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Namibian dairy sector measures questioned by South African dairy company

10 April 2014

The use of dairy sector import controls in Namibia has been criticised by the South African dairy company Clover  (see Agritrade article ‘ Discussions on dairy sector safeguard measures in Namibia intensify’, 26 August 2013), which has attributed the recent retrenchment of 34 Namibian staff to “the negative impact of Namibia’s quantitative restrictions on the import of dairy products”.  In response, Namibian government representatives highlighted in February that the local dairy sector employs 1,750 Namibians, noting the importance of maintaining “a home-based productive capacity able to serve all corners of the country and reduce vulnerabilities in the market”.

The Namibian Dairy Producers Association (DPA), for its part, argued that it was incorrect to blame the government’s quantitative import restrictions for any market difficulties, noting “failure on the part of importers to comply with the requirements of permit applications”. The chairperson of the DPA cited “predatory pricing by some local retailers” as “one of the contributing factors” to the current problems on the Namibian dairy market.  Press reports have suggested that Namibia Dairies has been “unable to keep up with the local demand”, leaving “retail shops … struggling to keep dairy products on the shelves”. Retailers have described the import restrictions as “ridiculous” given the drought in Namibia, which is affecting the domestic milk supply situation.

The criticisms follow a legal challenge to the government’s August 2013 import controls in October 2013 by Matador Enterprises, a milk importing company. In an affidavit, the company claimed that despite over 12 years of infant industry protection the Namibian dairy industry had failed to competitively establish itself. Both the benefits and constitutionality of the import controls were questioned.  The Namibian government maintained in October that import restrictions were “necessary to build and maintain domestic capacity for the development and production of food products in Namibia” and pointed out that earlier controls had been limited to UHT milk. The August 2013 quotas, while being broader in their applicability, would only reduce monthly UHT imports by 23%. The legality of the measure under the Import and Export Control Act was also affirmed.

According to official import data, milk imports in 2013 exceeded the official quota by 30%, while imports of other quota-restricted dairy imports were only 2.28% above quota.  This has led to the Namibian government raising the prospect of “an investigation of possible under-declaration of milk and dairy product imports”.

Editorial comment

The private sector response to the Namibian government’s decision of August 2013 to establish import controls would appear to be indicative of a growing willingness of private sector companies to challenge government policy initiatives that seek to make use of traditional, long established, agro-food sector trade policy tools. These private sector actions highlight the domestic sensitivity of provisions in intra-regional trade agreements pertaining to the use of non-tariff policy tools.

Another dairy company operating in South Africa, Parmalat, has added its voice to Clover’s concern about the Namibian import controls.  Matador Enterprises, which retracted the first part of its legal challenge (an urgent application to stop the import restrictions) against the Namibian government at the end of 2013, has now joined with Clover and Parmalat in launching a joint legal challenge against the Namibian government’s dairy sector import controls. 

The proceedings of this legal challenge commenced on 14 March 2014. The outcome of this court case will have a decisive influence on the implementation of the government’s industrial policy, as well as its “Growth at Home” strategy.

These private sector challenges to the Namibian government’s use of agricultural trade policy tools represent an added complication to the ongoing EPA negotiations over agricultural safeguards and those provisions which seek to prohibit or restrict the use of quantitative restrictions on trade.

The French dairy company Danone bought out Clover’s shares in Danone Clover in 2009, and Clover SA and Danone Clover now operate as separate companies. Clover SA continues to provide services to Danone Clover, “notably in the fields of raw milk supply and distribution”.  Parmalat, meanwhile, is now part of the French international dairy company Lactalis, following Lactalis’s acquisition of a majority stake in Parmalat during 2011.  There thus remains a strong EU corporate interest in dairy sector policy developments across the SACU and beyond.


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