Martin Swanepoel, CEO of Montic holding company Sontic, told Fin24 that the economics of having a depot in the region do not make financial sense in the long term. "Some of the bigger producers, that traditionally went through Clocolan... have found other milk buyers... with Clocolan left with the small buyers," he said.
Clocolan is a collation depot which sends out vehicles to collect milk from farmers. From the depot, the milk is transferred to tankers which then transport it to Heidelberg production facilities in Gauteng. The depot is also facing challenges around milk quality and certification, according to Swanepoel. "With the Consumer Act retailers are focused on quality issues, with audits from the suppliers to the shelf," he said.
"They (farmers) won't get anybody to buy the milk if they don't fix it. They need to have correct certificates and 75% don't comply."
Philip Swart, producer services manager of the Milk Producers Organisation, told Fin24 that the livelihood of 70 farmers and their employees, who have up to six dependents each, was in the balance before an offer by a milk broker to service the producers.
According to Swart, Desmanda Transport will buy 1.3 million litres of the two million litres of milk previously bought by the Clocolan depot.
Despite the reprieve provided by Desmanda, the Free State dairy industry continues to shed producers and jobs.
According to DA MP in the provincial legislature, Roy Jankielsohn, the number of milk producers in the Free State has dropped from 987 in January 2007 to a mere 316 in September 2014. "This amounts to a 68% reduction in milk farmers in the Free State over a period of seven years. "In December 1997 the Free State was producing 18% of South Africa's milk, which dropped to 9.5% by October 2013," he said in a statement.
"Input costs such as electricity, fuel, grain, and other products required in the dairy industry have increased dramatically over the past few years. This has not been matched by similar increases in prices paid to producers for their milk. "Furthermore, the importation of dairy products from countries whose producers are often subsidised by their governments impacts negatively on our local industry," he said.
According to Jankielsohn the dairy industry is highly specialised, and he cautioned against the loss of production capacity and priceless dairy herds that have been bred over generations.
"The industry is also labour intensive, which implies a great number of potential job losses in an area of the province that cannot afford this," he said.
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