Beef export competitiveness deteriorates � BIDPA study
Isaac Pinielo | Friday September 18, 2015 15:13
In a recent working paper titled ‘Export Competitiveness of Botswana’s Beef Industry’ published by the Botswana Institute for Development Policy Analysis (BIDPA), the researchers stated that despite its deteriorating competitiveness, Botswana still outperformed most of the SADC countries.
The paper, authored by BIDPA researchers: Tebogo Seleka and Pinkie Kebakile, investigated Botswana’s beef export competitiveness using indices of Revealed Comparative Advantage (RCA) and data for the period 1961-2011.
According to the study, Botswana exported about 20 percent of its beef in 1961 and reached a peak of 75 percent in 1975, and thereafter its ratios of net trade to domestic production (NP) got eroded until reaching 20 percent in 2011.
The study further says Botswana and Namibia are the most competitive SADC beef exporters, noting that Namibia’s NP rose steadily from 1961, reaching a peak of 68 percent in 1998 and thereafter fell to reach 26 percent by 2011.
Zimbabwe’s performance was impressive from 1961 to 1979 but sharply declined thereafter to very low levels, according to the report. South Africa, on the other hand, remained the least performer of the four countries throughout the review period.
It said Botswana’s beef exports were the most competitive for the periods 1961-65 to 1981-85 and that it was then surpassed by Namibia and New Zealand for most of the remaining periods and Australia for some of the remaining periods.
In construction of export competitive indices, the researchers said the relative competitiveness of any particular country depends on factors internal and external to the country in question.
They further indicated that institutional environments in importing and exporting countries as well as domestically, also do affect the country’s export competitiveness.
The researchers pointed out that the Botswana Meat Commission (BMC) has been the sole exporter of beef since its establishment in 1965 and that the Botswana beef has also been accorded preferential access into the EU market through various trade arrangements.
They indicated that before 1975, preferential access was made possible through the Commonwealth Preferential System, which allowed duty free access of the Botswana beef to the British market.
The researchers stated that although these arrangements have played critical roles in stimulating the development of a competitive beef industry in Botswana, through promoting export market access the same institutions are potential threats to beef export competitiveness in Botswana.
“First, the single export channel, through a state trading export monopoly, means that the collapse of the state trader may lead to an instant collapse of the beef industry in Botswana,” read the research paper.
The researchers pointed out that the potential threat is not far-fetched in that the BMC has operated at idle capacity since the 1980s when its throughput began to steadily decline.
They added that such eminent threat is also reflected in the poor financial performance of the BMC, characterised by declining and negative profits.
They also believe that Botswana’s competitiveness is enhanced by duty free/quota free access of its beef exports to the EU market, while the country’s key competitors are subject to high import duties in the same market.
“Therefore, Botswana’s beef exports are priced higher than world market prices because of trade restricting protectionist policies in the EU market,” said that report.
According to the researchers, trade reforms in the EU that ease trade restrictions would lower beef prices in the EU market, further leading to preference erosion and reduced beef export competitiveness in Botswana.
Changes in standards in the EU market are also said to pose risks to Botswana’s beef industry, particularly where compliance capacity is limited or compliance costs are prohibitive amongst communal farmers.
“For example, the requirement that cattle should have been kept in a single enclosed area for a given period before they are slaughtered for the EU market is not practical under communal arrangements and serves as a trade barrier,” the report said.
Given that more than 80 percent of Botswana’s cattle are in the communal production system, this requirement would therefore lead to reduced exports to the lucrative EU market, thereby impacting adversely on beef industry competitiveness, according to the report.