Dairy farmers have hailed government for hiking duty imposed on foreign milk products, but warn that the move could turn out to be mere opium smoke if no corresponding measures to increase raw milk buying prices are initiated.
Finance Minister Ken Kandodo indicated in his budget statement some three weeks ago government wanted to raise duty imposed on foreign milk products, both powdered and fresh milk, from 10 per cent to 30 per cent.
The development excited dairy farmers, long used to getting fringe benefits for their sweat, but riled mothers who depend on milk formula for children- forcing Kandodo to play reverse gear over formula milk like Lactogen, but maintain the heavy load over other foreign milk products.
There are concerns, however, that a 30 per cent duty on foreign products would not help develop the local industry and will, instead, stifle consumer choice since Malawian buyers would be forced to make do with local expensive products- a development more likely to perpetuate the general lack of a savings culture in the country as the less that people earn will go towards meeting basic necessities.
The Consumers Association of Malawi (Cama) has spoken out against the move, saying, other than bringing the best for the consumer, it would maintain the worst for him in terms of products’ quality and affordability.
According to Cama Executive Director, John Kapito, the decision taken by government is more of a protective mechanism for local industry than a market-enhancing measure. He says this contravenes the spirit of a free, liberalized market.
This has, however, not fazed the Malawi Milk Producers Association (MMPA) and Shire Milk Producers Association of Malawi (Shimpa).
Philemon Kapinji, MMPA and Shimpa president and chairperson, respectively, said in an interview Thursday government’s decision was in the best interests of Malawian dairy farmers.
Kapinji said dairy farming had the potential to replace tobacco and other leading exports, only that such possibilities were hampered by low buying prices for raw milk. He said milk processors were buying the commodity at far much lower prices, compared to other countries in the Southern African Development Community region, and blamed the development on the influx of foreign milk products.
“We are not against the foreign products but, rather, the way their farmers are nurtured. There are so many subsidies on their part while we labour and toil alone here in Malawi. It is unfair to expect us to compete fairly with such products, hence our happiness at government’s decision to increase duty,” said Kapinji.
He said one of the reasons local processors bought raw milk at below-mark prices pertained to the influx of such foreign products, and hoped for the better now that Kandodo has announced the new measures.
The new measure is just a proposal as at now, until Parliament passes the 2009/10 national budget to turn it, and a host of other proposals, into law.
Kapinji warned, nevertheless, that there was need for government to equally intervene on the issue of raw milk buying prices. He said the decision by milk processors to reduce the buying price from K68 to K50 effective June 1, this year threatened to undo government’s intended goals in imposing heavy duty on foreign products.
“The benefits will only go to the processors, who will now face reduced competition in terms of pricing. On the whole, it is farmers who stand to lose from this because they will continue to make losses as processors earn more. For your information, it costs an average K68 for a farmer to produce one litre of milk, considering the inputs that go into dairy farming. We are working for the processors, really; nothing for our family,” said Kapinji.
Kapinji said the new government measure would remain a mixed bag and mockery for dairy farmers without any efforts aimed at straightening current price disparities.
“We are happy, and yet sad at the same time. Let the processors be fair with us, as government has been fair with them. In fact, it is us who asked government to raise the import duty for foreign milk products; it is their time to help (us),” said Kapinji.