Feathers fly in chicken import tussle - Kosmos Radio 94.1 FM

Feathers fly in chicken import tussle

Feathers fly in chicken import tussle
Yanna Smith

The issue of chicken imports in Namibia is heating up following the announcement by Namib Poultry Industries (NPI) that as at end September, they had stockpiles of more than 1 900 tonnes with imports continuing unabated. Moreover, local, smaller chicken producers have added their voices to this, saying they too, had no market for their products as imported chicken is preferred by buyers. To further compound matters, the day-old chick project driven by NPI to enhance local production has seen a drastic decline in orders, due to market saturation of broiler meat.
At a recent public consultation to assess the current restrictions on the importation of chicken to Namibia, Petrus Shoopala, the incoming chairman of the Association of Meat Importers and Exporters (AMIE), gunned for NPI, accusing the company of oligopolistic behaviour and harming the consumer with excessive brine levels.
According to Shoopala, “There is little or no benefit in the market for importers to buy leg quarters as NPI seeks to dominate the market through fixed pricing structures. The business strategy of the local producer is to control the retail market.” He accused NPI of a lack of loyalty to their consumers with what he described as “excessive” brine levels adding that in South Africa, brine levels are allowed to 15% while local brine injection is 25%.
However, experts are of the opinion that if brine were a consumer issue, all canned meat products, bacon and gammon, also imported, should be included in this debate.

The Brazilian connection
Shoopala continued to emphasise consumer protection in this regard. The John Hopkins Bloomberg School of Public Health has performed extensive research on the composition of broiler feeds which mostly, in particular overseas, contain antibiotics and meat-derived products, including, in some cases, carcasses, roadkill and euthanized domestic pets. These elements are ground up and added into feeds. Shoopala was adamant that Brazil, as a net exporter of chicken breasts to the EU, “the quality of the product of Brazilian poultry is held at European standard”.
Brazil has seen major challenges to its meat industry with the most recent international reports including large-scale bribery of meat inspectors in that country. The country has seen several bans on its products both in the EU and the United States and most recently, the South African Poultry Association has also gunned for the Brazilians in this regard, with imports to South Africa.
The primary accusation levelled against AMIE is that they do not contribute to sustainable job creation and continue to undermine local production capacity and the development of the industry.
Shoopala, when asked for a list of AMIE’s 22 members, replied that there “is a concern from the members to currently provide you with that information as it could lead to them being utilised in newspaper publications that could jeopardise their business activities.”

How much?
Moreover, he would not respond to questions regarding the import price of leg quarters.
Recently, a South African national, Sarel Oberholzer, who operates as an importer in Namibia, challenged the Meat Board in the Windhoek High Court for an increased quota, saying in his papers that he was forced to buy chicken from other importers in Namibia at “a premium of N$10 a kilogramme”.
In his comments on consumer protection and rights, Shoopala made mention of the “cheaper” imports. Further, the outgoing AMIE chairman, Fanie du Plessis, told Kosmos 94.1 News, while never actually supplying the import prices, that there is a lack of competition.
“According to the status quo, there is a lack of competition amongst local producers resulting in a lack of competitive pricing. To compound the matter, the fact that the dominant local producer does not have adequate price structures is harmful to the consumer. In order to apply for quota allocation, importers have to support local buy. However, the pricing of the products by the local producer is expensive and thus the effect of this pricing scheme trickles down to the consumer.”
Cirrus Capital has done extensive research on the broiler industry in Namibia and its importance and room for growth. According to Cirrus economist Robert McGregor, the comparative pricing of local and South African production cannot be made on retail prices.

“Factory gate prices are more accurate for comparing producer efficiency. What we found from this is that production in Namibia is very efficient and almost in line with that of the South African producers we could compare them to. There has been talk of very cheap chicken being landed in Namibia, well below the prices at which Namibian or South African producers offer. Because chicken prices in Namibia (and even South Africa) are higher than these, it does leave room for some along the supply chain to capture the difference in prices by adding a large mark-up, which obviously does not benefit the consumer. What needs to be determined though, is whether products being brought in at such low prices are dumped or not – this lies at the heart of the matter,” McGregor said.
This rings true as chicken in stores across the country does not demonstrate a big price difference and the consumer has at most, options of a few dollars cheaper.

The question of fodder
AMIE’s Du Plessis took aim at Feedmaster when questioned on the millions of dollars that leave the country for the importation of chicken.
“Please also include in your article the statistics for Namib Mills and Feedmaster’s grain and feed imports. It is estimated that 80% or more of Feedmaster’s raw material like maize and soya used in chicken feed is imported and the costs of feed is 70% of the cost of poultry farming. Please confirm the facts with the Agronomic Board,” he said.
Pieter van Niekerk, commercial manager at Namib Mills, pointed out that just for the manufacturing of poultry feed, 120 Namibians are gainfully employed. The Namibia Statistics Agency notes that there are 4.6 dependents per wage earner in Namibia which implies the poultry feed production in the country supports 552 Namibians.

“Namib Mills first purchases all local available grains before importing. Feedmaster is also one of the few companies in the country that imports a raw product, adds value to it and sells it in the local market. Fodder production in Namibia is not a protected industry and Feedmaster competes exceptionally well in the open market,” Van Niekerk explained.

According to McGregor, an important consideration is the reduction in the value of imports. “Chicken is a higher value product than feed, so importing more feed and less chicken is still net beneficial, which thus results in less of a ‘drag’ on growth. Over and above this, Namibia’s foreign currency reserves are vital in maintaining our peg with the rand, and thus reducing the value of imports also plays a role in maintaining international reserves or at least, reducing them less than would otherwise be the case, and thereby keep the peg safe.”

Contributions made
AMIE made mention of their contributions saying they have invested N$150 million into infrastructure (cooling and storage facilities) and N$150 million into the GDP, in the form of taxes and road user charges etc. They also say they have created 204 000 jobs and spend N$250 million in salaries and wages. Shoopala could not shed any light on the details of the contributions in terms of infrastructure, saying only that “this information was submitted by the individual members of the association to me”.

Economists agree that imports contribute less to GDP and job creation than local production. Moreover, Cirrus, in its research, found that for every dollar invested into the local broiler industry, there is a multiplier effect of just over N$4 that goes back into the local economy.

Simply put, they say, it is better to invest N$100 million into local production than to invest N$100 million into imports, even if, as Shoopala told Kosmos 94.1 News, imports provide consumers with a choice.

McGregor is of the view that “if we had no local industry and imported all our poultry requirements, I do not believe they would replace all the jobs lost in the local industry. They already have their importing and distribution networks in place, thus it would simply be a matter of potentially slightly more administration work (on the importing side) and possibly a few new drivers and trucks for the additional volume; I highly doubt this would be at the same scale of investment and employment that we see in having a domestic industry.”

No benefit from quotas
According to Paulo Shipoke, a chicken producer near Ohangwena, he has seen no benefit from the quota system which aims to limit imports and grow the local industry.

“We have submitted everything (to retailers), we are yet to get an order.”

Shipoke’s farm can slaughter 1 000 chickens but he says he is limited in what he can take to the market. Currently, if he gets more orders he can increase his capacity to between 3 000 and 5 000 birds a day but, imports are hampering his business’ growth.

He made mention of Japan which has a 102% tariff on Brazilian imports and South Korea, which has 90%. “It is difficult to compete against the EU, the USA and Brazil as their industries have government support. I could have taken my laptop and started importing from Brazil with my son in a corner office and put my N$14 million in my pocket. But one makes your own ideas.”

He added that for the sector to grow it needs support and protection “otherwise we will be wiped out before we even start”.
With regards the benefit to the consumer, Shipoke said: “You do not see import prices passed on to consumers. Where is the benefit going? The pocket of the importers obviously. I think their profit margin must probably be 40 – 50%.”
Shipoke has created 33 jobs and produces 8 tons of tomatoes in greenhouses fed with chicken manure.

It’s about jobs
Producers from across the country echoed the same sentiment at the public consultation - that the volume of imports are too high for them to operate sustainably.

According to Van Niekerk, between January 2018 and December 2018, there were 115 SMEs purchasing 473 662 chicks from the day-old chick programme. This created 527 SME jobs. Based on the import data for that year, if all imports were substituted with local production, 10 504 jobs could be created in Namibia.

Milton Shaanika-Louw from the Namibian Consumer Protection Group is of the view that jobs are more important than cheap chicken saying that if he has to buy chicken for all the members of his family, including those who are jobless, it is irrelevant what the chicken costs, he still has to buy it for everyone because they cannot buy it for themselves.