Summary
In 2016 the Namibian government built on the successful Horticulture Development Initiative by launching a Retail Sector Charter, aimed at promoting increased procurement of locally grown or manufactured goods. The Horticulture Development Initiative, through its Namibian Market Share Promotion Scheme, had seen over a 10 year period an expansion of local sourcing of horticulture products from 5% of local consumption to around 50%. The Retail Sector Charter is a multifaceted plan aimed at progressively raising local procurement from 6% of purchases of all retailers, traders and hospitality sector enterprises to 20%. In its implementation the Retail Sector Charter draws on the experience of the UK Groceries Code Adjudicator.
The Namibian Governments 2016 Retail Sector Charter emerged from the successful experience of the Horticulture Sector Development Initiative. Preparations for the Horticulture Sector Development Initiative began in 2000 with a scoping study on the potential for local horticulture sector development and regional consultations on local constraints on expanded production. This included discussions with all horticulture sector stakeholders of possible solutions to the challenges faced. This identified on the one hand access to reliable markets and on the other convenience consideration amongst retailers and large traders, as key constraints on expanded local sourcing.
During these discussions a willingness to explore ways of increasing local procurement was expressed provided this was realistic. Local stakeholder committees were set up identify the concrete actions which would be required to expand local sourcing. This consensus based, participatory approach, implemented in a clear and transparent legal and policy framework facilitated the establishment of subsequent operational initiatives.
Established in 2002 the National Horticulture Development Initiative was launched with the primary objective of “increasing the local production of fruit and vegetables and…reduce… dependence on imported horticultural fresh produce”, (2) within the limitations imposed by climatic conditions in Namibia. In addition to a dynamic computerised data base on supply and demand developments and the provision of daily market price information, the initiative included a the Namibian Market Share Promotion Scheme which established a requirement for local purchases of horticulture products.
Significantly the initial local procurement target set for each participating company was the average level of local procurement (5%) then prevailing in the supply of horticulture products. As such it did not require any immediate and significant changes to average levels of local procurement by retailers and traders. Rather it sought to generalise current ‘best practice’. Once the consensus around local sourcing was established, the bar of current ‘best practice’ was gradually raised.
By 2015 this had reached a target level of local procurement of 41.5%, but with reports carried on the allafrica.com website suggesting that in the third quarter of 2014, 52% of the fresh fruit and vegetables consumed in Namibia were produced locally. Overall, according to the Agronomic Board, from March 2014 to April 2015 fully 49% of horticulture products consumed in Namibia were sourced locally. (3)
Significantly while tied import licences were the principal policy tool utilised, as required seasonal market closures have been introduced for specific commodities to allow local product markets to clear during peak production periods.
New products have been added to the scheme, with specific initiatives being taken to promote local procurement and investment in production of specific horticultural products. It is noteworthy that by improving access for local producers to high value commercial supply chains, which provided good margins of profitability the problem of the sourcing of investment funds for the expansion of agricultural production solved itself. Once farmers had contracts with a multiple retailer or a major trader to supply specific products on a clearly defined supply schedule, it was relatively easy to secure bank loans for production expansion.
It was on the basis of this experience that the government of Namibia began to explore how more generally the retail sector can be encouraged to source more products locally and by so doing provide a boost to local manufacturing and value added processing of agricultural products, in line with national development plan objectives.
Consultations on a Retail Sector Charter were launched in 2013. The aim of these early consultations were to determine how the retail and distribution sector can ‘support local manufacturing and value chain based industrialization through preferential procurement, stocking and distributing of goods produced locally’.
At the time of the launching of the Retail Charter initiative, it was envisaged that it would include a number of areas of activity:
- support to local sourcing and the promotion and marketing of Namibian produced goods;
- support for domestic value chain and supplier development;
- support for regional value chain development;
- the promotion of transparency and fairness in procurement procedures, particularly in terms of the credit, payment and rebate provisions so local producers receive no worse treatment than existing suppliers;
- the promotion of local ownership and control including the empowerment of formerly disadvantaged Namibians;
- the promotion of gender equity, human resource development, employee health and safety;
- ensuring Consumer protection regarding the safety and standards of products, the supply chains of these products, and their environmental and social impacts;
- corporate and social investment;
- the development of a system of monitoring and reporting against the goals and targets of the charter and encouraging public participation and consumer involvement in such processes.
It was envisaged that the Charter should be voluntary, but with retailers, traders and hospitality sector enterprises making a clear commitment to the underlying transformational agenda of the Charter.
The first draft of the Retail Charter was formally launched in October 2014. The formal launch of the finalized version of the Retail Charter took place in March 2016.
| The Seven Pillars of the Namibian Retail Charter
Pillar 1: Increased Local Sourcing by Retailers. Pillar 2: Expanded support for marketing and increasing the visibility of local products. Pillar 3: Increased support to development of, medium, small and micro enterprises. Pillar 4: Promotion of transparency in procurement procedures to ensure greater fairness for local suppliers. Pillar 5: Consumer protection to ensure safe and high quality products produced in environmentally friendly ways. Pillar 6: A specific level of corporate social responsibility investment. Pillar 7: The promotion of greater ownership among previously disadvantaged groups. |
A key aim of the Charter is to increase the retailer shelf space devoted to local products. The aim is to re-engineer the way retailers undertake their procurement. An initial target for all retailers is to devote 6% of each retailers’ procurement bill to locally produced goods, in line with the current average level of local supply. Ultimately however the aim is to ensure that 20% of products are locally sourced.
Significantly the Charter commits participating retailers to annual self-assessments of the progress being made, with the Namibian Trade Forum responsible for overseeing the implementation of the Charter. (1) As in the horticulture sector scheme the emphasis is on dialogue and cooperation, but with the Namibian government being committed to using other policy tools should this prove necessary.
The first phase of the implementation of the Retail Charter is set to run until December 2017 and will consist of familiarisation and training of retail sector members on the requirements of the Charter (an approach very similar to the UK Groceries Code Adjudicator’s approach) followed by the gathering and assessment of a first round of data on the progress being made in the specific areas set out under the code. (1)
On the basis of phase 1 the approach being utilised under the Retail Charter will be modified. (1)
Sources
(1) Namibia Trade Forum, ‘Namibian Retail Sector Charter’, 10 March 2016
http://www.ntf.org.na/pdf/Retail_Charter_Document.pdf
(2) Agronomic Board, ‘Horticulture’
http://www.nab.com.na/controlled-crops/horticulture/
(3) Namibian Agronomic Board Annual report 2015
http://www.nab.com.na/cms_documents/37a-nabannualreport2015v2.pdf
(4) Ohlthaver & List, ‘Namibian dairy industry in serious trouble’, 13 August 2015
http://www.ohlthaverlist.com/documents/2a4_media_release_namibian_dairy_industry_in_serious_trouble_13082015.pdf
(5) Namibia Economist, ‘Namibia dairies sound alarm’, 14 August 2015
https://www.economist.com.na/headlines/8292-namibia-dairies-sound-alarm
(6) Namibia Sun, ‘Dairy industry under attack, says Namibia Dairies’, 14 August 2015
http://www.namibiansun.com/agriculture/dairy-industry-under-attack-says-namibia-dairies.83038
| Comments and Analysis While the Namibian Retail Sector Charter is a voluntary scheme it remains implicit that if retailers, traders or the hospitality sector prove unsupportive of the underlying objectives of the Charter, more formal regulatory actions would need to be explored. This approach would appear to build on the experience of the UK Groceries Code Adjudicator, which was rapidly empowered by Parliament to impose fines for breaches of the voluntary Code.Even before the formal launch of the Retail Sector Charter, during the process of consultations, the resolve of the Namibian Governments was put to the test. In May 2014 a legal challenge to Namibian governments’ import restrictions for dairy products under the ‘Import and Export Control Act’, was upheld on a technicality by the Namibian Courts. This saw formally established import controls on dairy products suspended.Against this background, in the course of 2015, in the face of low global dairy commodity prices, increased dairy imports into South Africa (+56% in 2014) and expanded domestic South African milk production (+10.6% January to July 2015), saw a flood of low cost long life milk entering the Namibian market. According to the main local dairy producer, Namibia Dairies, these imports were priced at levels which ignored the VAT payable on dairy products and the transport and distribution costs related to serving the Namibian market. This, it was held, amounted to predatory under-pricing of dairy products sold in Namibia (a market equivalent to only 0.83% of South African milk production). This generated a situation where Namibia Dairies UHT milk sales in July 2015 were 23% below the levels attained in July 2014 and a backlog of stocks of UHT milk was built up. (4,5, 6) By August 2015 Namibian Dairies and the Namibian Dairy Producers Association (DPA) were appealing to the government for ‘urgent intervention’ in a sector which was ‘on the verge of collapse’. Specifically a call was made for the Namibian government to either ‘make subsidies available to farmers’ or ‘totally restrict imports’, if the collapse of Namibia’s dairy industry was to be avoided. (4,5,6) The Namibian government opted for neither of these options, rather it held discussions with the major retailers and traders on their sourcing practices, pointing out how the evolving procurement arrangements in the dairy sector were wholly inconsistent with the principles of the Retail Charter which was then in the final stages of elaboration. It was reportedly made clear to major retailers and traders that it would be better for them to adjust their procurement practices in line with the underlying objectives of the Retail Charter, rather than compel the government to go down a more formal regulatory path in order to preserve the domestic Namibian dairy sector. The major retailers and traders reportedly responded positively to the Namibian governments’ appeals. Namibia Dairies stocks were subsequently cleared and more normal market conditions returned. This dairy sector example highlights the ‘grey areas’ which need to be exploited in incentivising retailers and major traders to modify procurement practices in line with a longer term structural transformation agenda. |
| Key words: Southern Africa, Namibia, Retail Charter Tags: Southern Africa EPA, Horticulture, Dairy |