Windhoek-If the long-awaited bill to regulate the importation and export of dairy and dairy products – due to be tabled in parliament soon – is not given the green light, it could spell disaster for Namibia’s small dairy producers.
The country’s 16 dairy producers and the entire dairy industry are in dire straits. On February 23, a special meeting was held between the management of the Dairy Producers Association and representatives of the processor Nammilk regarding a raw milk price reduction for Namibian producers of 10 cents per litre and a further possible 10 cents reduction by the end of April.
This will be the second price reduction in the last seven months for producers, and these price reductions could potentially mean the end of business for some of the dairy producers.
In addition to the price reduction, payments of producers are being deferred on a monthly basis. Producers are also warned not to increase milk production, as excess milk will most probably not be taken up in the market due to imports. There are currently less than 3,000 commercial dairy cows left in Namibia.
This critical situation in the dairy industry can be ascribed to mostly the influx of UHT milk and closely related other dairy products into Namibia. The past two weeks, imported UHT milk was selling on shelves of Namibian retailers for as low as N$10.99 per litre. In reality this milk is cheaper than a litre of water bottled in Namibia selling in the same shop.
In addition, the low-cost imported UHT milk found on Namibian shelves is cheaper than the same packs selling on the same day in South Africa.
All role players have called for immediate and serious intervention to prevent the collapse of the industry. The managing director of Namibia Dairies, Gunther Ling, told New Era the price of milk and other dairy products like yoghurts is set to increase while milk volumes produced on Namibian farms in 2017 are four percent lower than five years ago.
This, coupled with the unfortunate challenging economic times faced today, which causes immense pressure on disposable income, has resulted in significant revenue cuts in the local industry, seeing a 15 percent decline in fresh milk and UHT in Namibia between July and December last.
“This economic dip makes resources scarce, thus resulting in the upscale of prices and in return increasing the cost of production. This is not just a milk thing. The pressure is on everyone. Maize prices will be affected by the lack of rainfall, and we can also expect an increase in fuel/oil prices going forward,” he lamented.
Compared to South Africa’s N$5.20 per litre, Namibia’s producer price of raw milk currently stands at N$6.05 per litre. The market offers a fully open and non-regulated trade in milk and other dairy products. This results in increasing import competition risking the replacement of local dairy production and
Almost all butter and cheese sold in Namibian shops are imported. The Namibian dairy industry was teetering on the brink of collapse at the end of 2015 and battled through two tough years since then when drought conditions caused large-scale losses of maize harvests in South Africa and resulted in tremendous increases in feeding costs, Ling noted.
Feeding costs remain the biggest factor in the total production costs of dairy producers. According to the Namibian Agricultural Union’s dairy producers cost index, feeding costs increased by nearly 50 percent in 2015 and total production costs increased by about 28 percent over the same period.
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 Ohlthaver & List Group, could face closure if the trend continues, resulting in almost 500 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 cents per litre of raw milk, and production costs like fuel hikes and fodder increased drastically.
Milk prices in South Africa are exempt from value added tax (VAT) for consumers and Namibia cannot compete against the import of subsidised dairy products. In Namibia a 15 percent VAT is levied on all milk sold. Sven Thieme, the managing director of the Ohlthaver & List Group, told dairy producers some time ago already that Namibia Dairies lost potential sales of N$1 million a month on long-life milk because of local shops stocking imported UHT milk.
If the UHT plant shuts down, it would result in cutting down the 1.7 million litres received from milk farms per month to only 700,000 litres, which would increase the price of milk for the average consumer drastically. The O&L Group already had to close down its large dairy farm Rietfontein near Grootfontein, which had been in operation for about 100 years.