Namibian Agriculture: An Inefficient but Key Employer

UNCLAS SECTION 01 OF 04 WINDHOEK 000069

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON EAGR WA

SUBJECT: Namibian Agriculture: An Inefficient but Key Employer

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Summary
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1. (SBU) Namibian agriculture employs - directly and indirectly --
approximately 70 percent of working Namibians. However, it
contributes to less than ten percent of gross domestic product.
Despite so much human activity involved in farming, Namibia's desert
climate makes it highly dependent on food imports. Commercial
farming yields most revenues, while subsistence farming employs a
majority of the population. GRN initiatives to protect and promote
Namibian farming are numerous. The GRN subsidizes poor farmers and
has implemented import substitution and crop control schemes
(limiting the exports and imports of key crops). It also imposes
export quotas on some livestock to promote "value-added" meat
exports. These and other GRN agricultural programs are aimed at
protecting farming jobs, boosting local food production, and
ensuring Namibia's food security. Namibia, though, can afford to
import agricultural commodities and food products which, in many
cases, may be cheaper given Namibia's arid conditions.


2. (SBU) Although well intended, the GRN's agricultural policies
provide distorted incentives. Subsidies and protected crops may
persuade marginal farmers to continue cultivating grains, when
market forces would have pushed them to find alternatives. Quotas
on livestock exports aimed at promoting value-added meat have pitted
livestock farmers against slaughterhouse owners. In addition, the
GRN continues to struggle with its land reform program, an
initiative intended to provide better opportunities and productive
farmland to historically disadvantaged Namibians. With limited
financial resources agricultural programs are costly to the GRN, but
faced with a 37 percent unemployment rate and the ruling SWAPO
party's rallying cry for land during the independence movement,
cutting agricultural programs would be politically difficult. End
Summary.

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Commercial vs. Communal Agriculture
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4. (SBU) Namibian agriculture comprises two groups that are largely
a legacy of Namibia's colonial and apartheid past: commercial farm
owners who are almost exclusively white and communal farmers who are
predominately poor and black, but also include some colored (mixed
race) Namibians. Commercial farmers own huge parcels of land,
primarily located in the south and central parts of the country, and
produce a surplus of food sold in domestic and foreign markets.
Black commercial farmers, most established since independence in
1990 with the help of the GRN's affirmative action scheme, are
sometimes called "emerging farmers." Commercial farmers are
represented by the Namibia Agricultural Union (NAU). The NAU has
tried to court black commercial farmers, but some emerging farmers
have preferred to stay out of the NAU.


5. (SBU) Communal farms are located throughout Namibia, but are
found in larger concentrations in the northern regions, where more
than 50 percent of Namibians live. No individual owns a communal
farm, but traditional authorities (chiefs) generally act as the
administrators of communal farm land with some central government
oversight. Communal farmers are generally subsistence farmers,
producing little excess food. Any surplus from communal farms is
generally sold in local markets, thus communal farmers do not profit
from the higher prices export markets offer. The Namibia National
Farmers Union (NNFU) represents communal farmers. The NAU and NNFU
collaborate at times via a consultative body called the Joint
Presidency Committee (JPC).

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Livestock Drives Namibia's Agricultural Economy
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6. (SBU) Livestock farming (cattle, goat and sheep) is the most
common form of agriculture in Namibia. A veterinary cordon fence
divides Namibia. The majority of commercial farms are situated below
(south of) the fence, a zone that has been internationally
recognized as free of common livestock diseases such as foot and
mouth (FMD). This permits commercial farmers to more easily export
their livestock, or to sell their animals to local abattoirs to have
them slaughtered and butchered for export. Most exported live
animals are sent to South Africa, while meat is often shipped to
European markets, where it can fetch a higher price. Most communal
farms are located above the veterinary cordon fence, from where
excess cattle is not easily exportable, unless the animal spends
three weeks in a quarantine lot and then three additional weeks in a
refrigeration facility after slaughter to ensure it is
disease-free.


7. (SBU) Foreign markets (mostly Europe and South Africa) pay more
for Namibian meat than the domestic market. A South African

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slaughter house pays 3-7 more Namibian dollars (30-70 U.S. cents)
per kilo for a live goat or sheep than its Namibian counterpart,
after accounting for transportation costs. The GRN, in an effort to
create jobs locally and to help reap more benefits from the value
chain, instituted a quota in 2005 requiring small livestock farmers
to sell a certain number of sheep (now six) to a Namibian abattoir
for every live sheep or goat sold in South Africa. Small livestock
farmers complain that this requirement favors local abattoirs over
producers, as Namibian abattoirs in effect buy a live animal at
below market prices and then sell the cut meat to South African
companies at the higher South African price.

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Plants . . . Not Just Livestock
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8. (SBU) Namibia has a small but growing agronomic (grain and
horticulture) sector. Considered the driest country in Sub-Saharan
Africa, only 50 percent of commercial agricultural land is
irrigated. The other half survives solely on seasonal rainfall.
Communal farms enjoy very limited irrigation. Some high-value
horticultural products like melons and grapes are grown primarily
for export. South Africa is the primary importer of Namibian melons,
while Europe is the primary market for Namibia's table grape
growers. Few communal farmers are able to take advantage of the
revenues that field crops can generate. However, the GRN provides
them seed, fertilizer and plowing subsidies to encourage more
productive communal farming. The Namibian Economic Policy Research
Unit (NEPRU),a local economic think tank, argues that the subsidies
have not achieved their desired aims. According to NEPRU, most
communal farmers avoid fertilizers out of fear they will increase
soil toxicity, while the plowing subsidy has largely benefited
tractor owners who have simply raised their prices the same amount
as the subsidy.


9. (SBU) Two isolated outbreaks (one near the Angolan border, the
other near the town of Tsumeb) of "Bactrocera invadens" fruit fly
have recently threatened Namibia's horticultural sector. The fly was
first detected in May 2008, although it was not confirmed as
Bactrocera invadens until August. In October 2008, South Africa
closed its border to Namibian fruit. South African authorities
eventually authorized the resumption of imports after the GRN was
able to demonstrate that the fly had not migrated to the southern
parts of Namibia. Nevertheless, the damage had been done for many
fruit growers. The oversupply of fruit on the Namibian market
forced growers to sell much of their produce domestically, at less
than half of what they could have earned in South Africa. Shortly
after detecting the fruit fly last year, the Namibian Ministry of
Agriculture expanded its detection program for plant pests.
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Namibia and Food Security
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10. (SBU) Namibia is dependent on food imports because it has little
arable land (annual rainfall is extremely low),and due to droughts
which occur every two to three years, as well as occasional
flooding. Nevertheless, as a low-middle income country, the GRN and
the private sector can afford to import what the country does not
produce. However, Namibia's extreme income disparity means that the
rural poor often do not have access to sufficient food; some 25
percent of Namibians applied for food assistance in 2008. Following
floods in the north in 2008, the GRN released over USD 30 million in
emergency food aid to help communities until the 2009 harvest. In
January 2009, the press reported that many northern rural
communities were not receiving emergency food rations, and the Prime
Minister and other officials acknowledged problems with the
emergency food distribution system. The local World Food Program
(WFP) representative on January 20 told emboff that his agency has
had little insight into how the assistance has been distributed, as
the GRN had decided to "go it alone," saying it no longer required
WFP's assistance. (Note: WFP is still active in Namibia -- mainly
projects targeting orphans and vulnerable children - but, its main
emergency food delivery program has been shut down. End Note).


11. (SBU) The steep increase in global food prices in 2008 only
cemented the GRN's desire to decrease its dependence on imported
foods. The GRN employs a number of policy tools - including an
import substitution program, a program to increase horticultural
production (known as the Green Scheme),and the development of a
strategic grain reserve - to boost agricultural production, generate
jobs, and increase food self-sufficiency.


12. (SBU) The Green Scheme program has to date produced few
tangible benefits. Begun in 2003, Green Scheme is meant to develop
27,000 hectares of irrigated land over 15 years along Namibia's few
perennial rivers. The plan aims to boost not only food production
for internal consumption, but also to increase agriculture's
contribution to GDP. Eugene Kanguatjivi of the Ministry of
Agriculture's newly formed international cooperation division told

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econoff that the Green Scheme is the "GRN's long term solution to
food security." One objective of the Green Scheme is to match
small-scale subsistence farmers with commercial farmers to teach
them about commercial horticulture and crop farming. While some
Green Scheme projects have managed to produce crops for sale, there
is little evidence that subsistence farmers are benefiting.
Kanguatjivi admitted that the Green Scheme had lost the GRN's
attention until the 2008 food crisis. He noted that the GRN is now
looking for outside investors to assist with the project.


13. (SBU) The National Horticulture Development Initiative (NHDI),
the GRN's import substitution program, has enjoyed more success than
the Green Scheme. The Namibian Agronomic Board (NAB),which oversees
the program, sets the local production targets on a quarterly basis.
Horticulture importers must report to the NAB on a monthly basis
where they have sourced their produce. Importers who meet the NAB's
local produce sourcing targets qualify to receive an import permit.
Local horticultural product sales - mostly derived from commercial
farms - have increased from about 7 percent to 27 percent of the
total produce sold in country since the program began in 2002. Each
year the NAB tries to increase the local content based on the data
it receives from local producers and other sources. The NAB
commissioned PriceWaterhouseCooper to study the NHDI's expansion
potential. According to the study, Namibian suppliers could provide
up to 60 percent of domestic demand in the future. According to the
NAB, most grocery store chains in Namibia previously sourced their
produce from South Africa because it was more convenient and not
necessarily because of cost savings. (Note: Most large supermarket
chains in Namibia are South African, and carry South African
products. End Note). GRN officials argue that local produce is
generally more affordable than South African produce and that
grocery chains (importers) now do not balk at NHDI requirements.


14. (SBU) The Agronomic Board is also responsible for managing the
controlled grain crop program. The Board protects producers of
controlled crops (white maize, wheat and millet) from foreign
imports during the annual grain marketing season which usually runs
from May 1 to August 31, after which the Board allows the import of
the controlled crops into Namibia. Controlled crops also enjoy a
price floor to ensure that farmers know the minimum price their
grains will fetch. The GRN's "strategic reserve" of cereal grains
project, begun in 2008, is a further attempt to reduce Namibia's
dependence on foreign grains. The GRN hopes that seven newly
constructed strategic reserve grain silos will encourage domestic
farmers to produce even larger amounts of grain (especially in years
with good rainfalls). Kanguatjivi from the Ministry of Agriculture
told emboffs that the project faces a number of challenges,
including a lack of skilled technicians to operate the silos,
although they have implemented a training program to develop silo
operators.


15. The GRN's efforts to protect the local milling industry by
prohibiting imports of maize meal and wheat flour have complicated
achievement of food security in some regions. For instance,
Caprivi in the far northeastern corner of Namibia, has no
significant maize production and must rely on maize meal shipments
from Windhoek instead of importing it from much closer points in
neighboring Botswana or Zambia.

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Land Reform Leads to Less Productive Land
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16. (SBU) The GRN's agricultural policies inevitably intersect with
its land reform program. The government views agriculture and land
redistribution as mechanisms to reduce the staggering rates of
poverty and unemployment amongst historically disadvantaged
Namibians, as well as a tool to correct some of the inequities of
the country's apartheid past. The GRN has, to date, employed both a
"willing-buyer, willing-seller" policy and expropriation, paying
fair market value for land. The program has redistributed slightly
over 200 previously white-owned farms, but most resettled farms have
seen significant drops in productivity.


17. (SBU) Resettled farms are usually divided into smaller parcels
to allow distribution to several families, but smaller parcels are
generally less economically viable. Most resettled farmers lack the
resources (capital, equipment and know-how) to operate a commercial
farm for profit. Facing high maintenance costs, many resettled
farmers have resorted to subsistence farming. Other resettled
farmers, recognizing the challenges they face, have simply opted to
sell off their livestock and lease their land to others, leaving the
resettled farmers once again without any land to call their own.
According to one slaughterhouse owner, resettled farmers who lack
the resources to fund their operations, frequently sell their
livestock before it reaches appropriate slaughtering size. Smaller
livestock fetch lower prices at slaughter, thus perpetuating the
farmers' poverty. Abattoirs that handle less livestock and smaller
livestock are then underutilized and therefore less profitable.

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Good Intentions, Unintended Consequences
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18. (SBU) According to one well-respected Namibian economist,
economics lecturer and former Fulbright scholar Sean Kalundu, many
senior GRN policy makers rarely understand the negative economic
implications of their decisions. The Green Scheme and the crop
control program, for instance, are intended in part to address the
37 percent unemployment rate, but they generally discourage more
efficient agriculture and overlook the opportunity cost of using the
GRN's funds for other initiatives. Controlling grain crops ensures
that some farmers, who would normally exit the market and seek other
jobs, remain in farming. These food security and job creation
programs, without substantial investments, will likely continue to
fall short of lifting large percentages of historically
disadvantaged Namibians out of poverty. Larger government
investments in these programs, however, run the risk of creating
even more distorted incentives.

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Comment
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19. Although some of the GRN's agricultural policies have led to
reduced revenues and distorted economic consequences, land reform is
a political imperative. "Land" was at the heart of the independence
struggle, i.e., returning land to its rightful owners and/or
redistributing land to alleviate poverty. While employing more
efficient agricultural production seems logical, alternative job
opportunities for subsistence farmers are virtually non-existent.
Realizing the lack of success of its land reform program, the GRN
has decided to provide greater assistance to resettled farmers and
focus more attention on green schemes. Allocating more resources to
these programs will mean a reordering of national priorities,
however, and this remains to be seen. End Comment.
MATHIEU