Saturday, May 18, 2024

Millers demand protection of local industry

As considerations on whether to retain or do away with the contentious wheat levy are currently ongoing, millers who are the center of the debate have reiterated the need for government to put in place mechanisms to protect local industry.

Government placed a 15 percent levy on wheat flour imports in 2003 to protect local millers against predatory pricing or dumping from outside the country, specifically South Africa. However, with a complaint filed to Southern African Customs Union (SACU) and local bakers piling pressure for free wheat flour imports, government is weighing options on the levy.

The two millers, Bolux and Bokomo, are now restless as they foresee total collapse of their industry if there is no protection against dumping. Both millers, however, share the same sentiment that the levy should be retained, should the levy be scrapped a sufficient anti-dumping measure should be instituted.

“The levy must be retained as it is helping us to be competitive in the market against the South African players,” said, Nkosi Mwaba, the corporate affairs manager at the Bolux Group. Piet Van Wyk the Chief Executive Officer at Bokomo emphasized the need to retain the levy as scrapping it off has too much downstream impact.

Ndaba said the issue of dumping cannot be ignored because it is done in a smart way and takes long to notice. Anti-dumping investigations are complicated and, therefore, legislation usually allows for up to 18 months to complete the investigation.

“We are not saying ‘don’t remove the levy’; but our main concern is that a measure that curtails dumping should be put in place,” said Ndaba.

A paper outlining Bolux’s position on the levy says: “It’s the responsibility of the Botswana government to help its own industry and protect it as far as possible from practices such as dumping. The Botswana government knows what’s in the toolkit and what can be done.”

The two milling companies share the same fears that sustained dumping prices will certainly force the closure of local millers, which will lead to the loss of hundreds of direct and indirect employment opportunities.

In a study conducted by Isaac Ndungu on the wheat flour levy, he notes that dumping by South African millers is a seasonal occurrence regionally. Cake flour is the most popular type of flour in RSA. Bread flour has much less demand and is often exported to neighboring countries, especially Mozambique, Zimbabwe and DRC.  Millers face storage constraints and when there is build up of product, they, from time to time, export bread flour at prices which constitute dumping.

Another study, however, done by Keith Jefferis, argues that the levy provides a privileged economic environment for the two local millers, which may lead to anti-competitive behaviour. Jefferis, whose report calls for the levy’s removal, adds that the levy has disadvantaged bakeries and consumers by raising bread prices while providing no incentive for local millers to enhance efficiency.

“We would be happy with an alternative measure to control dumping,” said Ndaba.

The umbrella body representing the two parties, the Botswana Exporters and Manufactures Association (BEMA), is expected to conduct another meeting with the two parties to chat the way forward.

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