Chicken plans set to ruffle feathers

NAMIBIANS could end up paying double for imported frozen chicken next year, should a scheme by South Africa’s Supreme Poultry to set up a chicken broiler plant outside Karibib under the auspices of the Infant Industry Protection (IIP) scheme go ahead.

With food inflation in Namibia running at anywhere between 15 and 25 per cent, the desirability of statutory protection in the form of additional taxes on basic foodstuffs is now being questioned by wholesalers and consumers alike. If done under IIP measures, Supreme Poultry’s plans to erect a chicken broiler farm 15 km outside Karibib on NamWater’s Spes Bona farm by March next year would mean all other chicken imported from outside Namibia would face a 40 per cent levy.The IIP measures, announced by the Ministry of Agriculture, Water and Rural Development in 2001, levies an import tariff of 40 – 46 per cent on all Ultra High Temperature (UHT) milk, broiler chickens and pasta imported from outside Namibia.”Infant industry status implies that Namibia can levy imports of pasta, broilers and UHT milk from outside Namibia (including Southern African Customs Union members) for an eight year period” under Section 54 of the Namibian Customs and Excise Act to protect local investment, the MAWRD said in an advert published at the time.This means Namib Mills (already benefiting from similar measures on imported maize) enjoys a distinct marketing advantage on their Polana Pasta product.UHT (Ultra High Temperature) milk produced by O&L’s NamDairies recently had this IIP levy on competing imports extended for another four years.A similar tariff was proposed for broiler chickens, but has not yet been implemented.While the Ministry of Finance said this IIP measure for broiler chickens had expired, Trade and Industry officials appear to be of the opposite view.Supreme Chicken’s local director Raymond Liang said MTI officials had told his company that the IIP levy was still in place and insisted that their locally-produced chicken – once their plant was up and running – would not cost significantly more than frozen chicken imported from South Africa and Brazil.Frozen chickens imported from South Africa are priced according to the Western Cape benchmark wholesale price of about N$15 per kilo, and retail in supermarkets there for about the same.But should the IPP tariff of 46 per cent be imposed, chicken imported from South Africa could cost as much N$28 to N$32 a kilo on the retail market, local wholesalers fear.If maintained over four years, Supreme could have an accumulated price advantage of up to N$208 million for the next four years over its competition under IIP tariffs, it was calculated.Chicken is widely believed to be the most affordable form of animal protein: South Africans have increased their consumption from 2,3 kilo to 22,4 kilo per annum over the past 10 years, statistics showed.Supreme’s Liang however said their biggest concern was “dumping” of chicken by their two larger South African competitors, which – combined with the high cost of chicken feed locally – had seen several previous such ventures fail within a few months.”The cost effectiveness of producing in Namibia is quite good, but our main concern is dumping of chicken at prices below operational cost by the others big guys in South Africa,” he said.While Supreme’s planned Karibib broiler plant would need about three to four years to get to its optimum capacity of 350 tons per week (Namibia consumed about 305 tons per week at present, he said), supplementary chicken would be sourced from their Botswana and South African operations in the meanwhile.These imports, Liang said, would “probably” be subject to the IIP levy.With initial production aiming for about 100 tons a week, this leaves 205 tons that would attract the punitive 40 per cent IIP levy.While the responsible officials at MTI did not respond to queries, another official pointed out that such IIP tariffs would apply across the board – meaning that any chicken not produced at the proposed Karibib plant would cost at least 40 per cent more.The proposed Karibib plant has also come under fire for its “astronomical” water usage: with between 18 and 22 litres needed per slaughtered bird and 50 000 birds to be slaughtered per week, annual water usage would run to millions of litres per year.Liang however indicated that they would welcome alternative sites for their plant, and would be using a process that uses recycled water.Supreme’s plans were by no means the only such scheme attracting fire at present: Namdairies’ protection of their UHT milk was recently extended for another eight years, leading to a legal challenge by a rival importer, wholesaler Tauber & Corssen.If done under IIP measures, Supreme Poultry’s plans to erect a chicken broiler farm 15 km outside Karibib on NamWater’s Spes Bona farm by March next year would mean all other chicken imported from outside Namibia would face a 40 per cent levy.The IIP measures, announced by the Ministry of Agriculture, Water and Rural Development in 2001, levies an import tariff of 40 – 46 per cent on all Ultra High Temperature (UHT) milk, broiler chickens and pasta imported from outside Namibia. “Infant industry status implies that Namibia can levy imports of pasta, broilers and UHT milk from outside Namibia (including Southern African Customs Union members) for an eight year period” under Section 54 of the Namibian Customs and Excise Act to protect local investment, the MAWRD said in an advert published at the time.This means Namib Mills (already benefiting from similar measures on imported maize) enjoys a distinct marketing advantage on their Polana Pasta product.UHT (Ultra High Temperature) milk produced by O&L’s NamDairies recently had this IIP levy on competing imports extended for another four years. A similar tariff was proposed for broiler chickens, but has not yet been implemented.While the Ministry of Finance said this IIP measure for broiler chickens had expired, Trade and Industry officials appear to be of the opposite view.Supreme Chicken’s local director Raymond Liang said MTI officials had told his company that the IIP levy was still in place and insisted that their locally-produced chicken – once their plant was up and running – would not cost significantly more than frozen chicken imported from South Africa and Brazil.Frozen chickens imported from South Africa are priced according to the Western Cape benchmark wholesale price of about N$15 per kilo, and retail in supermarkets there for about the same.But should the IPP tariff of 46 per cent be imposed, chicken imported from South Africa could cost as much N$28 to N$32 a kilo on the retail market, local wholesalers fear.If maintained over four years, Supreme could have an accumulated price advantage of up to N$208 million for the next four years over its competition under IIP tariffs, it was calculated.Chicken is widely believed to be the most affordable form of animal protein: South Africans have increased their consumption from 2,3 kilo to 22,4 kilo per annum over the past 10 years, statistics showed.Supreme’s Liang however said their biggest concern was “dumping” of chicken by their two larger South African competitors, which – combined with the high cost of chicken feed locally – had seen several previous such ventures fail within a few months.”The cost effectiveness of producing in Namibia is quite good, but our main concern is dumping of chicken at prices below operational cost by the others big guys in South Africa,” he said.While Supreme’s planned Karibib broiler plant would need about three to four years to get to its optimum capacity of 350 tons per week (Namibia consumed about 305 tons per week at present, he said), supplementary chicken would be sourced from their Botswana and South African operations in the meanwhile.These imports, Liang said, would “probably” be subject to the IIP levy.With initial production aiming for about 100 tons a week, this leaves 205 tons that would attract the punitive 40 per cent IIP levy.While the responsible officials at MTI did not respond to queries, another official pointed out that such IIP tariffs would apply across the board – meaning that any chicken not produced at the proposed Karibib plant would cost at least 40 per cent more.The proposed Karibib plant has also come under fire for its “astronomical” water usage: with between 18 and 22 litres needed per slaughtered bird and 50 000 birds to be slaughtered per week, annual water usage would run to millions of litres per year.Liang however indicated that they would welcome alternative sites for their plant, and would be using a process that uses recycled water.Supreme’s plans were by no means the only such scheme attracting fire at present: Namdairies’ protection of their UHT milk was recently extended for another eight years, leading to a legal challenge by a rival importer, wholesaler Tauber & Corssen.