eBusiness Weekly
The effect of last week’s ban on the importation of cold meats from South Africa and other countries by Government after the outbreak of listeria is yet to be ascertained in quantitative terms.
Neighbouring countries such as Namibia, Mozambique, Zambia and Botswana also banned the importation of cold meats mainly from South Africa.
The listeriosis outbreak which is said to be the world’s largest documented outbreak so far has already claimed about 183 lives in South Africa, with fears that the number will grow if no concrete measures are expeditiously taken to contain the outbreak.
For Zimbabwe, while no incidence of death or sickness has been recorded yet, the economic costs of the outbreak cannot be ignored.
Zimbabwe imports a lot of cold meats from South Africa, including polony, viennas, Russian sausages, cheese and milk — which are said to be the carriers of the infection.
Cheese imports from South Africa into the country, for instance, reached $2,3 million in the first eleven months of last year, with sausage casings standing at $3,23 million during the same period. Other processed meat products imported from South Africa also run into millions.
Retailers who already had consignments of these food products in transit or were warehousing them are obviously going to be affected as these goods are apparently not going to be put on the market.
And when it comes to the dynamics of the market forces, we might see the price of meat products going up at higher rates compared to what has already been happening.
These products were mainly being imported from South Africa largely because of their low price. Replacing them with local substitutes might see prices going up due to the high cost of production incurred locally and the general lack of competitiveness.
While the ban might also be positive in that local producers will increase their production of these substitutes and claim the foreign market share that was being occupied by South African producers such as Tiger Brands and RCL Foods.
Local meat processors such as Colcom can take advantage of the time the cold meats imports will be banned to full service the local market and create brand loyalty that will be difficult to break by the time the ban will be lifted. However, it will also require them to be competitive and diversified as consumers in a low-income country such as ours mainly base their buying decision on price.
The advantage is that it might take time for the ban to be lifted, which creates room for a de facto import protection. Even if the ban is lifted, it might take more time as well for local consumers to accept the imported cold meats due to fear of the unknown, especially considering the death toll that has so far been created. So local might be lekker for a while.
Meanwhile, there is strong need for Zimbabwe to reduce its reliance on meat imports not only to safeguard the erratic foreign exchange but to also avoid the vulnerabilities associated with the external shocks.
For instance, last year government imposed a temporary ban on the importation of meat and related products from Brazil, following the outbreak of a rotten meat exports scandal.
That happened at a time when Zimbabwe was importing large quantities of meat, including cheap chicken offals, and the cut in supply saw the price of meat rising on the local market.
Last year’s meat price increases were also partly exacerbated by the Ministry of Finance and Economic Development’s imposition of Statutory Instrument 20 of 2017 which allowed for the charging of Value Added Tax (Vat) at a standard rate of 15 percent on meat products such as beef, chicken, fish as well as other basic food products. The decision was however later reversed through Statutory Instrument 26A of 2017 which exempted the meat products from VAT.
As if that was not enough, there was an outbreak of avian influenza which saw government putting Irvine’s Private Limited’s white meat and eggs under quarantine. The avian influenza had killed some 7 000 birds, with the company also proceeding to cull an additional 140 000 birds to prevent the spread of the disease.
Zimbabwe’s poultry and poultry products exports were also banned to avoid the spread of the virus in other countries in the region. The move however affected the production of chicken against high demand for the product on the local market, which also increased the price of meat.
Because of the above factors, coupled with other domestic challenges, the inflation of meat has been rising on a monthly basis and the graph below shows the trend over the past six months.
As illustrated in the above chart, meat inflation has been rising dynamically and above the general price level which stood at 3,52 percent in January. Meat inflation rose from 3,97 percent in July 2017, rising to 8,59 percent in October and stood at 13,42 percent last year.
While it remains to be seen how the real impact of the ban in cold meat will ultimately turn out to be, it is important to ensure that government has effective strategies in place ensure that there is sanity in the meat industry and that there is price competitiveness. —FinX.
