allAfrica.com: Southern Africa: Fledgling Industries Fear Choking Under SADC FTA (Page 1 of 1)

Local industries fear they will be choked to death by a glut of South African imports as the SADC region opens up to a free trade zone.

At its summit in Johannesburg, South Africa, SADC launched a regional trade zone last Sunday that aims to eliminate import tariffs ahead of a common currency by 2018.

The Chairman of the Botswana Poultry Association, Peter Kirby, says the poultry industry will be "adversely affected because South Africa produces huge quantities of chicken. With the launching of free trade zone, I do not think we will be in business for very long, especially small producers who borrowed funds from CEDA."

Kirby, who was speaking in a telephone interview from his farm in the Tuli Block, said between them, South African poultry companies Rainbow Chicken and Country Farm produce 4 million chickens a week.

"The big producers in Botswana will also suffer," he said. "For us to compete with these South African producers, we need to grow first. It is only last year that the government passed legislation for abattoirs and allied industries. It is barely a year since the Act was passed. How can we be ready to compete? We do not have the experience."

Kirby says with the implementation of the free trade zone, there will be no reason to produce locally because the price structure is different. "Labour is also a problem here because poultry farming is not a popular occupation."

Kirby says before the SADC free trade zone, Botswana poultry producers benefited from protection. The Ministry of Agriculture had failed to prepare the Botswana poultry industry very well to ensure that it is safe before the free trade zone was launched.

The CEO of Bolux Milling in Ramotswa, who is also executive member of the Botswana Millers Association, Piet Van Wyk, says it is not yet clear which products will be affected. "We do not know whether wheat flour is included, but I know that certain products are not. The Department of Trade will have to inform us first before we can make an informed comment."

He says Botswana millers have also enjoyed protection all along. "Wheat and meat have been enjoying quantitative protection," Van Wyk said. "Wheat flour has a 15 percent levy on it, although it has been very ineffective. We had concerns about the ineffectiveness of this protection because it was not being properly policed."

Ken Lewis is the Chairman of the Pig Producers Association of Botswana. He also fears that the effects of the SADC free trade zone will be dramatic because Botswana pig producers are already disadvantaged.

Lewis says at the moment, Botswana has only one abattoir dedicated to the slaughtering of pigs. The Gaborone-based abattoir belongs to Sediba Farm and was formerly owned by Lewis.

"It is only last year that a law on abattoirs was passed," he says. "What it means is that the rest of the facilities that were used by pig farmers for slaughtering will have been rendered illegal by the new law and farmers who fail to meet the new requirements for slaughterhouses will have to close their businesses."

Exacerbating the problem is that pork that is not halaal certified requires separate slaughterhouses from goats and cattle, which is an expensive exercise. According Lewis, almost all the pork consumed in to Botswana is imported because the Botswana pig industry is still in its infancy and is fragmented.

He says he has already had to sell his pig farm because the costs of production were too high. "My production cost was P19 per kg, and the super markets were only willing to buy at P16.50 per kg."

But Howard Sigwele of Delta Dairies, the only company currently producing UHT milk in Botswana, says he does not expect dramatic changes between now and the next three years.

"Unless South African companies use unfair means, we should continue to have an advantage over them," Sigwele says. "The Government is not going to remove the existing import duty immediately. It will be removed over time. It will take time to reduce duties for the simple reason that this is a strategic industry. We are currently protected.

"Tariffs will be gradually reduced. We have sensitive industries like the beef industry, the dairy industry, and the milling industry. Sensitive industries are a sector that a country sees as very important for industrialisation, economic growth, and poverty reduction."

Infact, Segwele says the dairy industry will benefit from cheaper raw materials. His company imports milk and other raw materials from South Africa. "They can only kill us with predatory pricing," he adds.

As infant industries, companies like Delta Industries are protected from external competition for eight years under the Southern African Customs Union (SACU).

The Ministry of Trade and Industry had not responded to a Mmegi questionnaire at the time of going to press.

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