Cheaper South African milk imports threaten Namibia Dairies as the company lobbies government for further intervention, stating this week that even bottled water has become more expensive than milk, indicating the distortion in the production prices of dairy products.
Managing Director, Mr. Gunther Ling said on Thursday at the Namibia Dairies headquarters in Windhoek’s Prosperita Industrial area that they have approached the Namibia Trade Forum and the Namibia Competition Commission to lodge a dumping complaint against South African milk producers.
Ling described the collapse of the local dairy industry and related industries as a perfect storm due to the fact that there is a global dairy crisis forcing Namibia and South Africa to prevent large volumes of milk from flooding local markets.
Botswana is also in a similar situation as it is producing too little while relying on imports.
Ideally Namibia Dairies would prefer that a liter of milk retails for N$17.99, at a cost of N$5.50 to the producer. Currently local milk sells at a cheaper price than bottled water, a situation the Managing Director described as unfortunate.
Although local production has gone up by 10%, Chairperson of the Dairy Producers Association, Japie Engelbrecht said that the industry has a 6-month lifeline until the Namibian dairy industry and its value chain become obsolete.
South African production increased by 11% and demand by 2% while export volumes have increased by a massive 53%. That country is also moving to protect its local industry in what Ling described as a preventative move as East and West African markets act as buffer zone for milk from Europe.
This, he said is due to unfair competition of longlife milk imported from South Africa. In comparing the two countries, he said Namibia produces 23 million litres of milk annually which is 1% of the South African market which has 3 % of global market share.
“How does a country that produces 2 million litres per month compete with 240 million litres per month” Engelbrecht said in late July while addressing a Dairy Producers meeting at the Namibia Agricultural Union in Windhoek.
Despite a 13% growth for the Namibian dairy industry from January 2015 to June 2015, economies of scale are forcing producers to produce more and more which Engelbrecht said after import restrictions in 2013, will take 3 years to reach normal production.
“My personal opinion is that we as producers are busy on a downward path, but at this stage it is not critical yet. With increased fodder prices, fuel and electricity tariffs, we as an intensive industry will have to look at our strengths to produce at a cheaper price” Engelbrecht told dairy farmers adding that the industry finds itself in the same situation as in 2013
It is the wish of the Dairy Producers Association together with Namibia Dairies that the government take a decision to make subsidies available to farmers or risk having the industry collapse, or [government must] totally restrict imports.
Promoting smallholder dairy farming is a serious consideration for the government apart from the Uvhungu-Vhunga Dairy farm at Rundu which Engelbrecht said could fail dismally if the government fails to act sooner.
A two-year legal process is currently under way to protect dairy producers, similar to that for maize farmers who enjoy periodic protection when faced by cheap imports.
He gave the example of vegetable retailers also having to buy 37% locally before a permit is given to import more fresh produce. This Engelbrecht said is what the dairy industry is lobbying for.
“Looking at the prices in South Africa and [the fact] that their dairy imports have increased, then we understand why South African producer prices are waning” he said.
While Namibia Dairies is seriously considering a milk processing facility for Grootfontein, Engelbrecht believes it might end up processing South African milk or reconstituting milk powder from Europe.
As part of governments “Growth at Home” strategy, Engelbrecht is confident that communal farmers as well as black-owned commercial farms and resettlement farms can, with the help of government, begin to produce butter thus reducing the risk of raw milk going bad and generating extra income for smaller farmers.
It is estimated that informal milk producers produce up to 70 million liters of raw milk per year, and this the Dairy Producers Association believes is a viable option for becoming a nett exporter of butter.
A comparison of the two countries show that South Africa has 1760 producers to Namibia’s 16 with only 4000 cows in lactation while South Africa has 480,000 cows in lactation.