Diary producers in a bind – Trade Forum applies to Competition Commission for relief
An application by the Namibia Trade Forum to the Competition Commission on behalf of local dairy producers and retailers, provides an indication of the adverse conditions under which local producers have to compete with mega-producers in South Africa.
The Trade Forum, in its capacity as a government agency that must mediate between the government and the private sector on trade and investment, represents Namibia Dairies as the producer, CIC as the distributor and four large supermarket chains as the retailers.
The application seeks exemption from certain sections of the Competition Act for a period of five years. This relates to an earlier agreement between the applicants that defines the so-called ‘voluntary local sourcing scheme.’
While considering the application, the Competition Commission stated that the general public must be afforded the opportunity to comment on the application. These submissions must be in writing and reach the commission latest 30 April 2020.
At the heart of the application is the only local producer of any significance, Namibia Dairies’ inability to compete both price- and volume-wise with the very large producers in South Africa.
The Competition Commission, in a statement, furnished a breakdown of the local dairy market, indicating that Namibia Dairies is the dominant supplier of fresh milk but that with all other dairy derivatives, the majority is imported.
“When looking at the combined consumption figures for UHT milk, fresh milk and yoghurt, 58% of the 38 million litres consumed annually, is imported while only 42% is produced locally.”
If the application succeeds, according to figures provided by the Namibia Trade Forum, UHT milk consumption could grow by 4.3 million litres by 2027. This would provide a measure of relief to Namibia Dairies to be more competitive in the long-life milk category. The local financial benefit of this increase in market share is estimated at an additional N$800 million.