EFFECTS OF MILK IMPORTS ON COMPETITIVENESSS OF DOMESTICALLY PROCESSED MILK IN TANZANIA 3 RD ANNUAL AGRICULTURE POLICY CONFERENCE.

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1 CT O MILK IMPOT ON COMPTITIVN O DOMTICALLY POCD MILK IN TANZANIA 3 D ANNUAL AGICULTU POLICY CONNC Dar-es-alaam 02 March st -3 rd March 2017 erena Hotel, Dar es alaam By olomon Baregu conomic and ocial esearch oundation

2 Outline Introduction Quick acts and igures Milk Processing in Tanzania Performance of dairy sector and contribution to the economy tatement of the Problem Objectives of the tudy The tudy indings Policy ecommendations Conclusion

3 QUICK ACT: Dairy Industry in Tanzania 40% of the households in Tanzania own livestock and rely on them for an often major part of their income livestock industry accounts for 3.8% of the GDP, with the dairy sub-sector contributing 30% of this output Cow milk production has been gradually increasing overtime, reaching 2.1 billion liters in 2014, marking a 6.7 per cent increase from 1.92 billion liters in But the country is still a net importer of Milk

4 1,600,000 Production of Milk in Tanzania, ,400,000 1,200,000 '000 Liters 1,000, , , , , Indigenous Cattle Improved Cattle Indigenous cattle contribute 65% of total milk produced; improved cattle contribute 35%

5 Top 5 Leading Processing Companies, Percentage Tanga resh Ltd AA Dairy Milk Com Mara Milk CA Njombe

6 It is estimated that 41 million liters of cow milk is processed annually in the country into pasteurized milk, UHT, cultured milk, ghee, butter, cheese and cream and sold in the domestic market (MLD, 2011) Between 2014 and 2015, UHT milk accounted for 27 percent of total market share with 45,000 liters being processed per day by a single processor, Azam Dairies by reconstituting 100 per cent of imported milk powder into UHT.

7 Market hare of Dairy Products Processed in Tanzania,

8 POBLM TATMNT Growth of the national dairy industry is threatened by increasing imports of milk and milk products Therefore, this study aimed to identify any unfair practices and determine the magnitude of impact they have in the milk industry in the short, medium and long term

9 OBJCTIV O TH TUDY General Objective: To determine the impact of milk imports on Tanzania Dairy markets pecific Objectives: i. To determine the growth of dairy sub-sector and its contribution to the economy of Tanzania ii. To assess the impact of policies, regulations and imported milk monitoring mechanism on diary industry competitiveness iii.to determine the impact of imported milk on competitiveness of locally processed milk iv.to determine dairy stakeholder s views on future dairy sub-sector development v. To produce dairy industry policy paper for the Government intervention

10 Anecdotal evidence reveals that, domestic supply alone does not meet the local demand for milk and milk products

11 esearch findings Tanzania imports of dairy products seems to be lower compared to total volume of production However, comparison in the market share of domestic production in targeted urban and niche market reveals that imports are significant and could have adverse effects on the growth of domestic production and processing industry Taking to consideration that most imported products are sold in urban markets, the share of imported dairy products in this market is indeed very high

12 indings cont.. UNCOMTAD data reveals that powder milk is highly imported in Tanzania compared to Liquid Milk Quantity of powder milk imported in the country is twice as much as liquid milk, rising from 28 million liters imported in 2010 to more than 46 million liters imported in These imports are likely to compete with fresh milk sold in the urban market particularly in DM, Mwanza, Arusha.

13 Tanzania Milk Import tructure, , ,000 40, , '000 Kg LM 30,000 25,000 20,000 15,000 10,000 5, Percentage Liquid Milk (kg LM) Powder Milk (kg LM) % Change in Powder Milk Imports (H)

14 ate of increase in powder milk imports is quite alarming with an average annual increase for the period being 15 per cent In Zanzibar, TA statistics reveal that importation of powder milk sharply increased in 2012 from 1000 MT in 2011 to more than 6000 MT, and has remained above 4000 MT per annum, with the most recent quantity imported being 4600 MT

15 Quantity of Milk imports in Zanzibar, ,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Powder Milk (MT) Liquid Milk (MT)

16 Value of Milk Imports in Zanzibar, ,000, ,000, ,000, ,000,000 TZ 300,000, ,000, ,000, Powder Milk (TZ) Liquid Milk (TZ) These imports on average cost Zanzibar more than TZ 500 Million per annum in the period 2010 to 2015

17 Origin of Imports In the period , Tanzania imported powder milk from more than 48 different countries at different years More than 45% of the total powder milk imported in the country originated from the Netherlands (28.1 %) and the United Arab mirates (UA) (16.8%) The study was not able to capture the origin of milk imports through Zanzibar as data provided by TA does not reveal the origin of these imports

18 hare and Volume of Powder Milk imports to Tanzania by Origin,

19 POLICI, GULATION AND MONITOING O IMPOTD MILK ON DAIY INDUTY IN TZ The Dairy Industry Act No 8 of 2004 established Tanzania Dairy Board (TDB). Dairy Industry egulations (2007) The Government through the MAL has adopted a number of policy frameworks: The National Livestock Policy 2006; The Livestock ector Development trategy 2010; The Livestock ector Development Programme 2011 The Tanzania Development Vision 2025

20 Impact of policies and regulations In 2012 subsidiary legislation was also published. This is intended to provide regulations related to Dairy Industry import and export of milk and milk products e.g. no person or body of persons shall export or import milk, milk products, designated milk or designated milk products before being registered by the Board etc Apart from policies, and regulations, Tanzania is further protected through tax instruments AC Common xternal Tariff (CI)(60 per cent) It applies a tariff of zero per cent for all of AC member states since 2010 In addition, there is a charge of 18 per cent Value Added Tax (VAT)

21 Impact of policies and regulations In terms of policies, regulations and therefore the monitoring framework Tanzania has made significant progress However, the country has not been able to translate its policies and regulations in to practice

22 Impact of policies and regulations Import figures by TA are far much lower than figures published by UNCOMTAD which is an indication of under-reporting ince imports from the ADC regions are tariff free, some traders have been importing milk powder and pass their consignment through ADC countries for processing before taking it to Tanzania. The ules of Origin do not therefore work

23 Impact of imported milk on competitiveness of locally processed milk This survey concludes that, there is unfair competition against Tanzania locally processed milk products in both domestic and export market This conclusion is mainly based on stakeholders perception

24 Impact of imports cont. Compared with countries like Kenya, Netherlands, UA and outh Africa where most of imported milk come from, the dairy industry in Tanzania i. Is still at infancy stage ii. Operates in poor working environment iii. Has poorly developed infrastructure iv. Has high cost of production and processing

25 Impact of imported milk on competitiveness of locally processed milk 2 To understand how imported milk powder competes with domestic fresh milk in Tanzania, the study has compared the prices per liter of milk powder imports with domestic raw milk, wholesale and retail prices of processed milk by Tanga resh The analysis revealed that the price of powder milk in Liquid Milk quivalent per liter is less than domestic farmgate milk price at both retail and wholesale levels

26 Impact of imported milk on competitiveness of locally processed milk TZ/Litre Milk Powder (CI) Average aw Milk Price Average Wholesale Price Average retail Price ource: UNCOMTAD and Tanga resh prices Data, 2016

27 Conclusion Capacity of the institutions mandated to govern the milk industry in Tanzania such as the Tanzania Dairy Board (TDB) is limited, and therefore not capable of enforcing regulations governing the industry To a certain extent the country s policies have not been supportive in terms of protecting domestic industry from unfair competition thus, encouraging unorganized importation of milk and milk products in the name of trade liberalization

28 Conclusion cont. Imported milk has created unfair trade in the domestic dairy market The negative impact of illegally imported milk on competitiveness of locally processed milk has been directly transmitted to all activities along the dairy value chain. or every 1,000 litres we import, we are loosing about 50 full time jobs (Omore et al. 2004; DP 2005) that could have been created along the Value Chain The industry is still at infancy stage, which requires protection from the Government for it to grow.

29 Policy ecommendations The following should be done to i. ffectively enforce implementation of the CT (60%) and VAT (18%) on all non-ac imported milk products ii. Dairy regulatory bodies and agencies should be capacitated to closely monitor the dairy sector iii. The government should ensure that responsible institutions oversee the enforcement of all policies and regulations, and strengthen the monitoring system

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31 THANK YOU!