16th March 2010
THE ZNFU COMMENTS ON THE DAIRY INDUSTRY DEVELOPMENT BILL, 2010
CURRENT STATE OF THE MILK INDUSTRY
In 1996 the Government privatized the milk industry by selling off the Dairy Produce Board (D.P.B). Farmers had several meetings with what is now called FINTA Dairies to buy the Mazabuka DPB factory, set up a UHT (long life) plant and grow the industry. Production of milk by then was about 30,000 liters per day.
Finta was approached and declined the proposal to use fresh milk and opted to use imported powdered milk. Finta then partnered with a Danish Dairy group and set up a UHT (Long life) plant in Livingstone. The production of fresh milk was about 2,500 liters per day.
Finta Dairies requested the then Minister of Finance to give them a 2 year gap of a reduced tariff on imported Powdered Milk from 25% to 5% enabling them to put up the investment and be given this period to grow the fresh milk industry in the area. It is now more than 13 year and duty is still at 5%. The fresh milk supply to Finta is still very minimal and very few farmers supply fresh milk o Finta.
The farmers in Mazabuka, Lusaka and Kitwe combined forces and negotiated with Zambia Privatization agency for BONNITA (a South African Milk processor) to buy the respective plants in those towns. ZPA brokered a deal enabling the Zambian Farmer to have a stake in the industry and the DPB was sold with BONNITA having 70% shares and the farmers (MUKULU Dairies) having 30%. Milk production soared in the first 3 years by about 26% per year. Small-scale farmers were developed and Milk collection centers were introduced and all Zambian farmers were fully supported to get into milk production.
The dairy industry has been growing fast in production of fresh milk and the demand for dairy cattle by farmers is huge.
CLOVER Dairies have now partnered with Finta in Livingstone. They pledged to invest in the industry to develop the industry. However this investment is only in importing powdered milk as there are no farmers supplying milk to Clover. The importation of powdered milk is seriously going to have a negative impact on the Zambian farmer’s ability to sell their milk and remain economically viable.
The Dairy Industry development Bill is coming at the right time and if it delays in being enacted the industry will suffer negatively and therefore we are urging the members of parliament to act swiftly subject to consideration of comments which we provide below:-
THE DAIRY IDUSTRY DEVELOPMENT BOARD
1. Composition of the Board; article 5. (1)
The board composition is key for the success of achieving the objectives of the Dairy industry bill which are:
a) Regulate the dairy industry so as to develop an efficient and self sustaining dairy industry that will effectively contribute towards poverty alleviation, household food security and employment creation;
b) Establish the dairy Industry Development Board and provide for its functions and powers;
c) Enhance milk production in order to fully utilize the capacity of processing facilities, so as to achieve growth in the processing of safe and wholesome high value milk products;
d) Provide for the processing, manufacturing, marketing and distribution of milk;
e) Ensure collaboration and participation of all stakeholders within the dairy industry and provide a wider service to farmers in the dairy industry;
f) Promote self regulation of the dairy industry through the development and use of codes of practice;
g) Repeal the Dairies and dairy Produce Act, 1931; and
h) Provide for matters connected with, or incidental to the foregoing.
It is observed that the board will comprise of 50% (5 out of 10) of the members coming from government institutions. It is important that the board should be private sector dominated if it is to provide checks and balances and achieve its objectives.
It is therefore important that the number of members from government institutions on the board be reduced.
2. The functions of the board; article 6, Feeds and feeding; article 7, Animal breeding services article 8 and Animal health and clinical services
There is a danger that the board may fall into the temptation of carrying out the services mentioned in the articles above instead of providing policy direction, regulation and creating an enabling environment for the private sector and other relevant research institutions that have been providing these services. The board may be perceived as a competitor by players in the dairy industry.
Article 10: Powers of the Board
The Board should also monitor and investigate the investment policy and adherence of such investors to the provisions of investment license.
Additionally the Board must be consulted at any time when investors apply for investment licences in the dairy industry so as provide guidance in the manner obligations are to be framed and monitored.
1. Application for registration, Article 14. (1) and (2)
The requirement that any person who deals with milk or milk products shall be required to register with the board, will mean that there will be a lot of people to be registered. It will therefore be important that:-
a) The registration process be decentralized and less complex to make compliance easier.
b) The registration fees should be minimal (affordable)
c) By and large this appears to be an impossible task, the act should clearly focus on what impunity or remedies the act is trying address. The Act must provide provisions or undertakings that are capable of being done.
THE DAIRY INDUSTRY DEVELOPMENT FUND
1. Article 23. (1) – Establishment of the fund
The farmers welcome the establishment of the Dairy Industry development fund as it will assist in the development of the livestock industry. As opposed to the livestock levies being collected by the council which do not benefit farmers, farmers are willing to pay livestock levies that can be channeled through the dairy association/dairy industry development fund for the development of the livestock industry where they also benefit. However, there are fears that if the livestock levies are left as they are being collected by councils, farmers will have to pay a certain levy to the development of the dairy industry and that means farmers will be paying double.
2. Article 24 – The purpose of the fund
While the Farmers recognize the importance of establishing the Dairy Industry Development fund, the purpose of the funds needs to be refined as it cannot be used for activities such as upfront procurement for sale to the dairy farmers or dairy industry of containers, coolers, instant chillers, liquid nitrogen flask and other dairy hardware equipment as stated in the bill. This will work in conflict with the private sector. The Board should not be involved in procurement of goods and services which the private sector can provide. We recommend that such funds should be channeled through the Dairy Associations to facilitate extension services and training, put simply capacity building activities, and also such funds should be channeled through the Research Institutions in order promote research for the development of quality breeds and cattle vaccines.
1. Article 30. – Offences relating to inspections, Article 31. – General penalty and Article 32
There is need to limit the offences to penalty fines and avoid imprisonment. The question again is, what should be the intended remedy in this Act? This is a developmental Act, meant to streamline the development of the dairy industry in Zambia; therefore it should not be heavy handed in prescribing penal sanctions that do not promote commercial orientation of the sector.
2. Article 31. (2) – General Penalty
The article states that where a person is convicted of an offence, under this Act, the court may order that any dairy animal, milk or milk product in respect of which the offence has been committed be forfeited to the State. This provision is misplaced. What has the cattle got to do with the committed crime to render it forfeited to the state?
It is observed that the animals are a Bank to farmers and a great asset; it would not be just to confiscate the animals. Furthermore it will be difficult to confiscate dairy animals in terms of both transportation and keeping is costly. This provision certainly is an unattainable, where will the state keep the confiscated dairy animals and for whom? Therefore penalty fines as stated earlier should be the best remedy.
3. Article 32. Offences by the Company
This article states that where a company commits an offence under this Act, any officer, director, employee or agent of the company who directed, authorized, assented to, or acquiesced in the commission of the offence shall be a party to and commits the offence, and shall be personally liable to punishment provided for the offence, whether or not the company has been prosecuted or convicted.
This article is not acceptable in its present form for an employee or an agent of the company to be personally liable to punishment for the offence of the company. The farming industry is the largest employer in the country and employs a lot of farm workers and most of whom are not educated to understand the detailed operations of the companies. It will not be right for them to be personally liable to punishment.
The article is also in contradiction with the Companies act Cap 388 of the laws of Zambia, which provides for the separation of the company and its owners or employees. This again is misplaced provision.
In conclusion, the Union supports the enactment of this bill into law as we believe it will support the development of the dairy industry which creates income generation opportunities for the farmers.