DTI investigates dairy industry
Clover wants exemption from Competition Act and return of independent industry board
November 13, 2009
 By Ann Crotty
The DEPARTMENT of Trade and Industry (dti) is investigating an application from Clover, the country's largest dairy group, for exemption from the Competition Act.
The move has been described by one industry analyst as a bid to reintroduce the equivalent of the dairy board, which oversaw the industry for decades until the mid-nineties.
Clover is currently fighting allegations of anti-competitive behaviour in a case that was initiated in February 2005 by the Competition Commission, and referred to the Competition Tribunal in June last year.
Due to a series of challenges by Clover on various technical points, the merits of the case have so far not been discussed before the tribunal.
Clover, which made the exemption application on behalf of the dairy industry in August, has argued that the stability of the industry is under threat.
According to a statement on the Clover website, the threat stemmed from the "intrinsic instability of dairy incomes, the greater ease of farmer exit, and unfair competition from subsidised imports".
The Competition Act states that an industry may be granted exemption if the Minister of Trade and Industry, in consultation with the minister responsible for that specific industry, deems it necessary to ensure the economic stability of the industry.
Clover has requested that the dairy industry be exempt from certain provisions of the act for five years.
Clover said the exemption would "allow for the collection and dissemination of industry data, discussions between the relevant firms and role players to establish rules going forward and to consider the establishment of a private regulator for the dairy industry".
Nomfundo Maseti, the chief director for policy and legislation at the dti, said yesterday that the department was undertaking an in-depth analysis into the circumstances surrounding the application.
Maseti said the department needed to establish which other parties in the industry were supporting Clover's application and the extent to which EU subsidies were affecting the local dairy industry.
"We have to do a thorough economic analysis of the circumstances to determine whether the dairy industry does deserve special treatment. We must also access the scope of the exemption that Clover has requested because if this is allowed it is likely to impact the price levels in the industry."
She said both Rob Davies, the Minister of Trade and Industry, and Tina Joemat-Pettersson, the Minister of Agriculture, Forestry and Fisheries, would have to be convinced of the claims being made by Clover. They would have to establish why normal market forces were not working.
Maseti said there was also concern that approval of Clover's application would open the floodgates for applications from a host of other industries.
Neither Johann Vorster, Clover's chief executive, nor his deputy Manie Roodt, were available for comment yesterday. But in a recent issue of the Food and Beverage Reporter, editor Teigue Payne said that Vorster admitted he was not optimistic about the chances of success for the application in part because of the government's hostility towards the dairy industry.
"Also the government might believe that this could open the floodgates for other exemption applications."
According to the Food and Beverage Reporter, Vorster said the local industry would survive if the exemption was not granted, "because it is, unlike in many other developed countries, largely in liquid milk, which cannot be imported on a large scale."
But South Africa would miss an export opportunity.
Maseti said the dti would issue a notice inviting interested parties to make submissions in about two weeks time.
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