Friday, 26 December 2014

Milk is soon becoming a cost at my house

(First Published in New Era Newspaper - 17 December 2014)

The past two weeks have been extremely hectic at the Shaanika-Louw household. First it was counting the elections results that kept me from home, now baby has decided we must get ready for our new addition. We arrived at the maternity ward quite prepared as we both have children from previous relationships. However, baby has had other ideas. Since morning Monday, till now just after lunch on Tuesday, baby has decided to take a break. It seems it will take longer to have our baby than counting the elections results.
As part of my baby preparedness, I took my wife to the new mall that recently opened in the south east of Windhoek. It was a pleasant surprise to see so many brand name stores and one look at the prices of these items made me appreciate the value of competition. In one of the toy stores I was able to buy a present for our elder son of 11 for less than N$ 200.00. The exact same toy is available from local toys stores and large retailers for more than twice the price.
Thus, I look forward to continuing dropping of prices as we see more competition in the market place.
This now leads me to a conundrum - a confusing and difficult problem or question. If competition is good for me as a consumer when prices drop, when can it be bad for me?
As a previous promoter of trade for Namibia based at the United Nations Industrial Organisations office in Paris, France, we often complained about competition against our local business that forced them to go out of business. Many times I heard the argument we need to defend our Namibian industries and business against “unfair” advantage and tactics used by especially South African businesses. The examples are numerous where the power of size was used by such companies, for example cooking oil, toilet paper, foam mattresses, etc.)
In recent months I have approached by both sides of the arguments on “protecting local industry”. (The two commodities referred to is the fresh milk and the chicken market.)
The suppliers argue that they need protection from the outside producers because they only have a small market, and the large produces can afford to flood the market and the non-protection would lead to job losses. Consumers on the other hand argue quite rightly that when there is competition, then prices will come down and prevent monopolies from increasing their profit margins without due regard to the “market price”.
Having been on both sides of the “game”, I must now take a stand. Do I believe in market forces keeping prices affordable or do I believe in protecting jobs? Wrong!
That is not the actual question. We need to look at the industries concerned on an individual basis and then come to some recommendation.
The dairy industry used to consist of many producers supplying to dairies that were locally based. For example, in Rehoboth the farmers supplied their milk to the locally owned dairy. At Independence there were two main large dairies and they kept the market in balance. However, these two consolidated and became almost a monopoly. This large size meant they could use business tricks to get rid of competitors or put them into a position of having to either sell or close down their business. Today, this is the largest dairy and if I am correct, only dairy in the country. They even have their own super-farm to provide products to themselves.

This large company now wants to continue the production of the dairy industry because otherwise there will be loss of jobs and it is important to grow the Namibian economy.

I disagree. This monopolistic attitude is causing harm to our consumers and should not be allowed to continue. The Ministry of Trade and Industry must bow down to demands from large companies crying “infant protection” when they are neither infants nor protectors of the small and medium business owners in this country.

1 comment:

Anonymous said...

You are quite correct in saying these producers do NOT require protection for an infant industry as they intend being the sole or monopolistic supplier in the country which is not conducive to keeping inflation or high costs down by healthy competition. Competition across the entire food industry is a healthy one managing to keep prices and inflation down and in the interest of the consumer, not only in the interest of the supplier.. The competition Commission should regulate this and monopolistic suppliers should not be allowed where it could hurt the consumer, such as currently in the dairy and chicken industries..