/CPL continued to be the top categories of MPO palm oil products exported into the region with 67.3% of total imports.

From a global perspective, as a market destination of Malaysian CPO/CPL, Sub-Saharan Africa’s percentage has jumped tremendously from a mere 1.7% in 2011 to its highest level of 33.3% last year with an export volume of 1.473 million MT.

Figure 1:    Total CPO/CPL Exports to SSA (MT) and Percentage of CPO/CPL of Total Exports

Source: MPOB

Top Importing CPO Countries in the SSA Region

Based on MPOB data, there are 16 importing CPO/CPL countries in the SSA region but the countries shown in table 1 below are the top five importing countries with an import volume of more than 100,000 MT annually. Two countries from the West Africa Sub-Region, two countries from the East Africa region, and one from the Southern Africa region.

In the East Africa region, there are two significant buyers of CPO namely Kenya and Tanzania. The palm oil industry in these countries compliments each other as they are neighbouring countries and the processed palm oil produced by these 2 countries is also routed to Uganda, Rwanda, and Burundi. However, the palm oil scenario in Tanzania has changed completely as its refining industry was grounded to a complete halt as the Tanzanian government increased the import tax of CPO in their attempt to assist local oilseed producers. As the table below shows, the role of Tanzania as a major importer of CPO in the East Africa region is taken over by Kenya in the past two years. This scenario is likely to remain unless the Tanzanian government revised its CPO import duty downwards from 25% presently.

Nigeria, being the most populous nation and the largest economy in Africa is the biggest importer of Malaysian CPO with import volume exceeded 328,000 MT last year. Despite high import duty imposed by the Nigerian government (35%), refineries in Nigeria continue to import Malaysian CPO as the demand keeps increasing. Ghana is another important importer in the West Africa region with a CPO import volume of around 200,000 MT in 2017 and 2018.

In the Southern Africa region, Mozambique’s rise to become a significant importer of Malaysian CPO cannot be overlooked. From an import volume of just 522 MT in 2013, this country on the southeast coast of Africa has shown tremendous growth as evident from the upward trend in imports volume to more than 243,000 MT last year. Mozambique also exporting some of its refined palm oil to its landlocked neighbouring countries such as Malawi, Zambia, and Zimbabwe.

Table 1: Big Five Importers of Malaysian CPO/CPL from Sub-Saharan Africa (MT)

  2013 2014 2015 2016 2017 2018 2019 2020
Kenya 28,530 33,846 56,510 54,979 19,712 121,737 153,172 455,717
Nigeria 114,499 182,928 217,717 178,003 235,141 214,607 228,497 328,513
Mozambique 522 73,087 92,061 162,548 116,143 147,438 156,144 243,568
Ghana 55,893 45,457 122,498 167,399 211,829 199,303 113,781 187,596
Tanzania 82,459 201,716 175,765 265,507 83,388 78,028 1,000

Source: MPOB

The Effect of Malaysian CPO Export Duty on SSA Palm Oil Imports

Malaysian CPO export duty is a very important factor that drives the increase of Malaysian CPO/CPL export to the SSA region. Since the Malaysian government abolished the tax-free crude palm oil export quota in 2013, Sub-Saharan Africa has become a substantial importer of Malaysian CPO. In January 2013, the Malaysian government abolished the quota system and introduced a progressive export duty system. According to the revised duty structure, the export duty on CPO moved from 4.5% to 8.5%, as compared to that flat rate of 23% applied before 2013. In 2020, the government has done another revision in this duty structure and the new duty structure ranges between 3% and 8% depending on the price of CPO.

After the implementation of this new policy, Malaysian CPO export to Sub-Saharan Africa has increased tremendously from just 63,000 MT in 2011 to almost 1.473 million MT last year as illustrated in Figure 1. The jump in CPO imports was quite striking from 2019 to 2020 with a more than 85% increase to 1.473 million MT last year from 794,000 MT in the year before. From June to December 2020, the CPO export tax was exempted by the Malaysian government with the intention to raise the volume of Malaysian palm oil exports to other countries, especially to India. Few countries in the SSA region namely Kenya, Nigeria, Mozambique, and Ghana took advantage of this policy to import more Malaysian CPO last year.

In January 2021, the Malaysian government has decided to resume CPO export tax at the highest rate of 8% based on a reference price of RM3450 per MT. From the buyers’ perspective, this move will curb the palm oil demand for many countries in the SSA region. As Sub-Saharan Africa is one of the most price-sensitive regions in the global palm oil market, the upward movement of palm oil price will affect the buying and consumption pattern of palm oil. With an average CPO price of USD1127 per MT (cif, Rotterdam) in March 2021 compared to just USD 598 in June 2020, this massive hike in price will be too expensive for buyers from the region.

With palm oil is trading at high prices in decades and is expected to stay at this level in the first half of this year due to anticipated supply tightness as well as the competitiveness of CPO price compared to other edible oils, it probably would stall the demand from SSA region. As a result, MPO exports to the region this year would be lower than last year’s export volume.

Intensifying Marketing Efforts through Online Promotional Activities

Sub-Saharan Africa is one of the key market destinations for Malaysian palm oil in 2021 due to its large population and widespread usage of palm oil in Africa’s food supply chain. However, the current high price of palm oil could affect Malaysia’s exports to the region as buyers may delay purchases or import less until the price stabilizes towards a more reasonable level. Despite the high price, palm oil remains the cheapest edible oil available in the market. Under the present condition, Malaysian palm oil exporters and related agencies should explore other strategies to entice buyers from the region to continue procuring Malaysian palm oil and build on the momentum gathered during last year’s record exports. As physical programs are restricted by movement control order still imposed by most governments during this pandemic season, promotional online activities such as biz-matches, webinars and social media engagements could be intensified.

Prepared by Iskahar Nordin

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