The financial situation at Meatco is increasingly becoming desperate with reports that the meat processing and marketing company is projected to incur losses of N$150 million in the current financial year.
Sources familiar with the operations at Meatco told the Windhoek Observer this week that the year-to-date loss at Meatco stands at around N$60 million and is projected to more than double to N$150 million at the end of February 2019.
According to the sources, the projected loss will break Meatco with dire consequences to the meat industry and the Namibian economy if something is not done quickly to stop the free fall.
Public Enterprises Minister, Leon Jooste, said he is aware of the losses and the projections, but referred further questions to the Minister of Agriculture, Water and Forestry Alpheus !Naruseb.
Sources said the losses will largely come from the dwindling cattle numbers which will drive operational costs as a result.
“Fewer cattle to Meatco will drive operational costs up resulting in such operational losses after commercial farmers decided to withhold their cattle from Meatco,” the sources said.
Commercial farmers are said to be withholding their cattle mainly because they are unhappy with the decision not to appoint their representative on the Meatco board following the resignation in February of commercial representative, Fannie Oosthuisen.
Sources say that Oosthuisen resigned due to disagreements with the current board, in particular because of the board’s position to request the ministry of agriculture to close borders for weaner exports.
The Namibia Agricultural Union is said to have written a letter to the board requesting that Oosthuisen be replaced, but this has not been done.
Oosthuisen’s replacement was expected to be appointed during Meatco’s Annual General Meeting (AGM) in June.
The Meatco Act makes provision for board nominations to represent both communal and commercial farmers’ interests.
Meatco Manager for Corporate Affairs, Rosa Thobias, also attributed the losses to a declining throughput that the company is experiencing.
She said Meatco is currently busy with the turnaround strategy which will focus on increasing cattle numbers, efficiencies, cash flow management, international and local market optimization, reduce production, administration and overhead costs, stakeholder relationships as well as Meatco’s Involvement in the Northern Communal Area.
Livestock Producers Organisation (LPO) Chairperson, Piet Gouws, said they had put out a motion in which members expressed that they had lost all trust in the board to ensure a successful turnaround of Meatco.
“The international competitiveness and financial position of Meatco deteriorated rapidly during the tenure of most of the current Meatco Board of Directors, to a point where urgent intervention is required,” the motion read.
“Despite various words of caution, Meatco continued to invest hundreds of millions of Namibian dollars in non-profitable ventures, which put the future of the company at stake.
“These decisions by the board, as well as the financial losses experienced during their implementation, contributed a key role to the current financial crisis of Meatco.”
The motion also said that despite various commitments by the board that urgent turnaround strategies are being developed; no information has yet emerged on what these plans are, whilst severe financial losses and cash flow constraints are suffered to the detriment of the Meatco members.
It said since the 2014/15 financial year to 2017/18, Meatco operated in a relatively favourable exchange rate environment with an average exchange rate of N$14.96/€1 for this period, compared to an average of N$10.73/€1 for the 2010/11 to 2013/14 financial years.
“Exchange rate depreciation therefore benefitted Meatco’s revenue with almost 40 percent. Despite this relatively favourable business environment, Meatco lost significant market share against abattoirs slaughtering cattle for the Namibian market.
“In an expert financial analysis of the period 2014/15 to 2017/18, the following information emerged that while the financial performance deteriorated, the director’s remuneration and administration cost as percentage of turnover, increased steeply while the interest expense of Meatco increased significantly.”
With Meatco struggling to get enough cattle for its export abattoir, it remains to be seen if it will be able to meet the deadline of September to start exporting beef to the Chinese market.