• Business 7

Fox in the chicken coop

- 2022-06-29 00:00:00

JM KRETSCHMER - Within a space of seven years, from 2014 to 2021, the figures indicate that transit chicken, in other words, bonded chicken that enters Namibia destined for other countries or, vessels at Namport, increased by a staggering 4 475%. The value in 2014 stood at N$16 million and grew to N$716 million.
The figures correlate – with a marginal difference - with those provided for 2021 by the Namibia Statistics Agency (NSA), standing at N$708 million in imported chicken during that year.
Bonded chicken, or chicken in transit, does not fall under the import limitations of 1 200 tonnes monthly for local consumption.
The exponential growth raises eyebrows.
Bulk chicken
The only open markets in neighbouring countries are the Democratic Republic of Congo (DRC) and Angola. The United States is the preferred supplier of frozen poultry to both countries. American chicken is subject to most-favoured-nation customs duties, including anti-dumping duties, in Namibia, in line with Sacu protocols, but it appears to be readily available in bulk, to Namibian customers.
This reporter engaged Hangala Jason Nuloveli via a Facebook platform, who was selling chicken packaged in Pilgrim’s packaging. He was selling 10 kilogramme boxes at N$300. He assured this reporter that the chicken was Angolan-produced and is for sale in Namibia. Pilgrim\'s Pride Corporation is an American, multi-national food company, currently one of the largest chicken producers in the United States and Puerto Rico and the second-largest chicken producer in Mexico.
And the list goes on. Chicken, packed in bulk, is readily available on social media, mostly in informal markets and sold by individuals.
Evasive
Finding answers and getting information, is almost impossible.
On 1 July 2019, the trade ministry took over the management of import permits for chicken products from the Meat Board. The ministry did not respond to repeated requests for the total import permits issued in 2021 and thus, this article relies on SACU figures and the imports and re-exports as provided by the NSA.
And those figures too, raise eyebrows.
Mechanically deboned chicken, known as mechanically deboned meat or MDM, is not subject to import limitations and according to the import and export figures as provided by the NSA, 1 240.99 tonnes of chicken is imported monthly. When MDM is removed from that figure, importers are only bringing in 499.56 tonnes monthly – with an available quota of 1 200 tonnes monthly. And yet, they complain they do not get enough quota.
Moreover, if the figures are to be believed, Namibia used 741 tonnes monthly of MDM in 2021. MDM is used to make processed foods such as polonies, chicken nuggets, canned beef, and more. Thus, there should be twice as much locally produced processed chicken products on our shelves than actual chicken and chicken cuts, excluding local production. Imports of all the other cuts and portions combined total a mere 492.2 tonnes.
Where is it coming from?
According to Pieter van Niekerk, commercial manager at the NMI Group, owner of Namib Poultry Industries, their current stockpiles are at roughly 2 000 tonnes, more than three times the standard 600 tonnes which is needed to keep operations running smoothly.
He adds that these are the highest levels experienced in recent history and that it appears to be part of a growing tendency. He says other local producers report the same, having difficulty to sell their products.
Currently, Namibia is roughly 70 to 75% self-sufficient in poultry production. Bertha Ijambo, speaking on behalf of the Poultry Producers’ Association (PPA), indicates that they have 35 registered producers. This excludes small-scale production, or so-called backyard producers.
Ijambo says that in 2021, broilers produced 33 219 tonnes, up from 30 453 tonnes in 2020. The rough estimate is that Namibia consumes approximately 4 700 tonnes per month. Thus, in 2021, just under 2 770 tonnes was locally produced but only 500 tonnes were imported. Where is the rest of the chicken coming from that is on the market?
In 2019, Business7 reported that roughly 5 000 tonnes of chicken without any import permits, had remained behind in Namibia, illegally.
“Well-placed sources told Business7 that this chicken is most likely chicken that is in transit and as it travels through the country, it falls off the truck.
“Of great concern however, is the revelation that Namport is the preferred port for chicken in transit which is indicative of a bigger loophole.”
Costly
Illegal chicken sales in Namibia are costly, not just in terms of revenue to government and Sacu, but also to the local economy.
Informal calculations indicate that for an SME or informal trader, raising chicks and selling these as adult chickens, slaughtered, creates 1.5 jobs for every 100 chickens sold.
Working on a rounded 5 000 tonnes as reported in 2018, or 5 million kilogrammes and at an average of 2 kg per whole chicken sold, 2 500 000 chickens entered the country illegally in 2018. If 1.5 jobs are created per 100 chickens sold, Namibia lost, in its SME and informal sector, 37 500 jobs during the course of 2018. Taken at a minimum wage of N$2 500 monthly, the total losses in income stand at N$93.75 million.
The staggering growth in the value of bonded chicken registered as coming into Namibia, along with the MDM imports, brings to the fore more questions than answers.
Investigation
Business7 is in possession of a 2021 letter to the then executive director in the finance ministry, Ericah Shafuda, from the PPA requesting information on the outcome of an investigation into illegal chicken imports that the former minister of finance Calle Schlettwein had ordered in 2018.
20 importers were investigated by Customs and Excise and one importer was found to be responsible for 67% of all imports over a period of two years. The letter further states that “the underpayment of duties is estimated at around N$23 million”.
Moreover, during those two years (2018 and 2019), it appears as though one importer was “also responsible for importing 11 000 tonnes of MDM which is highly irregular as there is no market for such high volumes of this particular product in Namibia”. Last year alone, that figure stood at just under 9 000 tonnes.
A response by the commissioner of the Namibia Revenue Agency, Sam Shivute, dated 23 August last year, states that the “team has finalised the investigation” and that he has taken note of the “findings and recommendations”. However, he quotes the Revenue Act of 2017, saying the findings are confidential.
Queries to Ijambo only confirmed that they have no information on the matter and emails sent to Shivute’s office in this regard went unanswered.
It appears as though irregularities in the poultry importation industry in Namibia are shrouded in secrecy and thus, rumours abound, including that some importers order from local, smaller producers in order to receive import permits, only to not pay for their local orders, bringing these producers to their knees.
But why chicken?
According to Anton Faul from the Agricultural Trade Forum, any commodity or tradable product that is regulated, or where free market principles are not followed and trade interference is practiced, is subject to smuggling. In his view, the restriction on trade is what creates the incentive.
“In the case of poultry, the current quota system restricts the free movement of poultry across our borders. This takes away the free-market dynamics and establishes an artificial poultry market system in Namibia. This in turn leads to disruptions in supply, which again may result in higher prices for poultry products in Namibia compared to what is available outside Namibia. Importers therefore see the opportunity to import cheaper poultry products from outside and in the process, make more profits in Namibia. This opportunity – to profiteer at the expense of the local industry – then creates the incentive for smuggling,” Faul says.
He continues: “The same rationale can be followed given the lack of quality standards on poultry in Namibia, which also allows importers to literally import any kind of poultry they can lay their hands on, regardless of quality. In many instances, poultry is also deliberately being dumped into the Namibian and the broader Sacu market by third parties, which amplifies the already existing problem of smuggling.
“The current Sacu tariffs on poultry products are very high and include various anti-dumping and safeguard duties on the imports from the big poultry-exporting entities including the United States, Brazil and the EU, and as a result, the incentive for smuggling is enormous.”
Regulation
Engagements with the agriculture ministry to regulate the poultry and dairy industries are ongoing. The ministry has in principle stated it accepts and supports the fact that these two industries need better regulation and support. In the local agricultural sector, only these two industries are not regulated by the ministry. The existing protection measures for poultry has not worked.
According to Faul: “If one looks at the trade statistics over the past eight to ten years, it has been demonstrated that these measures have not been sufficient in providing support for the local industry. Imports and local demand have continued to grow, while local production seems to remain stagnant and did not follow the same upward trend.”
Chicken production is recognised across the world as a relatively easy way for especially women and rural households in developing countries to earn a decent living. It is relatively easy and can be practised in a small space. Namibia still only has one large-scale chicken producer, NPI, and all other large investments, have been put on hold, owing to the current status quo. Not good news for job creation at all.
*JM Kretschmer is a freelance journalist.