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Producers Accused of Price Fixing

by 5m Editor
24 November 2008, at 8:16a.m.

BOTSWANA - Chicken prices are much higher than in neighbouring South Africa, and local producers are accused of making excessive profit.

High prices of chicken prices have been blamed on manipulation of the market and profiteering by large-scale poultry producers, according to Mmegi of Botswana. The producers are said to be fixing prices.

Figures made available to Business Week indicate that farmers should charge 14.81 pula (BWP) per kilo of chicken to retailers but the figure is as high as BWP 19.50. As a result, retailers charge up to BWP 26 per kilo excluding 20 percent VAT.

The consumers end up paying as much as BWP 38 per kilo while in South Africa, the cost of the same chicken is 30 to 40 per cent cheaper. "You can gather that there is no competition in this industry and that the big producers are far exceeding normal profits due to their price fixing," said one retailer speaking on condition of anonymity.

By charging BWP 14.81, the chicken farmer makes 25 percent profit. Under the present scenario, a big poultry farmer who produces 60,000 chickens per month or about 78 tonnes makes approximately BWP 450,000 profit above what they should be making.

"This is about 35 per cent more than what they should be making to be at par with their South African counterparts," the retailer said. He added that what compounds the situation is that retailers have not been allowed to import chicken in bulk from South Africa.

The retailer argues that if they are allowed to import, the price could be lower. Instead, producers are allowed to import and dictate prices.

Director of Animal Production, Lesitamang Paya said chicken is only imported if producers do not meet local demand.

He said the high demand of poultry in Francistown is a result of an influx of Zimbabwean shoppers. This has necessitated imports. Paya said the demand for chicken has gone up following the recent outbreak of Foot and Mouth Disease (FMD).

He added that the importation of chicken has been centralised to avoid the under production. He asserted that farmers might deliberately under produce in order to import cheap chicken from South Africa and maximise on profits.

He said it was realised that retailers were excluded from imports and they complained to the Minister of Agriculture about their situation.

"We have agreed to involve retailers and producers in the importation of chicken so that such imports can be monitored. It is an organised arrangement," Paya said.

He said the issue of mark up has been resolved as producers imported chicken in the past and determined the price. "In an ideal situation, retailers should be the ones to import. It is only that there is a crisis this year (FMD). When the situation normalises, we will call the producers and tell them that their role is to meet the local demand," Paya said.

He added that cheap prices in South Africa should benefit retailers and subsequently, the consumer.However, it is understood that retailers are still not allowed to import chicken. Such permission has only been granted to one wholesale distributor.

The government has been blamed for letting some wholesalers and producers to determine chicken prices. The Mmegi report concludes that the situation is not the same in neighbouring South Africa where some multinationals have been charged for price fixing.

5m Editor