Windhoek
A global and regional oversupply of milk has resulted in the local dairy industry teetering on the verge of collapse.
The country’s only dairy producer Namibia Dairies (ND) and the Dairy Producers Association (DPA) yesterday said that a total breakdown of the industry is imminent if urgent intervention from the government and consumers is not forthcoming within the next three to six months.
ND and the DPA agreed that if the sector collapses it would have dire consequences for about 1 000 people directly employed in the industry, as well as for those indirectly involved in the sector such as transporters and suppliers, not to mention farmers and their employees.
The Managing Director of Namibia Dairies, Gunther Ling, yesterday explained that the quandary is a culmination of a number of factors that have caused a state of crisis in the global dairy sector and resulted in world dairy prices reaching a 13-year low. He spoke at a media briefing at the company’s warehouse in Prosperita industrial area, Windhoek.
Ling said contributing factors include an increase in dairy production by major producers like New Zealand, the United States of America and Europe. This increase in production has resulted in a surplus that cannot be absorbed by existing markets. The overproduction automatically leads to a drop in prices, which is then exacerbated by an influx of cheap imports.
“Namibia’s own dairy industry is not able to compete with these cheap imports flooding the market and the fact that these imports are often sold in Namibia at the same prices or lower than in their market of origin is testimony to the under-pricing of these dairy products,” said Ling.
He added that imported milk sells for as little as N$11.99 per litre for UHT milk, while he feels a fair price for locally produced milk is N$17.99 per litre.
“If we can sell our UHT milk for between N$16.99 and N$17.99 per litre for at least the next 12 months then the future of the local industry is secure,” added Ling.
The ND chief added that they will soon be meeting senior officials in the Ministry of Finance to recommend the exclusion of value added tax (VAT) on certain dairy products like UHT milk. This alone, he said, could provide some breathing space for the industry if government agrees on this intervention.
Ling said that there has been a drastic decline in demand for ND products as a result of underpricing of imported dairy products, which he noted is evidenced with a 23 percent decline in sales of fresh and UHT milk by ND in July, compared to the same time last year. He added that with a capital debt of N$240 million, ND is not in a position to weather the storm.
Also at yesterday’s press briefing was the chairman of the DPA, Japie Engelbrecht, who admitted that farmers also have to help to save the industry. “Dairy farmers in Namibia have invested heavily to increase their production and build up the local industry. If we are to reduce the price of milk further our operations will no longer be viable, and we may as well concede that the Namibian industry cannot bear he onslaught of more developed countries,” said Engelbrecht.
Also weighing in on the impending disaster was Sven Thieme, Executive Chairman of the Ohlthaver and List Group, which is the parent company of ND. He said in an internal memo sent to ND staff that external suppliers are willing to sell their products at a loss, as long as they recover some of their costs.
“If we don’t fight for the survival of Namibia’s dairy industry, our farmers will exit the dairy business and once the dairy industry is lost, we will not be able to establish it again. Thereafter, if we no longer have our own dairy industry, Namibians will be reliant on imports. When this cycle of oversupply ends, and the world faces its next dairy shortage, Namibians will not have milk. This is something we cannot allow,” warned Thieme.