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COVID-19 could halt 40% dairy levy

21/06/2020 09:10:00 BY WELCOME DLAMINI

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MBABANE – Chances are high that a proposal by the Eswatini Dairy Board to introduce a 40 per cent levy on imported dairy products might not kick in at the beginning of July 2020 as earlier scheduled.
This is because stakeholders have reportedly raised concerns that the timing of introducing the levy could be bad due to the effects of the coronavirus pandemic.

The Board has proposed that the import levy be charged on all dairy products which are sufficiently produced locally, such as emasi (sour milk), yoghurt, fresh milk and fresh cream.

REMARKABLE IMPROVEMENTS
In a correspondence that Tony Dlamini, the Chief Executive Officer of Eswatini Dairy Board, sent to stakeholders on February 26, 2020, he explained that the country’s dairy industry had realised remarkable improvements in its value chain, particularly in milk production and processing. However, he said the industry was still at an infancy stage and needed protection against competitive pressure from mature and developed economies. He said it was on this basis that the Board sought to use one tool of protecting an infant industry by invoking Section 25 of the Dairy Act ,which proposes a review of levy for all imported dairy products.

“This industry protection measure will further lead to greater investment opportunities within the country,” Dlamini said in the correspondence.
It is proposed that once the 40 per cent levy kicks in, any new products added on the listed emasi, yoghurt, fresh milk and fresh cream, which will be sufficiently produced locally, will also automatically attract the proposed charge.
For all other dairy products that are not sufficiently produced in the country, they will be charged at 13 per cent on the invoice value.

Talking to the Times SUNDAY, Dlamini said they would soon be writing to the stakeholders regarding the decision of the Board on the proposed levy. He said the coronavirus pandemic had caused a lot of negative effects on the industry and they did not want to overburden importers and consumers alike. He said since the proposal was a Board resolution, there was a need to go back to them to report contributions that have been made by stakeholders. “It is after the Board has heard what the stakeholders have to say that a new resolution will be taken,” Dlamini said.

“The products are a daily necessity in people’s lives and we cannot increase their cost at a challenging time like the present. We can’t have people being laid off work on the one hand and also increase the cost of the dairy products on the other,” the CEO said.
He re-emphasised that the intention of the 40 per cent was for it to kick in once a product was sufficiently produced in the country.
“This is to attract investors who will be guaranteed of protection and they would see their investments as being viable. We have to protect investors who will produce these products locally at a sufficient level. But if we get to July but there is no one who is meeting the local production, then the 40 per cent won’t apply,” he said.

He made an example of the chicken business where he said the same principle was applied after it was seen that locally produced birds were not being bought.
He said It was then proposed that if there is enough local production, a levy should be charged on imported chickens, which then saw the emergence of major local players because they knew they were protected.
“We align ourselves with this sentiment because even our investors are complaining that they are not protected. They are saying the imported products are sold at cheap prices locally compared to theirs,” Dlamini said.

He said in the current economic situation, this is the kind of protection that is needed for investors. “We worked with the Competition Commission to ensure that investors do not abuse the protection such that they begin charging consumers exorbitant prices for their products. The regulator will have fixed prices for all the products to protect consumers from inflated pricing,” he added.

Meanwhile, in the February correspondence, Dlamini had urged importers to help support the local dairy industry by making use of local processes by engaging them with specifics of their brands to produce and pack for them as opposed to importing products which can be sourced in the country thus developing the dairy industry. He gave the board’s commitment to creating an enabling environment for all dairy stakeholders in order to promote industry interaction and to further uplift the economic position of the country.

He also assured the stakeholders that all necessary legal procedures and processes would be followed carefully in the implementation of the proposal. The mandate of Eswatini Dairy Board, as the regulator and developmental body of the dairy industry, is to develop the industry; this development being aimed at promoting milk production, processing, distribution, consumption, investment in all phases of the industry as per Section 12 of the Dairy Act of 1968.