Protection of local dairy industry extended

PRESERVING what is left of the Namibian dairy industry, rather than just a handful of jobs at their UHT (Ultra High Temperature) milk processing plant, should be the main reason for extending Infant Industry Protection (IIP) for another four years, Namibia Dairies says.

Namibia’s largest dairy was reacting to questions on the desirability of costly market protection measures at a time when food inflation was galloping along at an estimated 25 per cent a year. The Ohlthaver & List Group-owned dairy confirmed that IIP protection was extended until 2012, on a sliding scale from 40 per cent to zero in the final year.This extension was recently legally challenged by the 110-year-old Taueber & Corssen wholesaler, O&L further confirmed.The measure, which sees the Government slap a tariff of 40 per cent on UHT milk imported from South Africa, was initially approved for eight years (2003 to date), and came after Namibia in 2001 successfully applied for protection of its infant industries at SACU level.IPP protection was initially extended for UHT milk, pasta and broiler chickens, but the IIP measures on chicken appeared to have lapsed after no one could take advantage of it, the Ministry of Finance has indicated.The IIP measures on milk meant that the local product, which is used to further process milk that cannot be immediately processed and sold, is often priced as much as 50 per cent higher than comparable South African imports.In effect, Namibia consumers are subsidising six full-time jobs at Namibia Dairies’ UHT plant, in which O&L has invested N$11 million to date.UHT milk in South Africa often retailed for as little as N$8 a litre, while costing N$12 in local supermarkets, it was pointed out.Namibia Diaries admitted that locally produced UHT milk was often more expensive than imports, but pointed to the much higher costs of producing milk in Namibia because of distribution costs and weaker economies of scale.”It is important to understand that Namibia is not ideally suited for dairy production, and the input cost at agricultural level is substantially higher than in [South Africa],” its MD Desmond van Jaarsveld said.”Should no protection exist, the Namibian dairy industry could collapse, with the implication that the country will have to rely fully on imported dairy products with severe implications at retail pricing level,” Van Jaarsveld cautioned in a written statement.In the past, dumping of SA dairy products at below cost level saw Enduro Dairies in Walvis Bay and Oshakati Dairies fold under the onslaught from much bigger SA competitors, he said.”The GRN has also indicated that the dairy industry is of strategic interest,” he added.Taueber & Corssen, while seemingly accepting the initial eight-year period of protection, however challenged the extension, arguing that it amounted to a competitive advantage now unfairly extended beyond the original envisaged period.Van Jaarsveld however said that he personally felt that the zero-rating for Value Added Tax (VAT) should be extended to a number of fresh and culture milk products, as has been the case with maize since 2003, and more recently, beans, rice, pasta, cooking oil and other foods consumed by especially the poor.* John Grobler is a freelance journalist; 081 240 1587The Ohlthaver & List Group-owned dairy confirmed that IIP protection was extended until 2012, on a sliding scale from 40 per cent to zero in the final year.This extension was recently legally challenged by the 110-year-old Taueber & Corssen wholesaler, O&L further confirmed.The measure, which sees the Government slap a tariff of 40 per cent on UHT milk imported from South Africa, was initially approved for eight years (2003 to date), and came after Namibia in 2001 successfully applied for protection of its infant industries at SACU level.IPP protection was initially extended for UHT milk, pasta and broiler chickens, but the IIP measures on chicken appeared to have lapsed after no one could take advantage of it, the Ministry of Finance has indicated.The IIP measures on milk meant that the local product, which is used to further process milk that cannot be immediately processed and sold, is often priced as much as 50 per cent higher than comparable South African imports.In effect, Namibia consumers are subsidising six full-time jobs at Namibia Dairies’ UHT plant, in which O&L has invested N$11 million to date.UHT milk in South Africa often retailed for as little as N$8 a litre, while costing N$12 in local supermarkets, it was pointed out.Namibia Diaries admitted that locally produced UHT milk was often more expensive than imports, but pointed to the much higher costs of producing milk in Namibia because of distribution costs and weaker economies of scale.”It is important to understand that Namibia is not ideally suited for dairy production, and the input cost at agricultural level is substantially higher than in [South Africa],” its MD Desmond van Jaarsveld said.”Should no protection exist, the Namibian dairy industry could collapse, with the implication that the country will have to rely fully on imported dairy products with severe implications at retail pricing level,” Van Jaarsveld cautioned in a written statement.In the past, dumping of SA dairy products at below cost level saw Enduro Dairies in Walvis Bay and Oshakati Dairies fold under the onslaught from much bigger SA competitors, he said.”The GRN has also indicated that the dairy industry is of strategic interest,” he added.Taueber & Corssen, while seemingly accepting the initial eight-year period of protection, however challenged the extension, arguing that it amounted to a competitive advantage now unfairly extended beyond the original envisaged period.Van Jaarsveld however said that he personally felt that the zero-rating for Value Added Tax (VAT) should be extended to a number of fresh and culture milk products, as has been the case with maize since 2003, and more recently, beans, rice, pasta, cooking oil and other foods consumed by especially the poor. * John Grobler is a freelance journalist; 081 240 1587