War rages over import levy

Milling companies and local bakeries are at loggerheads over whether government should scrap off the 15 percent import levy imposed on wheat flour.The levy was introduced in 2003 as a measure to prevent predatory pricing by South African millers. At that time local milling companies approached government seeking protection at what they called ‘dumping’ by South African millers into the local market.

“The predatory pricing was threatening to crush the local milling industry and the 15 percent levy saved us, we are still operating because of that levy as we speak,” Nkosi Mwaba, Corporate Affairs Manager at Bolux Group, the biggest milling company in the country said. South African millers have since been unable to ‘dump’ their wheat flour in Botswana because of the levy.

SA millers then filed a complaint to Southern African Customs Union (SACU) about the levy saying that it contravenes the obligations of member states under the SACU Free Trade Agreement (FTA). SACU has apparently advised Botswana to seek and implement an amicable solution to the dispute. This has since placed Botswana government between a rock and hard place as it mulls over the appropriate action.

Trade and Industry Minister Dorcas Makgato-Malesu confirmed being aware of the complaint over the levy, adding that she had deployed “my team” to make thorough investigations and analysis. The investigation will then recommend a way forward that is suitable for economic growth. Local bakeries are also putting pressure on government to remove the levy.

“We want it removed completely because that could help us access wheat flour from SA at reduced prices so we could also make profit,” said Osman Kergblo Managing Director at Star bakery. However Mwaba fears that if the levy were removed, then the local milling companies -Bolux Group and Bokomo-would close down.

Mwaba said Botswana has always been a dumping ground for South African wheat flour because Gauteng market consumes mostly cake flour. He said with white bread flour being an additional component of the milling process, South African millers have excess white bread flour to dispose of. 

“The Botswana market is predominantly a white bread flour market which thus offers the South African millers the opportunity to export at prices below South African prices and sometimes below cost price which will crumble us completely,” he said. Local market consumes 120 000 metric tonnes per annum, a demand which Mwaba said the two local milling companies-Bokomo and Bolux-have the capacity to meet.

However, SA millers, produce 2.5 million metric tonnes per annum, leading to excess wheat flour. “Milling companies are at times failing to supply us with the wheat flour, which is why we buy from South Africa because we supply bread to some institutions on contract, so we cannot fail to honour the contracts just to support local milling companies,” said Molebeledi Manyemane, Managing Director at Super Bread bakery based in Selebi Phikwe.

His colleague Kergblo also added that milling companies also produce bread and not only wheat flour. “So we are in direct competition, yet they expect us to buy from them, we want to buy cheaply from SA,” he said. A study conducted by Botswana Exporters and Manufacturers Association (BEMA) last year showed that local milling industry is under existential threat.

“The conditions that led the Botswana government to introduce a tariff are still rife. Reported cases of collusion in RSA could easily happen in Botswana. Without any kind of shielding local millers it would take only a small section of the RSA industry to obliterate Botswana’s two millers,” read the report.

BEMA stated that local milling industry contributes to the economy through diversifying away from the mining sector to manufacturing with significant volumes of pasta currently being exported. “The two mills engaged in wheat milling have created 800 jobs directly. High numbers of Batswana are also trained and getting skills in milling. These people can set up their own enterprises and grow the economy and also contribute to food security,” read the report.