Sunday, February 28, 2021

Millers warn phasing out wheat import levy will flood market with imports

Government is bracing for a backlash following the announcement of a reduction in wheat levy, which local millers believe will contribute to dumping and in the long run kill the domestic economic diversification drive. The Ministry of Trade has decided to phase out the 15 percent wheat levy over a period of 10 yearsÔÇöa move that has irked the Maize and Wheat Millers Association (MWMA) and Botswana Bakers Association.

The position of the two is that the levy should be retained to protect local millers from dumping.

“We wish to state for the record on behalf of Botswana Bakers Association and Wheat Millers Association Botswana that our joint agreement and recommendation to the Botswana government is that the 15 percent Wheat Levy on imports must be retained,” states a position correspondence from the two bodies.

The argument is that the removal of the wheat levy places the entire milling industry in Botswana under imminent existential threat. It is said that Botswana’s milling outputs only make up four percent of the South African milling capability and as such, milling in Botswana will no longer be viable without an anti dumping tool.

“The market will simply be flooded by imports that are made available at dumped prices and local millers will be forced to adjust their business models to traders and divest from milling operations,” the millers argue.

“This will have a significant impact on employment figures as wheat millers employ over 800 Batswana. This goes against the grain of economic diversification and industrialization efforts and will have an overall detrimental effect on the economy in our view”.

The millers have submitted to the ministry that they will be forced to import finished product through traders and distributors (or register their own trading subsidiaries) as this is more viable in an environment where dumped products are allowed without counter measures. They also argued that imported flour products will not be effectively distributed to the more remote areas of the Botswana market. Equally, they said imports are typically dumped in the greater Gaborone area as this is in close proximity to the South African entry points. Local millers currently ensure distribution and availability across the country.

Chairman of Botswana Millers Association, Nkosi Mwaba said the strength of the levy has been diluted, which might affect the local industry. He said their concern is that this was their only tool against dumping which still exists as major threat to the local industry.

“The levy was effective at 15percent and the strength of this tool has been diluted within a short space of time. This has a significant impact on investor confidence as the future of this business in Botswana is now uncertain,” Mwaba said. “Millers will possibly begin to adjust their business models and chances are there will be more imports and less local produce in the short term. The results of this decision are not in line with diversification expectations.”

Since dumping cannot be investigated within a Customs Union as Botswana is a member of SACU, a 15 percent levy on wheat flour imports was introduced in 2003 to off-set the unfair price advantage of South African imports over local wheat flour and to level the playing field. Announcing the adjustment, Trade and Industry Minister, Vincent Seretse said in government the Gazette that the Control of Goods, Prices and Other Charges (Restriction of Importation of Wheat Flour) Regulations were amended in regulation 4 by substituting for “15%” appearing in subregulation (2) the word “13.5%”.

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