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Adding value with mutton: Is pricing everything?
Institute for Public Policy Research (IPPR) Briefing Paper No. 40

Contact:
November 2006
Saul Kahuika, Calicious Tutalife and Daniel Motinga
Institute for Public Policy Research

Acknowledgements: FANRPAN acknowledges the Institute for Public Policy Research as the source of this document: www.ippr.org.na


This paper is an attempt at looking at the cost and benefits of the small stock value addition scheme implemented in 2004. Thus far about 146 jobs have been created through the establishment of new abattoirs, however this seem to have taken place at the expense of mutton producers as they face “losses” ranging from N$1 million to N$ 20 million due to adverse pricing on the part of local abattoirs as well as through the deduction of the value addition commitment fee of N$1.50 per kilogram from the South African reference price. This means that either we intended to create very expensive jobs or intended to reduce the income of farmers. Of equal concern is the low take-off in terms of other downstream activities traditionally link to value addition in the meat sector such as value addition to hides and skins for leather and other uses. With regards to tanning for instance, not much has happened since the scheme was implemented as skins are still exported after the basic process of pickling. The paper recommends that the Meat Board should actively monitor abattoir prices in order minimises potential income shortfalls that producers may suffer as a result of too low prices.

Introduction

Despite being drought-prone, Namibia hosts more than four million small livestock, and these are concentrated in the Hardap and Karas regions. These two regions accounts for 68% of the country’s sheep, whereas the northern communal areas (NCA’s) and Northern Kunene account for 47% of Namibia‘s goat population. Namibia ranks third in Southern Africa in sheep production after South Africa and Tanzania. While Namibia has several breeds of goats and sheep; for commercial trade the boergoat and doper sheep are the prime breeds. However, Damara, Van Rooy and Karakul sheep are also important breeds due to adaptability to arid conditions. With current developments in the international pelt market, the importance of Karakul may increase overtime and farmers might be well advised to move in the direction of Karakul as a way to spread risk across a wider portfolio of livestock. In fact some will argue that for long-term sustainability of grazing pastures, Karakul might be the best bet for drought-prone Namibia. However, karakul pelt production is coming off a low base and the dominant sheep breed is still the dorper, which was specifically developed for mutton production (see Table 1). The dorper sheep accounts for over 60% of all sheep bred in Namibia. This makes Namibia an excess producer of mutton and therefore a net exporter of mutton. Another small stock breed that is also developed for meat production, namely the boergoat accounts for nearly 20% of total small stock in Namibia. Jointly, the dorper and the boergoat accounts for nearly 60% of total small stock (see Table 1).

Table 1 Total production of sheep and goat: 2002 to 2005
Source: Annual Reports of the Meat Board of Namibia (various issues)

For many years Namibia has been exporting on average about 960,000 live sheep per year to South Africa. The table below provides comparative figures of income generated by both large and small stock exports. In the context of the Small Stock Marketing Scheme, it is the directive that the export of small stock, especially sheep on the hoof shall significantly be reduced in the short-run and would be totally ceased in the longer-term. In addition to sheep exports, on an annual basis Namibia exports on average some 250,000 live goats to RSA.

Figure 1 Export value of cattle and small stock
Source: Meat Board of Namibia

Figure 1 shows the export value of Namibia’s livestock, broken down into cattle and small stock. It is clear from this graph that the export returns of small stock have been relatively more volatile compared to cattle. In 2005, Namibia exported N$1.6 billion worth of livestock of which small stock accounted for N$ 406 million or 25%. Given the figures shown in the above-mentioned table and figure, it becomes quite possible for politicians to assume that raw materials are available in good quantities and that the issue of value addition to create and increase employment opportunities in Namibia and to support the manufacturing of leather products would be viable and should therefore be pursued. In fact the introduction of the Small Stock Marketing Scheme could be understood in this context.


Footnote:
  1. Saul Kahuika and Calicious Tutalife are economists associated with the IPPR. Daniel Motinga is the executive director of the IPPR, Windhoek.

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