Challenging times ahead for the Namibian beef processing sector
08 April 2012
According to projections from the Bank of Namibia, the Namibian ‘meat processing sector will grow by 3.0%’ in 2012, contributing N$279 million (€27.6m) to GDP compared to N$255 million in 2011. Europe will remain the main market for Namibia’s processed beef exports, despite the economic downturn, as there are continuing efforts in the sector to increasingly serve quality-differentiated beef market components that are less price-sensitive.
This requires the attainment of a wide variety of product and production standards at the level of the exporting enterprise, as well as the maintenance of strict SPS and food safety standards. For example, since April 2010 Meatco has been accredited by the British Retail Consortium, whose standards include benchmarks for production, packaging, storage and distribution of safe food, animal welfare, corporate social responsibility and ethical labour policies. It also requires the development of new targeted marketing strategies focusing on premium retailers such as Woolworths (South Africa), ASDA (UK), the Co-op (Denmark and Sweden), Norsk Polar (Norway) and quality manufacturers such as Heinz.
However, despite the strong financial performance, the number of cattle slaughtered at European- and South African-approved abattoirs fell by 13.4% in 2011 (down from 127,141 in 2010 to 110,119 head of cattle). This reflected in part the 1.52% decline in the total number of cattle marketed (from 352,613 to 347,253) but also the 3% increase in the number of cattle exported live on the hoof to South Africa (from 194,310 to 200,236). The increase in export to South Africa was attributed to the higher weaner prices being offered by South African feedlots. Towards the end of 2011, Namibian abattoirs increased their prices offered for cattle, in an effort to compete more effectively with the live export trade.
Maintaining effective animal disease control systems continues to be a challenge, particularly in view of outbreaks of foot and mouth disease elsewhere in the region. Any deterioration in the health status of the Namibian livestock sector is seen as carrying ‘significant consequences’ for the beef sector.
Currency volatility is also affecting the relative attractiveness of the EU compared to regional markets for undifferentiated beef cuts, as is the ongoing uncertainty over the outcome of the ongoing EU–Southern Africa EPA negotiations.
In the course of 2012, it is expected that Namibian beef sector earnings will be helped by a further increase in global beef prices, despite prices increasing at a slower rate than in 2010 and 2011. Beef producers will however continue to face a profitability squeeze, given the high regional grain prices.
Editorial comment
The price competition from an increasingly concentrated and integrated South African feedlot sector is a major source of concern to the Namibian meat processing sector. In the second half of 2011 the situation was eased somewhat by the rapid increase in South African maize prices (up 90% in the course of 2011) which put pressure on the South African feedlot industry, reducing demand for Namibian weaners. This could well continue into 2012, given continued uncertainties over the future regulatory framework for exports of maize from South Africa.
In the medium to long term, however, the regional competition is a major source of concern, and there are efforts underway to stimulate increased production and greater off-take (i.e. marketed or slaughtered) of quality cattle from smallholder producers in communal areas south of the veterinary control fence. Assistance is being mobilised through the Meatco Foundation from ethical trading companies in the EU (e.g. Danish Co-op) in support of various mentoring and quality improvement schemes. Such initiatives could greatly benefit from an increase in targeted ‘aid for trade’ support from official donors.
This type of tripartite collaboration (involving a local industry-linked NGO, private European corporate support and official development assistance) could well offer a useful model for the deployment of dedicated ‘aid for trade’ support, aimed at dealing with specific agricultural development initiatives designed to better serve export markets. This is particularly relevant in Namibia, where reclassification as an upper-middle-income country in 2011 has encouraged many traditional donors to disengage at a time when serious trade challenges are being faced.
In the case of Namibia, the involvement of a European ethical trading enterprise could well serve to address important issues related to the functioning of supply chains, in order to ensure that primary producers secure the full commercial benefits of both improvements in quality and an expansion of production.
