Exchange rate to eat into import rebate benefits
The volatile exchange rate could diminish gains from the proposed rebates on imported wheat and dairy products, the Namibia Trade Forum (NTF) has warned.
NTF Chief Executive Officer Ndiitah Nghipondoka-Robiati told the Windhoek Observer that this would, however, not have a direct impact on pricing.
The Ministry of Agriculture, Water and Forestry (MAWF) announced the availability of a rebate on import quotas for butter, cheese, skimmed milk powder and whole milk powder, starting in October 2016 and running until September 2017.
These products will be limited to 400, 300, 700 tonnes and 400 tons, respectively.
The tariff rebate facility allows limited quantities of dairy products from outside the Southern African Customs Union (SACU) to be imported into Namibia duty-free.
The MAWF said the facility was open to companies that have joint venture agreements with registered local macro, small and medium enterprises.
However, the development has previously been criticised by detractors, who felt it would trigger an influx of cheaper and lower quality products into Namibia, and that it would be detrimental to the ‘Growth at Home’ strategy, which seeks to empower local producers and position them to compete with international brands.
Nghipondoka-Robiati said the issue of rebates was very critical, as most countries used them as part of their industrialisation policies.
She said what was likely to happen theoretically, was that the tax on these goods would be refunded, hopefully bringing the production costs down for intermediaries, such as for skimmed and whole milk powder (used for yoghurts and milk juices), and the wheat grain used for pasta.
On the issue of a price reduction on such products locally, Nghipondoka-Robiati said: “That is not a yes or no scenario, as we know that the final price is not only determined by the price of the intermediary inputs, but a range of other reasons.
“The volatile exchange rate is a factor that can even diminish the gains from the rebate, as we have seen happen in the last week.
“This list of products is a very old one, and as far as I recall, 10 years ago these products were being rebated.
“What we have constantly been involved in, is the increase in the quantities/volumes, due to the rise in demand of these products.
“We were involved in the submission to increase wheat from 50,000 to 80,000 tons and we are now in the process of having that increased to 120,000 tons, which is just about the domestic demand. Remember that we produce about 10 percent of domestic demand only,” she said.
Nghipondoka-Robiati also highlighted that the NTF will be hosting a workshop on rebates in the next quarter, which would include looking at how South Africa has used them, in the context of the SACU agreement, as well as in its industrialisation policies.
In a previous interview, Namibia Dairies Managing Director, Gunther Ling, said they were not worried about the introduction of the rebates, as the company did not produce any of the rebated products.
Ling said some of the products could, however, be produced locally on a smaller scale, by farmers or smaller dairies, which would be very small volumes.
“It is possible to make these products locally, but this would require high capital investments, and this is opposed by a low economy of scale, as well as shortages of excess raw milk,” Ling said at the time.