Local millers want wheat levy retained
Isaac Pinielo | Wednesday December 3, 2014 11:16
The levy was introduced on all wheat flour imported into the country, in order to develop the local industry.
This week, chairman of the Botswana Millers Association, Nkosi Mwaba, told BusinessWeek that the levy was an effective tool to curtail dumping and to address predatory pricing from South African millers.
“It is no surprise that some economists are quick to speculate and accuse millers of anti-competitive or monopolistic behaviour.
In any event, the Competition Authority should be in a position to intervene and react accordingly should this ever become the case as a matter of fact,” he stated.
Mwaba also pointed out that Botswana millers welcomed competition, adding that there had been a new entrant into the market recently, which he said was a welcome and healthy development for the economy.
“We have three members of the millers association producing wheat flour and related products. We must just be careful not to be seen to punish growth,” he said.
The chairperson also stated that if the existing players are efficient and competitive then their growth must be welcome and supported and not discouraged. “I believe that we should maintain focus on the bigger picture which is successful industrial development and economic diversification in Botswana,” he said.
Mwaba reiterated that the barriers to entry into the milling industry were quite significant and that milling by its nature was machine-based, and hence capital intensive.
He said one must be willing to make a significant investment to play a meaningfully role in the milling game. He also noted that existing millers were also required to make continuous capital investments into their operations in order to live up to technological advancements and remain competitive in the market.
He added that there were only a handful of meaningful players in the milling game, in Botswana and elsewhere. He further stated that dumping by nature and sophistication was difficult to quantify, noting that it can take up to two years to investigate conclusively.
“The long-term effects of allowing dumping to continue without any counter measure are detrimental and pose existential threat to the entire milling industry in Botswana,” said Mwaba.
Official data showed that South African millers produce in excess of 2.5 million tonnes of flour per annum whereas Botswana millers produce about 120 thousand tonnes in the same period. Mwaba explained that it would take South African millers about three weeks to produce what Botswana produces in a year.
He noted that should government see the need to remove this mechanism in consideration of regional expectations, an effective alternative measure would be put in place to curtail dumping in Botswana.
“We strongly believe that we must take care of the local economy and ensure its independence, growth and success before we make commitments that focus more on regional efforts. Should the levy be removed, the milling industry in Botswana will not be sustainable and jobs will simply be lost to South Africa,” he said.
In his view, local millers compete fairly within Botswana and have sufficient capacity to satisfy the domestic market.
He stated that studies had shown that local millers were price competitive with South Africa counterparts and it had been proven that Botswana’s quality was similar or better than that of South African millers.
“We have created a successful and self sustaining domestic food manufacturing and agro-processing industry which has room for growth and considerable export potential,” he said.