BUSINESS - ECONOMY
| 2013-07-23Milking home grown cows
Chamwe Kaira
Namibia dairies has invested n$140 million in the !aimab superfarm near mariental. Photo: Contributed.
THE local dairy industry is fighting for survival and says if the government does not take action to protect it from cheap imports, things may turn sour.
In a major indication that the dairy industry in Namibia is on the decline, the Dairy Producers Association (DPA), which is part of the Namibia Agricultural Union, says creameries in all major towns have been closed.
“However, these are all gone,” said Wallie Roux, Manager of Research and Development at the Namibia Agricultural Union during a public consultation on quantitative restrictions on the importation of dairy products into Namibia hosted by the Ministry of Trade and Industry in Windhoek last week.
The DPA and Namibia Dairies, the biggest dairy company in the country, have made an application to the trade ministry for the imposing of restrictions on imports of fresh, extended shelf life, ultra high temperature milk, buttermilk, curdled, yoghurt and other fermented milk products under the Import and Export Act. The industry also has independent farmers and independent processors who are not members of the DPA.
Price takers not makers
The majority of dairy farmers are based around the towns of Gobabis and Mariental and mostly depend on Namibia Dairies buying their raw milk. Roux says the farmers receive a farm gate price, making them price takers and not price makers. The Namibia Trade Forum, which operates under the Ministry of Trade and Industry is said to have conducted a survey on the dairy industry that reportedly showed that out of the milk production chain in the country, retail shops get the highest margins, way above that of the farmers. The Forum declined to release the results, when requested by The Namibian, saying permission must be obtained from the trade minister to release the results.
Roux said Botswana exercises its rights within the Southern African Customs Union and said since 2007, that country’s dairy industry has received protection through additional duty on milk imports. Botswana imports over half of its fresh milk. Swaziland has from time to time, exercised its right under the SACU agreement to protect infant industries including milk and dairy products.
The local industry maintains that it is not against competition but says it wants competition to be on a level playing field and believes that the regulation of imports would provide some support measures. Roux said in line with the trade ministry mission, it wants “growth at home.”
The last option
One of the opposing views on import restrictions during the consultation meeting came from, Clover Industries, the South African company that exports dairy products to Namibia. The company argued that restrictions must be the last option.
Clover executive Jimmy Botes said the company believes in fair competition and warned against establishing a monopoly if the restrictions are imposed. Botes argued that Clover only caters for 10% of the market saying that the products are very insignificant to have a material effect on the market.
SA has many advantages
According to figures provided by the Ohlthaver and List Group of Companies, the mother company of Namibia Dairies, South African producers have lower costs.
The figures show that raw milk production costs are as low as N$2,46 per litre in Kwazulu Natal, N$2,84 in the Western Cape and N$3,05 in Mpumalanga, while in Namibia the raw milk production cost is N$4,65 based on 2012 production figures. In South Africa, all milk is VAT exempt unlike in Namibia. The South Africans also have a transport subsidy system, practiced by many retail chains, whereby distributors and manufactures allocate transport costs on a percentage basis on the value of goods imported.
Patricia Hoeksema, Group Manager of Corporate Relations at Ohlthaver and List Group of Companies told The Namibian that as most importers import a wide range of products, all low value products with a large weight or volume attract proportionally less cost as they should.
She said imported UHT milk retailed in Namibia often does not reflect the real transport cost and the distribution cost to retailers within Namibia, placing the local processed UHT milk at a distinct disadvantage in the retail trade.
Hoeksema that cross-subsidisation accounts for roughly 50% of imported products.
She said input costs are more expensive in Namibia and that the use of growth hormones, which improve animal health and feed conversion are illegal in Namibia.
“While very cheap products which have been dumped in the Namibian market will no longer be as readily available, the Namibian dairy industry is committed to maintaining price compliance to reasonable pricing structures, which will further be monitored by the government. Therefore, in the long run, this will guarantee that Namibian consumers are not subject to excessive prices,” she said.
Three years ago, Namibia Dairies opened one of the most modern dairy farms in the world, which is located near Mariental. The !Aimab Superfarm currently has approximately 1 500 cows to be increased to 2 000 cows over the next three to four years. !Aimab was built and equipped with tested, state-of-the-art technology from New Zealand, Israel and the United States at a cost of N$140 million.
Namibia Dairies and the DPA say without government intervention, the Namibian dairy industry could collapse resulting in about 1 500 employees losing their jobs.
“However, these are all gone,” said Wallie Roux, Manager of Research and Development at the Namibia Agricultural Union during a public consultation on quantitative restrictions on the importation of dairy products into Namibia hosted by the Ministry of Trade and Industry in Windhoek last week.
The DPA and Namibia Dairies, the biggest dairy company in the country, have made an application to the trade ministry for the imposing of restrictions on imports of fresh, extended shelf life, ultra high temperature milk, buttermilk, curdled, yoghurt and other fermented milk products under the Import and Export Act. The industry also has independent farmers and independent processors who are not members of the DPA.
Price takers not makers
The majority of dairy farmers are based around the towns of Gobabis and Mariental and mostly depend on Namibia Dairies buying their raw milk. Roux says the farmers receive a farm gate price, making them price takers and not price makers. The Namibia Trade Forum, which operates under the Ministry of Trade and Industry is said to have conducted a survey on the dairy industry that reportedly showed that out of the milk production chain in the country, retail shops get the highest margins, way above that of the farmers. The Forum declined to release the results, when requested by The Namibian, saying permission must be obtained from the trade minister to release the results.
Roux said Botswana exercises its rights within the Southern African Customs Union and said since 2007, that country’s dairy industry has received protection through additional duty on milk imports. Botswana imports over half of its fresh milk. Swaziland has from time to time, exercised its right under the SACU agreement to protect infant industries including milk and dairy products.
The local industry maintains that it is not against competition but says it wants competition to be on a level playing field and believes that the regulation of imports would provide some support measures. Roux said in line with the trade ministry mission, it wants “growth at home.”
The last option
One of the opposing views on import restrictions during the consultation meeting came from, Clover Industries, the South African company that exports dairy products to Namibia. The company argued that restrictions must be the last option.
Clover executive Jimmy Botes said the company believes in fair competition and warned against establishing a monopoly if the restrictions are imposed. Botes argued that Clover only caters for 10% of the market saying that the products are very insignificant to have a material effect on the market.
SA has many advantages
According to figures provided by the Ohlthaver and List Group of Companies, the mother company of Namibia Dairies, South African producers have lower costs.
The figures show that raw milk production costs are as low as N$2,46 per litre in Kwazulu Natal, N$2,84 in the Western Cape and N$3,05 in Mpumalanga, while in Namibia the raw milk production cost is N$4,65 based on 2012 production figures. In South Africa, all milk is VAT exempt unlike in Namibia. The South Africans also have a transport subsidy system, practiced by many retail chains, whereby distributors and manufactures allocate transport costs on a percentage basis on the value of goods imported.
Patricia Hoeksema, Group Manager of Corporate Relations at Ohlthaver and List Group of Companies told The Namibian that as most importers import a wide range of products, all low value products with a large weight or volume attract proportionally less cost as they should.
She said imported UHT milk retailed in Namibia often does not reflect the real transport cost and the distribution cost to retailers within Namibia, placing the local processed UHT milk at a distinct disadvantage in the retail trade.
Hoeksema that cross-subsidisation accounts for roughly 50% of imported products.
She said input costs are more expensive in Namibia and that the use of growth hormones, which improve animal health and feed conversion are illegal in Namibia.
“While very cheap products which have been dumped in the Namibian market will no longer be as readily available, the Namibian dairy industry is committed to maintaining price compliance to reasonable pricing structures, which will further be monitored by the government. Therefore, in the long run, this will guarantee that Namibian consumers are not subject to excessive prices,” she said.
Three years ago, Namibia Dairies opened one of the most modern dairy farms in the world, which is located near Mariental. The !Aimab Superfarm currently has approximately 1 500 cows to be increased to 2 000 cows over the next three to four years. !Aimab was built and equipped with tested, state-of-the-art technology from New Zealand, Israel and the United States at a cost of N$140 million.
Namibia Dairies and the DPA say without government intervention, the Namibian dairy industry could collapse resulting in about 1 500 employees losing their jobs.
