Namibia’s dairy industry ‘on the brink of collapse’

THE dairy industry in Namibia is on the verge of total collapse – it could go under in less than 12 months if it does not receive protection from Government against cheaper dairy imports, local diary producers have warned.

Since 2004, Namibia has faced a massive influx of milk products from South Africa, putting extreme pressure on local dairy producers. Only 17 of 25 were still left, Japie Engelbrecht, Chairman of the Dairy Producers’ Association (DPA) said yesterday at the organisation’s annual general meeting.High customs tariffs to Angola and Botswana hampered exports to neighbouring countries and prevented market expansion.Namibia’s only long-life milk production plant, which belongs to the Haversack’s & List Group, might also have to close down soon, resulting in 460 job losses.”The Namibian dairy industry did not receive any price increase over the past two years; instead they had to accept a price reduction of 10 cent per litre of raw milk,” Engelbrecht said.”Production costs like fuel hikes and fodder increased drastically and we will soon reach the end of the road,” he added.”Milk prices in South Africa are exempt from Value Added Tax (VAT) for consumers and we cannot compete against the imports of subsidised dairy products.”In Namibia a 15 per cent VAT is levied on all milk sold.Six years ago, Namibia Dairies, a subsidiary of the Ohlthaver & List Group, invested in a production plant for long-life or UHT milk.Only this product, but not raw milk and other dairy products like cheese and yoghurt, receives Infant Industry Protection (IIP) status granted by the Ministry of Trade and Industry until 2008.The Dairy Producers’ Association recently requested the Ministry to extend the period to 2012.A further attempt to protect the local sector was made in the form of a submission via the Ministry on behalf of the sector to the Southern African Customs Union (Sacu) to put a levy of 40 per cent on the price of imported UHT milk.They are still awaiting a response.Sven Thieme, the Managing Director of the Ohlthaver & List Group, told the dairy producers yesterday that Namibia Dairies lost potential sales of N$1 million a month on long-life milk because of local shops stocking imported UHT milk.”We cannot sustain those losses anymore and we are weighing the option of shutting down the UHT plant, which is the only one in Namibia,” Thieme said.”It would result in cutting down the 1,7 million litres we receive from milk farms per month to only 700 000 litres, which would affect you, the dairy producers, and would increase the price of milk for the average consumer drastically.”Thieme proposed that Government should scrap the 15 per cent VAT on milk and that the sector should approach the Ministry of Trade and Industry to lobby Angola and Botswana to drastically lower their import tariffs in view of the envisaged free trade area for Southern Africa by 2008.”We are also mulling the idea of establishing a super dairy farm with several hundred cows like in South Africa and elsewhere in the world, inviting existing dairy producers for a joint venture, but that would need an investment of N$40 million,” Thieme said.The O&L Group last year had to close down its large dairy farm Rietfontein near Grootfontein, which had been in operation for about 100 years.The closure resulted in 84 direct job losses and four diary farmers in the area, who had supplied milk to Rietfontein, had to close down and sell their valuable dairy cow herds.Currently only 2 920 dairy cows are left in Namibia.Only 17 of 25 were still left, Japie Engelbrecht, Chairman of the Dairy Producers’ Association (DPA) said yesterday at the organisation’s annual general meeting.High customs tariffs to Angola and Botswana hampered exports to neighbouring countries and prevented market expansion.Namibia’s only long-life milk production plant, which belongs to the Haversack’s & List Group, might also have to close down soon, resulting in 460 job losses. “The Namibian dairy industry did not receive any price increase over the past two years; instead they had to accept a price reduction of 10 cent per litre of raw milk,” Engelbrecht said.”Production costs like fuel hikes and fodder increased drastically and we will soon reach the end of the road,” he added. “Milk prices in South Africa are exempt from Value Added Tax (VAT) for consumers and we cannot compete against the imports of subsidised dairy products.”In Namibia a 15 per cent VAT is levied on all milk sold.Six years ago, Namibia Dairies, a subsidiary of the Ohlthaver & List Group, invested in a production plant for long-life or UHT milk.Only this product, but not raw milk and other dairy products like cheese and yoghurt, receives Infant Industry Protection (IIP) status granted by the Ministry of Trade and Industry until 2008.The Dairy Producers’ Association recently requested the Ministry to extend the period to 2012.A further attempt to protect the local sector was made in the form of a submission via the Ministry on behalf of the sector to the Southern African Customs Union (Sacu) to put a levy of 40 per cent on the price of imported UHT milk.They are still awaiting a response.Sven Thieme, the Managing Director of the Ohlthaver & List Group, told the dairy producers yesterday that Namibia Dairies lost potential sales of N$1 million a month on long-life milk because of local shops stocking imported UHT milk.”We cannot sustain those losses anymore and we are weighing the option of shutting down the UHT plant, which is the only one in Namibia,” Thieme said.”It would result in cutting down the 1,7 million litres we receive from milk farms per month to only 700 000 litres, which would affect you, the dairy producers, and would increase the price of milk for the average consumer drastically.”Thieme proposed that Government should scrap the 15 per cent VAT on milk and that the sector should approach the Ministry of Trade and Industry to lobby Angola and Botswana to drastically lower their import tariffs in view of the envisaged free trade area for Southern Africa by 2008.”We are also mulling the idea of establishing a super dairy farm with several hundred cows like in South Africa and elsewhere in the world, inviting existing dairy producers for a joint venture, but that would need an investment of N$40 million,” Thieme said.The O&L Group last year had to close down its large dairy farm Rietfontein near Grootfontein, which had been in operation for about 100 years.The closure resulted in 84 direct job losses and four diary farmers in the area, who had supplied milk to Rietfontein, had to close down and sell their valuable dairy cow herds.Currently only 2 920 dairy cows are left in Namibia.