Agribank Approves N$19.5 Million for O and L Superfarm

The Agriculture Bank of Namibia has approved financing of the !Aimab Superfarm in Mariental for N$19.5 million, making them the highest beneficiary of the Drought Relief Scheme introduced by the bank during last year’s debilitating drought.

The !Aimab Superfarm’s initial investment of N$80 million was mainly funded by loans received from Agribank (N$26 million) and the Development Bank of Namibia (N$40 million), asset finance from commercial banks (N$4 million) and cash flow of N$10 million. The !Aimab Superfarm is owned by Namibia Dairies, a subsidiary of the Ohlthaver and List Group of Companies, and it is the most modern dairy facility in Africa, using state-of- the art technology to provide Namibian dairy consumers with quality and healthy milk while using animal welfare. The farm incorporates full calf and heifer rearing facilities, a workshop, feed mixing plant with storage bunkers and sheds, 5-star cow housing, a water purification plant, milk parlour with a 64-point turntable milking platform and its agronomic section.

Agribank has financed the farm with the following loans:

* The Drought Relief Production Loan facility of N$15.8 million is repayable over six years at four percent interest and made up of feeding cost of N$10.3 million, concentrated fodder of N$6.2 million, roughage fodder requirements of N$3 million and weekly grain requirements of N$1.1 million, as well as maize planting cost of N$5.5 million.

* Asset financing funding of N$3.5 million repayable over ten years at 8.25 percent interest.

!Aimeb Superfarm was also severely impacted by last year’s drought and with more than 3 000 cattle, the farm makes up a significant portion of the demand and supply equation on fodder in Namibia.

The farm currently houses some 1 450 cows in milk and provides permanent employment to 130 households as well as indirect employment created in the nearby town and surrounding green schemes. It produces about 50 percent of all dairy products consumed in Namibia.

Agribank says it hopes that this drought relief will provide relief to the dairy sector, which is an important part of the agricultural sector and the Namibian economy. “A number of businesses depend on the dairy value chain,” says Chairperson of Agribank’s Board of Director, Terttu Uuyuni. She adds that the Namibian dairy industry was fully integrated in 2012, which resulted in competition from cheaper dairy imports mainly from South Africa. Namibia Dairies volumes account for less than one percent of the combined South AfricanNamibian dairy market, which makes Namibia very vulnerable to market diversification from SA.

“Notwithstanding free market principles prevailing in the Namibian dairy market, the local producers and processors are at a disaantaged position against imported products by approximately N$2.5 per litre. This relates mainly to inherent differences in production costs and production methods, distribution costs to local retailers, as well as the application of Value Added Tax (VAT),” she notes.

She says local production costs are aboutN$1.7 per litre higher than average production costs in SA. These low raw milk production costs are not achievable locally due to a prohibition on the use of synthetic milk induction hormones and antibiotics to increase the feed conversion ratio. “In addition, the production of local Genetically Modified Organisms (GMOs) fodder is prohibited. Transport costs of UHT milk from the Western Cape to Namibia is cross-subsidised by around N$0.50 per litre. This comes as a result of a value cost allocation vs volume cost allocation practice applied by importers.

“In SA, milk, cultured milk, milk powder and dairy powder blends are exempted from VAT, while in Namibia only fresh milk is VAT zero-rated with raw, ESL and UHT milk subjected to 15 percent VAT. “This is further augmented by the white maize protection in Namibia that contributes to higher production costs locally, and fresh products with short shelf-life distributed over a footprint of 824 000 square kilometres to a population of only 2.2 million people,” she concludes.

Source : New Era