Governance in the value chain: the case of Namibian beef value chain

Summary

Globalization and global interdependence has provided opportunities to businesses in developing to access and profit from lucrative markets beyond their border. However, they are expected to meet high standards and demands from governments and consumers. Thus, effective governance of the value chain is required for a developing country’s value chain to be able to maintain access to pricey markets. The Technical Centre for Agricultural and Rural Cooperation (CTA) which is a jointly established international institution of African, Caribbean and Pacific (ACP) Group of Countries and the European Union (EU) revealed that from the 79 ACP countries which are granted duty free access to EU markets, only Namibia exports beef constantly to the EU. This fortunate situation for Namibia has been attributed to the fact that it can meet the governance requirements set by the EU (CTA, 2013).

Namibia was granted preferential access to supply 13 000 tons of beef to EU, however the country has been unable to supply that amount due to numerous challenges facing the beef sector. One main factor is governance, because 51% of the cattle are resident in the communal areas north of the VCF, thus EU cannot accept any meat products from those areas, due to potential risk of the foot and mouth disease, hence Namibia is unable to take full advantage of the 13 000 tons duty free access granted to its beef exports under the Economic Partnership Agreement.

Namibian beef value chain

 

Source: Deloitte & Touch, 2013
Moreover, due to the access to EU market, Namibia is subjected subject to rigorous inspections and audits from the EU and other entities. EU required the implementation of a time-consuming computerised traceability system from the Namibian meat industry, and in response the industry has implemented the Namibia Livestock Identification and Traceability System (NamLITS). The requirements from institutions in developed countries are changing from time to time. However, Namibia has proved that with effective governance even the most stringent requirements can be met by developing countries, though at a high price.

Disease zoning with the veterinary cordon fence and strict control of animal movement by DVS has helped parts of the country to be to be free from food and mouth disease. However, 51% of Namibia’s cattle population are resident in the communal areas north of the VCF and can therefore not be exported to overseas markets. Thus, the country is faced with a challenge to have the areas declared disease free by the international authorities, such a declaration will shift the VCF northward to lesser risky areas and enlarge the FMD free zone and thus integrate some cattle farmers into the mainstream economy. This integration will unlock the economic potential of the communal areas north of the VCF as it will not only boast Namibia’s cattle production for export but it will also enable these producers to benefit from the high returns from export to the EU and other lucrative markets.

Veterinary zones in Namibia

Source: Adopted Gawande, et al, 2007

However, the realization of this dream requires very close cooperation from between all the stakeholders to anticipate potential risk and thereby avoid coordination failures, because coordination failure might result in the suspension the country’s beef exports.

The Meat Board plays a coordinating role in the beef value chain, all key stakeholders are represented on the Meat Board, its platform is used to raise and discuss important governance issues and workout national strategies to implement requirement of Supranational institutions. The Meat Board was instrumental as it ensured that Namibia meet the EU’s 90/40 residency and the traceability requirements. Meat Boards’ FAN Meat scheme ensures that Namibia’s claim that its beef is naturally produced from healthy free ranging cattle is maintained internationally. Farmers that subscribe to the FAN Meat scheme are closely monitored as they are expected to maintain high standards in terms of farm management, environment, animal welfare, animal health, feed and traceability.

Namibian cattle producers have established Meatco and developed the corporation over the years into a multinational company. As a result, the producers have indirectly upgraded in the value chain collectively. Therefore, they are benefiting directly from the returns from the lucrative markets. Meatco has been able to meet and maintain multiple standards, thus it has earned trust in foreign markets. Due to the capacity which Meatco has developed the corporation is able to strengthen and empower cattle producers to improve the quality and quantity of cattle which they supple to it.

Finally, Meatco has been able to tighten co-ordination, and thereafter it upgraded in the value chain from a beef processor/trader to a beef marketer. By developing a strong brand and appealing packaging Meatco has yielded positive returns for the producers (Members). Moreover, Meatco also owns subsidiary companies in Europe and South Africa. Therefore, this can also serve as a model for primary product exporting companies in developing countries. Beef producers in other ACP countries should organised themselves under one entity and engage other stakeholders in order to strengthen value chain governance. Once the value chain governance mechanisms are firmly in place then successes in terms of upgrading, exports and higher returns will follow .

References

Animal and Plant Health Inspection Service (APHIS). (2005). “APHIS Evaluation of the Footand-Mouth Disease Status of Namibia (Site Visit Report and Risk Analysis).” Veterinary Services, National Center for Import and Export. Retrieved from https://web01.aphis.usda.gov/db/mtaddr.nsf/2f5c87c0140172cb852564bf0046d1e2/aaff1b4d96d760de85257129006cc523/$FILE/

Chiriboga, L., Kilmer, C., Fan, R. and Gawande, K. (2008). Does Namibia have a comparative advantage in beef production? Texas A&M University Retrieved from http://kishoregawande.net/wp-content/uploads/2008/12/finalreporti.pdf

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http://agritrade.cta.int/Agriculture/Commodities/Beef/Executive-Brief-Update-2013-Beef-sector

CTA. (2012). Executive Brief Update 2012: Beef sector. Retrieved from http://agritrade.cta.int/Agriculture/Commodities/Beef/Executive-Brief-Update-2012-Beef-sector

Deloitte and Touche. (2013). Draft Joint Vision of the Livestock & Meat Industry of Namibia. Retrieved from http://www.nammic.com.na/index.php?option=com_jdownloads&Itemid=146&view=viewdownload&catid=8&cid=180

Gawande, K., Cabrera, R., Cochran, K., Dangelmayr, L., D’aguilar, G., Lee, J., Speir,I., & Weigand, C. (2007). African Capacity Building For Meat Exports: Lessons From The Namibian And Botswanan Beef Industries. Trade Law Journal, Vol. 19, No. 55, 2010. Retrieved from http://ssrn.com/abstract=1979233

Gereffi, G. (2009). Value chain governance. Briefing Paper. USAID. Retrieved from http://www.microlinks.org/sites/microlinks/files/resource/files/vc_governance_briefing_paper.pdf

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prepared for the IDRC. Retrieved from http://www.ids.ac.uk/ids/global/pdfs/vchnov01.pdf.

Meat Boad of Namibia. (2011). Namibian livestock sector strategy Retrieved from

Click to access NamibiaLivestockProducerSectorStrategy.pdf

Meatco. (2012). 2011/2012 Meatco annual report. Retieved from

Click to access Meatco%20Annual%20Report%202011%202012.pdf