The 2004 small stock marketing scheme has failed to discourage live exports of sheep to South Africa, and to promote value-addition in the sector.
The government finally succumbed to the failed scheme, and accepted the recommendation from the high-level panel of the Namibian economy to suspend the scheme.
The Meat Board of Namibia (MBN)'s chief marketing officer, Desmond Cloete, who spoke to The Namibian last week, said that the small stock marketing scheme was implemented in 2004 with the main objective of value-addition in the secondary industry sector and employment-creation.
He added that the implementation of the scheme led to the establishment of four sheep export abattoirs, but farmers responded negatively to the scheme, decreasing their production, and farming with different livestock.
"The export and local slaughtering ratio was 1 to 1. However, producers changed their production systems from sheep to cattle or game farming due to the quantities' restrictions. Many farmers also converted from Dorper sheep to fat-tail breeds that were not part of the scheme. Over time, the production of sheep declined dramatically from around 1,4 million marketed in 2004 to 825 000 in 2018," Cloete said.
He attributed the decline in production and the unwillingness of farmers to supply to local abattoirs to the low price per kg offered by local abattoirs, in comparison to the South African sheep abattoirs.
"Prices offered by abattoirs in Namibia were not competitive with those offered by abattoirs in the Northern Cape," he explained.
The MBN then intervened to offer prices for small livestock close to what producers get in South Africa as a motivation to slaughter their sheep locally and add some value.
"As a result, the MBN implemented the benchmark price of N$ 2,50 per kilogramme as an export permit condition," Cloete indicated.
The chairman of the Livestock Producers' Organisation (LPO), Piet Gouws, explained to The Namibian last week why the scheme failed to convince farmers to sell their sheep to local abattoirs.
Gouws said the price which is offered at local abattoirs was way below that of the South African abattoirs, and given the restriction, they were unable to derive enough revenue from their sheep farming as opposed to what they invest in.
Consequently, this depressed the whole southern economy due to the loss of income from sheep farming, he added.
"It's not necessarily that the farmers want to market to South Africa, but just that there is a huge price difference between what we receive on the local market versus any other market. Due to the scheme's restriction, we cannot export freely to the best market and get the best revenue for the country and the farmers," Gouws stressed.
The scheme burden also led to farmers disinvesting in sheep farming and diverting to game and cattle farming, which is not sustainable in the south of Namibia. Although the scheme wants local value addition, the cost of slaughtering is too much for the farmers, compared to the South African market, he added.
"The producers cannot pay the price difference (N$6 per kilogramme), and the issue needs to be addressed," he said.
As a result, the farmers take advantage of the short distance between southern Namibia and the Northern Cape to earn competitive prices.
Gouws said sheep farmers are willing to participate in value creation by slaughtering inside the country, but mutton as a fresh produce is not ideal to more value-addition due to the short shelf-life.
"The sheep product is part of the fresh produce products; it has a very short shelf-life. Because of the shelf-life, value-addition could be hard to derive until more competitive markets are found, Inland slaughtering is not viable," he stated.
He added that for the past 15 years, the country has failed to create an export market for the small livestock sector, which could be the only viable option, as opposed to the suspended scheme.
"The market for bone-in products has just never been realised for the past 15 years, given that the European Union only allow de-boned meat. However, more markets need to be explored, such as the Chinese market," Gouws said.
He furthermore called for a bone-in product market to be developed in the country, and indicated that they have been trying to engage abattoir owners to come to the table for the past 15 years to solve the pricing issues, but some never pitched up, or drove their own agendas.
However, two years ago, market participants finally agreed that the small stock scheme needs to be scrapped because in the long run, everybody became a loser.
"Nobody really scored with the small stock scheme, not even the abattoirs, otherwise they would have been up and running", Gouws explained.
He said with the suspension, they are now given a year to iron out all the shortcomings of the small livestock sector.
He thus assured the country that they are willing to stop exporting live sheep to South Africa, if there's a guarantee that they will be offered the best prices for their investments.
He also advised the abattoirs to find ways to contain their costs efficiently, instead of shifting the whole burden to the producers, which in return push them to the efficient and competitive Northern Cape abattoirs.