Beef quota battle heats up

17 October 2013 Author  

front meat 18 octNamibia’s two leading beef export abattoirs to the lucrative Norway market have locked horns over the export quota that they now have to divide equally between them. Witvlei Meat, which is the smaller operator of the two, wants the entire quota allocated to it. Meatco on the other hand wants a review of the 50-50 sharing formula, arguing that in terms of the volumes it slaughters it cannot share the export quota equally with Witvlei.

 

As Witvlei indicated this week that it wants the entire export quota, the Chief Executive Officer (CEO) of Meatco Vekuii Rukoro wrote to Meat Board of Namibia, which administers the quota.

In the letter, he requested that Meatco should receive an increased portion of the exports destined for Norway.

Sources at the company have indicated that Meatco is not happy with the disproportionate formula considering that it slaughters about 92 percent of the total cattle slaughtered at Namibia’s export licenced abattoirs.

The company argues that the 50:50 export formula is not only detrimental to the bottom line of Meatco, but also adversely affects the income of producers who should reap the price benefits of the Norway market.

The Cabinet, which approved the formula in 2010 based it on “incorrect assumption that the entire industry (including Meatco) agreed to the allocation method at the time”, Meatco said in a communication to the Ministry of Trade Permanent Secretary dated 26 September 2011.

Meatco wrote a letter to the Meat Board last Wednesday again to express its dissatisfaction with the current allocation of the quota.

At the same time, Meatco also formally applied for a share of the quota for the period 1 January 2014 to December 2014.

Meatco argues that the current allocation detracts fundamentally from the very purpose for which the Norwegian government extended this facility to Namibia, namely to benefit the greatest number of Namibian producers.

It further stresses that the current equal allocation is grossly discriminatory against the close to 100 percent of Namibian producers who market their cattle through Meatco, and is therefore, morally and legally indefensible.

In 2012, Meatco’s two export licensed abattoirs produced 104,524 tonnes of beef of which it could only export 675 tonnes to Norway under the 1,350 tonne quota allocated to Namibia. This translates to about 3 percent of its total production.

This, according to a 2011 submission of Meatco to the Permanent Secretary of Trade led to the company’s revenue decreasing with approximately N$35 million during the 2011/2012 financial year.

“This had a serious negative effect on Meatco’s financial performance and its ability to increase the average producer price.”

Witvlei, it is said exports about 73 percent of its total production to the lucrative Norwegian market.

Witvlei, according Meatco, had also not passed on the lucrative prices offered by Norway to the producers and had used Meatco’s per kilogramme base prices and only added on a dollar to pay its producers.

“Therefore even the limited amount of Namibian producers slaughtering their cattle at Witvlei did not receive the full benefit from this very lucrative market and lost out on an estimated N$15.5 million during the period [2001],” Meatco says.

Meatco has now requested the Meat Board of Namibia to give it an additional quota for the Norwegian market.

“In Meatco’s opinion, this additional portion should represent the difference between the predetermined 50 percent and actual percentage of Meatco’s slaughter cattle relative to other export slaughter cattle,” the letter from Meatco reads

The Norwegian market is a premium market where carcass prices are almost 100 percent higher than in Namibia, and therefore plays a significant role in providing Namibian producers with a premium over South African and other carcass prices.

According to a source within the industry, the current allocation has resulted in an unfair advantage to an individual business and its shareholders that have led to producers receiving lower prices while enriching foreign shareholders.

Contacted for comment the CEO of Witvlei Henri Badenhorst referred to the matter as one that needed an in depth response, and was unable to send his remarks before the time of going to print.

It has also emerged that when the Cabinet submission was made back in 2010 by then Minister of Trade and Industry Hage Geingob, not everyone in the industry had agreed to the proposed 50/50 allocation.

The Windhoek Observer has in its possession minutes of a meat industry meeting concerning beef exports, which took place on 16 April 2010 at the ministry’s offices.

The minutes initially reflect that the then CEO of Meatco Koos du Plessis was in favour of the proposed arrangement, however just a few sentences later Meatco rectifies what comes across as distorted information.

It would seem from the minutes that the record distorts Meatco’s submissions at the meeting and that is how they arrived at the 55:50 split.

Meatco’s position was that the quota be divided on an equitable, fair and transparent basis, and that it must take into account investment, performance and structure of the quota holders and should be based on production output.

The minutes also reflect that the chairperson requested the respective meat exporters to prepare written submission with inputs and comments on the proposal.

“He explained that the ministry will use these submissions as a guide to finalise another draft quota sharing proposal to be considered at another meeting during the course of the coming week 19-23 April 2010,” the minutes read.

The follow-up meeting never took place and for some reason a Cabinet submission was then prepared submitted and was later approved.
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