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Oil and Soap Industries Rate Positively on Implementation of VAT Exemption

Oil and Soap Industries Rate Positively on Implementation of VAT Exemption

The Confederation of Economic Associations (CTA) called a press conference this Thursday, 29 September, in Maputo, to talk about the VAT exemption on cooking oil, soap and sugar, which it assessed positively. However, it recognises that there is a squeeze on the industry of these products to compensate for the Government’s initiative.

“As a result of the monitoring we have done on the implementation of VAT exemption and looking at all the components, it can be seen that without VAT exemption the average price of oil to the consumer would be 146.25 meticais against the 125 meticais charged on the market, 25 meticais per litre,” said João Matlombe, representative of the Soap and Oil Industries Association, adding that, “in the soap component, we can see that the average price, without exemption, would be 73.71 meticais against the current 63 meticais, an estimated benefit of 10.71 meticais.

João Matlombe also said that “the benefits are also evident in the cost of the basic shopping basket, estimated at just over three thousand meticais against the four thousand that it would cost without VAT exemption, which means an estimated saving of over 500 meticais for the consumer”.

“These estimated benefits occur even with the rise in the cost of raw materials recorded in the period under review, by about 371.5% for oils and 62.2% for soaps. Bearing in mind that in the same period the market prices of these products rose by 68 percent and 33 percent, respectively, it can be concluded that this rise in raw material costs was not passed on entirely to market prices,” Matlombe said.

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Matlombe went further when he said that “with this level of rise in raw materials and the percentage of the real price, one can see that the difference is abysmal. This means that the sector is making a huge effort to compensate for the Government’s efforts to exempt VAT. So, the companies are giving up what would be their profit margins to make the balance, because purchasing power has also fallen and companies cannot set a high price under these conditions”.

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