The Honourable Minister of Finance during his presentation of the 2021 National Budget on 25th September 2020, increased import tax from 25% to 40% on beef and beef processed products, pork and pork processed products, chicken and chicken processed products as well as fish imported from outside the Southern African Development Community (SADC) and the Common Market for East and Southern Africa (COMESA) regions.
As of 2019, Zambia imported US$ 2,267,000 and exported US$ 627,000 worth of meat products to and from the world showing a trade deficit of US$ 1,640 000. From a manufacturing perspective, the Government’s policy pronouncement is aimed at encouraging the local processing of meat products by reducing competition from imported meat products. Ultimately, the tariff increase will help grow the processed meat subsector, as the increased tariffs mean that the imported meat products will become relatively expensive, thereby increasing consumption of domestically produced goods.
The growth in consumption of locally produced goods has several benefits not only to manufacturers but also to the economy. Given favourable conditions for growth, such as a conducive business environment, favourable exchange rates and lower business costs, the sector has an opportunity to increase job and employment creation for citizens of Zambia. Who will in turn pay employment taxes in form of Pay As You Earn and contribute to the revenue base of the country.
However, other factors may affect the achievement of these economy wide benefits. The meat-processing sub-sector continues to face many other challenges aside the high competition from imports such as, high cost of production along the value chain in form of increased cost of inputs, underdeveloped infrastructure, and limited funding towards research and development, making the production of meat processed products quite expensive in Zambia
While it is necessary to safeguard the subsector by reducing competition from imported products, this policy intervention is not sufficient to ensure that the subsector grows.
Weak energy infrastructure, which manifests in erratic supply of power, tends to disrupt the operations of the processing industry. The processing industry deals with perishables and as such require stable supply of electricity. As an alternative, those processors that can afford, resort to using generators. However, this tends to be very expensive.
Poor disease control is one other challenge faced by the subsector. Outbreaks of animal diseases affect the continuity of livestock supplies in the meat value chain. In times of disease outbreaks, livestock becomes more expensive with reduced supply, further increasing the input production cost.
Most of the small-scale farmers are found in remote areas characterised by poor road infrastructure networks. At best this causes delays in the supply of livestock to local processors. In worst case scenario, this has the potential to cut out linkages between the local livestock farmers and the meat processors, especially during the rainy season
Additionally, it has also been noted that the sector has limited research and training institutions which are cardinal to the development of the sector, leading to production of low-quality livestock.
These combined challenges make it difficult to meet local demand as new entrants fail to penetrate the market while small companies find it difficult to thrive. To further enhance growth in the meat-processing subsector and increase its overall contribution to GDP, the Government should take into consideration the following recommendations.
Firstly, put in place incentives to support investment in the alternative sources of electricity which will make it more affordable for companies to keep their business afloat. Avoiding the adverse effects of load shedding as they will be able to access other sources of electricity.
Secondly, the Government should heavily invest in disease prevention and control mechanisms to avoid the outbreak of animal diseases which increase the death rate of animals. Further, Government needs to speed up its response time to contain the spread of disease during an outbreak.
Thirdly, investment in the development of road networks in areas where livestock farmers are concentrated is a necessity that will make livestock transportation easier. In addition, Government should develop trading centres in rural areas where famers and buyers can conduct their transactions. This will eliminate the cost of moving from one place to another to only buy one additional animal.
Lastly, the Government must continue to support industrial research and innovation which are important to the development of the sector in nurturing and promoting entrepreneurship and product development.
In conclusion, ZAM commends the Government for the good policy move to increase import tax on meat products in order to encourage the consumption of locally processed meat products. Local producers must use this gesture to their advantage and the private sector is strongly encouraged to penetrate the meat processing sub-sector to increase volumes of production to meet local demand and further explore the export market. Innovation in the industry is advised to ensure the quality of products will leave the consumers satisfied and happy as they go local.
