Abolish Small Stock Marketing Scheme, study urges
Possibility of alternative market investigated
An agricultural economist, a market specialist and an auditor investigated the operating costs of the Farmers' Meat Market over the last 10 years as well as international markets that include Europe and the rest of the world.
A study into Namibia's sheep value chain has established that there is a high level of feasibility for the Farmers’ Meat Market (FMM) to export mutton abroad.
The study recommended that - as a first step - government completely abolishes the Small Stock Marketing Scheme (SSMS).
It followed the Livestock Producers Organisation's (LPO) 2020 regional meetings, during which sheep producers pointed out the risk of focusing on only one large market to which live sheep are exported, namely South Africa.
According to the Namibian Agricultural Union (NAU), the LPO was, during these meetings, tasked with conducting a study on the possibility of establishing an alternative sustainable market in Namibia for the export of sheep to international markets in an unregulated environment.
A steering committee, consisting of sheep producers nominated by the various regional agricultural unions as well as the LPO and Hartlief, conducted the study.
The NAU said an agricultural economist, a market specialist and an auditor were appointed as consultants who investigated the operating costs of FMM over the last 10 years as well as international markets that include both Europe and the rest of the world.
The focus of the study was, therefore, to determine the cost of the total value chain and how the price that can be realised at the export abattoir compares with what the competing markets realise.
Product preferences
“There was a focus on four product preferences, namely fat tail and non-fat tail, and carcass weights of <15kg and >15kg. Market prices, freight costs, import tax, certification, Halaal certification requirements, potential and challenges, live exports as well as detailed cost calculations of the routes to different markets were included in the study,” the NAU explained.
According to the union, markets such as Turkey, the European Union and Norway appear to be the most profitable at first glance, but these come with greater input and regulations.
“Norway is limited to a 400-tonne import duty-free quota for Namibia, Eswatini and Botswana, regulated on a first-come-first-served basis.”
The NAU added that Norway is also limited to deboned cuts and a 400-ton quota represents only about 40 000 sheep per year.
“Import duty after complying with the quota is subject to 69.26 Norwegian krone, equivalent to approximately N$164.90 per kilogram. Turkey surprises with lucrative pricing; however, it regulates its market with import tax between 100 to 200%, depending on product specification/Harmonised System code.”
Shelved for now
For all destinations, prices are higher at a wholesale level and it may make sense to examine direct sales to wholesalers, the union said. In the study's recommendations, it is explained that the current status is that the SSMS has been "shelved".
“In order to create policy certainty in the sector and mobilise investment, it is crucial that the scheme is abolished completely.”
The union further said a detailed business plan is required to determine additional capital investment and return on capital to ensure sustainability of the FMM abattoir. Operational efficiency and transparency of FMM should be established as well as the ability to mobilise and procure all role players in the industry, it added.
Furthermore, a detailed marketing study should be completed to determine preferred markets within the identified markets, based on ease of trading, potential to develop a strong brand and certifications.
“The success of the initiative will depend on the right product and consistent throughput figures.”
With regard to the way forward, the NAU said the FMM should reapply and obtain export certification and a new business plan by June.
“The FMM's doors should open for exports to Namibia, Botswana and South Africa with low slaughter levels by September.”
Following this, it should focus on the Norway market to utilise the 400-ton quota/year by March next year, and then focus on gaining market access to China and the United Arab Emirates by September 2023.
The study recommended that - as a first step - government completely abolishes the Small Stock Marketing Scheme (SSMS).
It followed the Livestock Producers Organisation's (LPO) 2020 regional meetings, during which sheep producers pointed out the risk of focusing on only one large market to which live sheep are exported, namely South Africa.
According to the Namibian Agricultural Union (NAU), the LPO was, during these meetings, tasked with conducting a study on the possibility of establishing an alternative sustainable market in Namibia for the export of sheep to international markets in an unregulated environment.
A steering committee, consisting of sheep producers nominated by the various regional agricultural unions as well as the LPO and Hartlief, conducted the study.
The NAU said an agricultural economist, a market specialist and an auditor were appointed as consultants who investigated the operating costs of FMM over the last 10 years as well as international markets that include both Europe and the rest of the world.
The focus of the study was, therefore, to determine the cost of the total value chain and how the price that can be realised at the export abattoir compares with what the competing markets realise.
Product preferences
“There was a focus on four product preferences, namely fat tail and non-fat tail, and carcass weights of <15kg and >15kg. Market prices, freight costs, import tax, certification, Halaal certification requirements, potential and challenges, live exports as well as detailed cost calculations of the routes to different markets were included in the study,” the NAU explained.
According to the union, markets such as Turkey, the European Union and Norway appear to be the most profitable at first glance, but these come with greater input and regulations.
“Norway is limited to a 400-tonne import duty-free quota for Namibia, Eswatini and Botswana, regulated on a first-come-first-served basis.”
The NAU added that Norway is also limited to deboned cuts and a 400-ton quota represents only about 40 000 sheep per year.
“Import duty after complying with the quota is subject to 69.26 Norwegian krone, equivalent to approximately N$164.90 per kilogram. Turkey surprises with lucrative pricing; however, it regulates its market with import tax between 100 to 200%, depending on product specification/Harmonised System code.”
Shelved for now
For all destinations, prices are higher at a wholesale level and it may make sense to examine direct sales to wholesalers, the union said. In the study's recommendations, it is explained that the current status is that the SSMS has been "shelved".
“In order to create policy certainty in the sector and mobilise investment, it is crucial that the scheme is abolished completely.”
The union further said a detailed business plan is required to determine additional capital investment and return on capital to ensure sustainability of the FMM abattoir. Operational efficiency and transparency of FMM should be established as well as the ability to mobilise and procure all role players in the industry, it added.
Furthermore, a detailed marketing study should be completed to determine preferred markets within the identified markets, based on ease of trading, potential to develop a strong brand and certifications.
“The success of the initiative will depend on the right product and consistent throughput figures.”
With regard to the way forward, the NAU said the FMM should reapply and obtain export certification and a new business plan by June.
“The FMM's doors should open for exports to Namibia, Botswana and South Africa with low slaughter levels by September.”
Following this, it should focus on the Norway market to utilise the 400-ton quota/year by March next year, and then focus on gaining market access to China and the United Arab Emirates by September 2023.
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