Fonterra in Africa export venture

Fonterra is planning a joint venture with South Africa's biggest dairy company to create a beachhead for exports to sub-Saharan Africa.

Malcolm Tweed, who heads New Zealand Milk Products (SA), told South Africa's Competition Tribunal the joint venture with Clover SA would be Clover Fonterra Ingredients, Johannesburg's Business Day newspaper reported.

The milkpowder import deal was publicised just as Clover SA announced that it planned to lay off up to 500 workers, and cut its milk payments to farmers.

Tweed revealed the plans last week to a Competition Tribunal hearing on the proposed merger to form the joint venture.

A Fonterra spokesman said last night that the company - wrapped up in a takeover battle for Australian milk company National Foods - would not be saying more.

Fonterra is the world's largest dairy ingredients company, collecting more than 13 billion litres of milk a year to market more than 2 million tonnes of dairy products.

Clover SA's annual turnover is 3.9 billion rand ($1 billion).

Clover processes 30 per cent of South Africa's milk in 17 factories and distributes its products through 33 distribution depots.

No value was given for the joint venture.

Fonterra had other big joint ventures in the United States, South America, Australia and Europe, but only a "modest" presence in southern Africa, said Tweed.

Separately, it has had a history of making significant sales in North Africa, particularly the difficult market of Algeria, from its European operations.

"This deal will provide the joint venture company with a reasonable base from which to launch into sub-Saharan Africa on a sustainable basis," Tweed said.

The market was currently dominated by companies in the United Kingdom, which held more than 70 per cent of the market.

Karyn Purchase, the manager of a major supply chain in Africa, Aspen Pharmacare, told the tribunal that the company planned to buy 300 tonnes of milkpowder from Fonterra this year, outside the African dairying season.

Clover SA supplied skim-milk powder to Aspen but, because of the seasonal nature of the local milk industry, the company also bought milkpowder from international suppliers such as Fonterra and the Irish Dairy Board.

Tweed said the Fonterra deal would provide a year-round supply of milk products for customers.

Clover SA would also benefit from Fonterra's marketing and sales expertise in a global supply chain that had customers in 140 countries.

After Australia and New Zealand, South Africa is one of the cheapest milk producers in the world, and it's dairy processing sector is largely deregulated.

The two-day tribunal hearing started as Clover's 6300 staff were told by a major trade union, Solidarity, that management planned to save 100 million rand in wage costs this year by making over 400 workers redundant.

- NZPA, staff reporter