Economist Keith Jefferis has proposed the abolishment of the contentious 15 percent levy on imported wheat to be done over three years to give millers time to adjust to changed economic environment.
Local bakers say the levy prevents them from accessing affordable wheat flour across the border while the two monopoly millers, Bolux Milling and Bokomo Botswana, want the levy retained to protect the market from the dumping of South African wheat flour products.
In 2003 Botswana Government introduced a 15 percent levy on all wheat flour imported into the country to develop local industry. Botswana millers, controlling 85 percent of the market, have warned that phasing out the levy will not only affect the confectionery industry but also extend to livestock rearing, trucking business, and small-scale farmers of wheat, food security and human resource development.
In his report, ‘Draft Assessment of Wheat Levy’ , Jefferis recommended removal of both the import permit requirement and the levy on wheat flour imports to be consistent with regional and international trade commitments and Botswana’s industrial policy.
“Permit regime is a cost to consumers and to government with no identifiable benefits; removal is consistent with government need to downsize,” said Jefferis.
There have been reported cases of complaints against this levy and calls for its removal. These have come from South Africa, some Botswana bakeries, and wheat flour traders. South African wheat flour exporters reported this as a non-tariff barrier (NTB) restricting free movement of agricultural goods while the local traders viewed it as an additional cost which makes imported flour more expensive. Botswana bakeries allege that the levy makes the wheat flour expensive.
In his report he stated that the levy has been reported as contravening Botswana’s commitment to the SACU Agreement. Articles 18, 24, 25, 26 & 29 have been quoted severally in the complaints against the levy as a non-tariff barrier. SACU Agreement does allow member countries to implement measures to support the development of local industries which is the case with the flour levy.
From his assessment, Jefferis said the levy has been effective in achieving one objective that of protecting the domestic milling industry and one firm in particular, Bolux Milling. He added that the levy provides a privileged economic environment for the two producers, which may lead to anti-competitive behaviour, which is a real danger.
The levy has been cited as undermining the potential role of imports, which is essential in preventing collusion. The report revealed that the levy has posed disadvantages to bakeries and consumers by raising the price of bread as well as providing no incentive for millers to improve efficiency.
Jefferis said there is need to engage with industry to find out what they need to make them competitive over this period.
“Consider utilising proceeds of levy to finance necessary industry restructuring,” he said. He added that complains about “Dumping” by SA producers are not valid, as the industry should be able to achieve regional levels of efficiency.
The wheat levy prompted a heated debate last week amongst bakeries and millers who failed to agree on what should be done with the levy. However, consultation on what and how best to solve this issue is ongoing.