In August 2012, it was reported in the Namibian press that a delegation from the Chinese Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) was in Namibia inspecting meat and fish processing facilities. This, along with an audit of the control capacities of the competent authority, is seen as a necessary final step in the opening up of export opportunities to the Chinese market.
There would appear to be considerable potential opportunities for beef exports on the Chinese market. According to press reports, Chinese beef imports in 2013 are expected to increase by 12% (to 34,000 tonnes), as a result of ‘robust demand from the rising middle class’ (for higher-quality meat cuts), in contrast to reduced demand for beef from lower-income Chinese consumers.
However, in terms of export volumes, the Namibian beef sector has faced difficulties during 2012. According to press reports, Namibia’s beef trade decreased by 28.8% in the first 6 months of 2012. This was largely due to the reduced number of live cattle exports to South Africa, which fell by 50.89% (from 97,787 to 48,021 head). This was reportedly linked to high feed prices in the South African feedlot industry, consumer resistance to higher prices, and increased supplies from Botswana following the closure of the EU market to beef exports.
Meat industry reports show a more mixed picture for exports of beef cuts, with Namibian exports to African markets decreasing by 44% in the first 6 months of 2012 relative to the corresponding period in 2011 (from 6,695 to 3,727 tonnes), while exports to the EU and Norway rose by 45% (from 3,765 tonnes to 5,465 tonnes).
However, as the 2011/12 Meatco annual report pointed out, the company was able to improve its financial returns despite the reduced volume of sales. This improvement was ‘due to the positive effects of the Corporation’s value addition strategies and branding’ and the success of targeted market initiatives developed in recent years. There have been significant gains in the unit price of Namibian beef sales across a variety of markets (for more details see Agritrade article ‘ Meatco’s strategy for moving up the value chain’, 2 December 2012). This in turn has led to significant additional revenues being delivered to Namibian producers, compared to their South African counterparts.
In 2012, the Meatco annual report for 2011/12 noted that approvals had now been secured for meat exports to the USA and Middle Eastern markets. In the longer term, however, a critical constraint remains the declining trend in slaughter throughput arising from both farm conversions (to game farms and other tourism-related uses) and competition from the South African feedlot industry.
While the inspections and finalisation of SPS requirements and food safety implementation modalities are essential prerequisites for meat and fish exports to China, the critical determining factor for exports to start up will be identifying higher-value commercial opportunities relative to those available on other markets. The sophisticated marketing strategy adopted by Meatco means that individual meat cuts are placed on markets that offer the highest returns for the particular cut. This requires building up a detailed understanding of local demand.
While Namibian beef exporters have traditionally expressed scepticism regarding a match between overseas export beef products and Chinese demand, the rising middle class demand for beef in China could well open up new export opportunities for Namibian exports of high-quality beef cuts (as opposed to the lower-quality beef currently required for other segments of the Chinese market).
There are a number of key challenges in order to exploit these opportunities. These relate to:
- identifying the specific market components to be served;
- overcoming consumer scepticism over beef originating from Africa;
- developing a strong branding and marketing strategy in association with local partners who understand the evolving patterns of Chinese demand for high-quality beef.
For a small beef producer such as Namibia, the human capital and financial cost associated with developing branded high-quality exports to the Chinese market is likely to be high, relative to the value of Namibia’s overall export potential.
Unless some form of ‘aid for trade’ support is extended to Namibian exporters in exploring commercial possibilities on the Chinese market for high-quality beef exports, the trade opportunities opened up as a result of SPS and food safety agreements are likely to remain marginal. In addition, the absence of details on the tariffs to be applied to beef and beef products exports by the Chinese authorities suggests that exports to China are still some way off.