Market Diversification Opportunities for Namibian Red Meat Products: Application of a Decision Support Model Ernst Idsar

1. Market Diversification Opportunities for Namibian Red Meat Products: Application of a Decision Support Model Ernst Idsardi, David Spies & Ermie Steenkamp 50th Annual AEASA Conference 1 – 3 October 2012, Bloemfontein, South Africa

2. OUTLINE • Background • Approach: a Decision Support Model for identifying export opportunities • Results • Conclusions

3. BACKGROUND • SETTING THE SCENE: • Namibian meat exports: boneless beef, carcasses of sheep, boneless meat of sheep • Small producer  niche products: grass-fed, organic • Disease status  exports of de-boned meat / limited exports from NCA • Export trends 2000 – 2011: • Beef exports +16% • Sheep meat exports + 413%

4. BACKGROUND (2) • SETTING THE SCENE: • 65% of Namibian beef is exported • In 2011 58% of all cattle marketed was exported on the hoof to SA • In 2011, 86% of sheep marketed was slaughtered at local export abattoirs • Agriculture 4.1% of GDP  Livestock sector 2.2% of GDP  70% of population to an extend dependent on agric.

5. BACKGROUND (3) • THE ISSUES: • Limited export market diversification Source: UN Comtrade

6. BACKGROUND (4) • THE ISSUES: • Trade policy • Norway  preferential TRQ, although high NTB’s • European Union • Deadline for full EPA with EU by 2014?  termination of provisional application of IEPA  DFQF market access after 2014?  alternative trade regime (= GSP) does not cover meat products  MFN treatment (Tariff implication: frozen, boneless beef 92%)

7. BACKGROUND (5) • THE OBJECTIVE: • Identification and selection of alternative export markets for Namibian red meat products • Excluding EU, Norway, South Africa • Agricultural development  diversification  new markets / existing products / new products

8. APPROACH • Background: • Screening of potential export markets • International market identification and selection method • Quantitative approach  qualitative approach • Decision Support Model (DSM):Cuyvers (1996) for Belgium, Pearson et al. (2007), Steenkamp et al. (2009) for SA  adapted for Namibia

9. APPROACH (2) • Framework of the DSM:

10. APPROACH (3) • Scope: • All countries included, apart from EU countries, Norway and SA (data availability): 214 • Limitations: trade classification provides no detail on specific meat cuts (e.g. forequarters, fillet) or production practices (e.g. organic)

11. APPROACH (4) • Filtering process of the DSM: Filter 1 • Filter 1.1 • Country risk scores for political and commercial risks (ONDD, Belgium) rated from 1 to 7 • Cut-off value calculated for filtering criteria • Filter 1.2 • GDP (current US$) • GDP per capita (current US$) • GDP growth • Cut-off value calculated for filtering criteria • Passes criteria if pass GDP and GDP per capita for two years • Elimination of 133 countries

12. APPROACH (5) • Filtering process of the DSM: Filter 2 • Relative market size and -growth: • Per country/product combination: import statistics • HS 6-digit level • Imports as proxy for market size • Import growth in the short and long term • Cut-off values calculated to determine seven categories: • Country-product combination in categories 0 and 1 eliminated (6 countries)

13. APPROACH (6) • Filtering process of the DSM: Filter 3 • Market accessibility index (no elimination)  weights

14. APPROACH (7) • Filtering process of the DSM: Filter 4 • Final elimination: fresh meats  shipping time > 50 days • Ranking of realistic export opportunities  scoring: • Market accessibility: getting the product to the market • Market performance: is there a market?

15. Results Export opportunities for Namibia per product

16. Results (2)

17. Results (3)

18. Results (4) • Market accessibility: Singapore, Hong Kong • Market performance: Canada • Ranking: • Hong Kong (5) • Switzerland (3) (not “new”) • Qatar, Bahrain (2) • Singapore, Malaysia, China (1)

19. Results (5) Top priority export opportunities per product  “low hanging fruits”

20. Conclusions • So what? all products, all countries, risk, market dynamics, broad concept of market access  quantitative analysis • Several realistic export opportunities identified • DSM = first step of export strategy  capitalise opportunities • Financial attractiveness, consumer preferences  per meat cut • Entry strategy  role players, market structure • Alignment with supply potential  NCA, under-utilisation of local slaughter capacity, live exports to SA

21. Conclusions (2) • Diversification strategy: • Namibia is a producer of niche not bulk products • “old” products  “low hanging fruits” • “new” products  cost/benefits of supply chain development? • Competitive edge: grass-fed, organic • Export opportunities for beef better than for sheep • Trade creation rather than diversion  SA is and will remain an important market, realisation of proposed changes in EU trade regime still unclear • Critical success factors: shipping times, supply, profitability

22. Thank you for your attention!