Government supports Meatco despite losses

Ester Mbathera

The Ministry of Finance and Public Enterprises (MFPE) has affirmed its support for the continued operation of Meatco despite the company’s ongoing financial struggles.

This was said by the ministry’s spokesperson, Johnathan Swartz, in an interview with the Windhoek Observer earlier this week.

“Considering the historical hurdles, it’s evident that achieving profitability or breaking even will require considerable time. Just like steering a large vessel laden with cargo, swift turns are ill-advised, as they may lead to instability. Instead, a methodical approach is necessary to gradually realign its course towards success,” he said.

He added that the interim board, appointed to oversee Meatco’s governance, has performed satisfactorily according to the MFPE’s expectations.

According to Swartz, the board has maintained strong corporate governance and addressed complex issues effectively.

“Despite the brevity of its tenure, the Board has delivered satisfactory performance, navigating through few, if any, contentious issues. Guided by a seasoned executive as the current Chairperson, the Board adeptly addresses the complexities inherent in its governance. Under his leadership, the board remains cohesive, and robust corporate governance measures are being diligently implemented,” he said.

Swartz explained that the interim board’s tenure is set to end on 30 June.

In the meantime, the MFPE is preparing to appoint a new substantive board, which he said will be made public once finalised.

“The procedure for appointing a new board, through a standard interview process, has begun, and a new board will be selected in due course,” he said.

Meat producers don’t seem to agree with the ministry.

One of the producers, Riaan Van Wyk, said that due to the ongoing financial squabble at Meatco, the company has not been able to pay the farmers on time.

“We are currently heading for a third year in a row where we have to hear the same old story. Meatco no longer pays us on a 30-day basis. Previously, we received payments every seven or ten days. Now we are going for five weeks. Meatco has been telling us that there are no commercial banks that want to offer them overdrafts,” he said.

With the drought looming, he said producers are in trouble.

He and other farmers are asking the government to ensure they can sell their cattle to Meaco for slaughter and receive payment on schedule.

Van Wyk said that as farmers, they are not prepared to lose more money because of Meatco’s financial troubles.

“It is not fair, we are asked to produce food for our country, but the government is allowing us to hang in there. We have on numerous occasions proposed to help Meatco by getting good management in place. They have had poor management for the last 15 years because of a lack of experience in international meat marketing,” he said.

Meatco solely depends on government funding through the Development Bank of Namibia (DBN) debt facilities.

For the last three years, this support amounted to N$ 1 billion as of 30 November 2023.

According to the company’s turnaround plan, the history of Meatco’s interest-bearing loans shows a move away from commercial banks to 100% of interest-bearing loans being held by DBN during the 2023 and 2024 financial years.

In 2023 government settled Meatco`s debt facilities to DBN amounting to N$530 million and extended direct financial support to Meatco amounting to N$83million during the 2023 financial year and a further N$135 million during the current 2024 financial year.

The remaining loan from DBN amounting to N$250 million extended during November 2023 is guaranteed by the government.

To prevent the collapse of the Meat Corporation of Namibia (Meatco), the government received advice last year to consider establishing a new company where private investors and farmers would have shareholdings.

The Development Bank of Namibia appointed Ombu Capital (Pty) Ltd., a consulting firm, to conduct an in-depth review of Meatco’s operations and recommend sustainable business model alternatives.

According to the report, the main problems facing Meatco are an insolvent position, recurring monthly gross losses, loss of producer trust, and unsustainable debt.

The firm suggested streamlining Meatco’s operations by keeping core assets and changing the ownership and governance structure to foster a producer’s “sense of belonging.”

The proposed structure under industry consolidation would involve two new legal operating entities, the Namibian Cattle Association (NCA) and the Smallholder Value Chain Fund (SVCF), with Meatco retaining a shareholding of 15% to 25%.

The private sector would hold the remaining shareholding in the new operating entities.

Private investors and the industry will own 75% of the new company (NewCo), with Meatco holding the remaining 25%.

Meatco’s performance since 2010 shows that its market share reduced from a high of 48% in 2015 to below 15% during the 2023 financial year.

The drought period experienced between 2015 and 2020 impacted the overall beef value chain and meant higher slaughter numbers for export abattoirs.

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