Business

Cooking oil now a luxury for broke, struggling Kenyans

Cooking oil now a luxury for broke, struggling Kenyans

Phyllis’ mini-mart at Hunters Kasarani has experienced a dramatic reduction of shoppers in the cooking oil section since the turn of the year.

This is tied to the increase in prices of cooking oil after a global surge in the price of palm oil in 2020.

Palm oil, the world’s most consumed edible oil, surged more than 120 per cent in the past year and burst through $1,091 a tonne to an unwanted record in May, according to Business Line, and Indian paper.

“The tropical oil, which is found in products as diverse as chocolate, pastries, soaps, lipstick and biofuel, and is widely used in Asian restaurants, has been swept up in the global commodity rally as farm crops soar on weather worries and China’s crop-buying spree,” said the paper.

It has been a global problem, coming on the back of the Covid-19 pandemic which, among other things, hit shoppers’ pockets.

For shoppers, it was a bad start to 2021. And the kitchen shelves must truly have noted a death of a product essential in any house, due to the high prices.  

“We used to sell two litres of Fresh Fri at Sh390. That has now gone up to Sh480,” says Phyllis.

Customers now opt to for salad oil that comes in barrels and sub-divided into smaller quantities at the shop. The customers carry their containers for the quarter, half, full litre of cooking oil they wish to buy.

But even this is no longer affordable for many.

“We used to buy the 20 litre barrel at Sh2,700. Now, that has gone up to Sh3,800,” she says. Ultimately, this means to the smallest unit, the prices will be higher. Customers spent Sh160 on a litre, but now they need Sh200”.

A 10 kilo carton of cooking fat, the solid yellow one , now retails from Sh1800, up from Sh1150.

Main ingredient

Palm oil is the main ingredient used to produce cooking oil. 

Most of Kenya’s palm oil comes from Indonesia, where the two islands of Borneo and Sumatra, which are some of the world’s biggest suppliers of palm oil, are. Malaysia is the second biggest market for Kenya’s palm oil.

Beginning 2020, bad weather, low use of fertiliser and shortage of manpower triggered by social distance measures imposed by countries during the Covid-19 pandemic, depressed production of palm oil in Asia.  

As global prices of palm oil skyrocketed, with demand outstripping supply, the effects rippled across the globe, triggering a crisis in Kenyan kitchens.

Consumers trained their guns on manufacturers, calling them out for what many perceived as unethical overpricing by a group of people keen to make a killing when they should be protecting the consumer.

But Kenya Association of Manufacturers (KAM), the professional business association for industrialists, says local manufacturers suffered.

“Globally, as we speak today, there is a huge commodity boom and prices of most essential foods and grains have doubled. Similarly, soybean oil and palm oil which is the main raw material used in the processing of edible oils, and is imported from South East Asia,” said an official from KAM.

“The prices of edible oils have increased in recent months, due to an increase in the price of crude palm oil in the global market. This has reduced local manufacturers’ competitiveness, thus eating into their local and global markets. It has also increased the cost of living for mwananchi, especially because edible oils are a household necessity.”

Besides Malaysia and Indonesia, Kenya also imports its palm oil from Cambodia, Thailand, China and India, taking up close to Sh60 billion worth of the country’s foreign exchange reserves annually.

More than 80 per cent of the vegetable oil consumed in Kenya is imported, with crude palm oil making virtually all of it at 93 per cent.

Income tax

At the start of December, National Treasury Cabinet Secretary Ukur Yatani announced that tax heads such as VAT and income tax paid by workers and employers would revert to their normal rates. VAT rose back to 16 per cent from a 14 per cent that had been the rate for most of the year.

Phyllis says two weeks after this announcement, product prices hiked.

“It was not only cooking oil. So many products hit the market at completely new prices,” she says.

Months ago, Abdulghani Mohamed Al-Wegih, the chairperson of the edible oil sub-sector at KAM, said the edible oil that is sold in the local market is reflected in the worldwide market price.

Seven months ago, a tonne of crude palm oil in the global market cost $600 (Sh65,400). Today it is selling at $1060 (Sh116,600) per metric tonne, with an additional $50 (Sh5,450) for shipping.

Abdulghani, who is also the General Manager Golden Africa, said the last time global prices of palm oil tanked to this level was in 1989.

Kitchens now have to do with less cooking oil for every meal.

And retailers like Phyllis can only watch as their customers wheel past the cooking oil sections, or stop by trying to tweak their budgets.

Some will try to bargain, and some will pick the product begrudgingly.