Windhoek
The Meat Corporation of Namibia (Meatco) is about to launch a new business model for its operations in the Northern Communal Areas (NCAs) aimed at providing better and more cost-efficient services to communal farmers.
This business model is Meatco’s new strategic approach to curb operational losses of close to N$43 million in 2014/15. Meatco’s projected losses were expected to be N$53 million in 2016 had it not adopted changes to its operations in the NCAs.
However, even while NCA abattoirs remained closed due to Foot and Mouth Disease (FMD), Meatco still incurred losses of up to N$12,9 million by end of December 2015 due to overhead costs alone.
Meatco took over the management of these government-owned abattoirs at Oshakati and Katima Mulilo in 1991/2 from the National Development Corporation (NDC). However, the management agreement was converted into a commercial lease agreement for the lease of the said facilities in 2011 at a cost to Meatco.
The financial losses incurred by Meatco operations since 1991 are estimated at N$354 million up to 2014/15. This situation has prompted Meatco members and the board to direct management to develop a new business model that will address the financial losses, while at the same time guaranteeing Meatco’s continued presence in the NCAs.
This prompted Meatco to reconsider its lease agreement with government. As a result Meatco decided not to renew the lease agreement.
This intention has been communicated to the Ministry of Agriculture, Water and Forestry (MAWF) and other relevant stakeholders.
Schedule A of the lease agreement provides for possible extension of the lease by government. In terms of the said clause, the agreement may be extended by the Ministry upon request by Meatco, not less than six months prior to the expiry of the initial period.
This means that Meatco should have given notice in September 2015 to the MAWF of its intention to request extension of the agreement. Since Meatco has not done so, this will mean the end of the agreement effective by March 4.
Meatco’s management developed various options that are in line with the objectives set out in the Meatco Act which are: “To serve, promote and co-ordinate the interests of the producers of livestock in Namibia, and to strive for the stabilisation of the meat industry of Namibia in the national interest”, and “To rationalise abattoirs and related factory activities and conduct and manage such business in an orderly, economical and efficient manner.”
It is in the spirit of the second objective that the Board of Meatco and management deliberated on ways to reduce financial losses in the NCAs.
The Board of Directors considered these options at their meeting on August 13, 2015, and resolved to pursue a new business model. This new business model was communicated to the Minister of Agriculture Water and Forestry, his management and the Namibia National Farmers Union early in November 2015.
Subsequently, as key stakeholders they also had the opportunity to comment of the new business model towards the end of November 2015. This allowed the board to finally approve the new model on December 5, 2015.
The new mobile abattoir is expected to be operational by early July 2016. The future demand for slaughter will determine the amount of units to be ordered and deployed. Consultations with other key ministries and stakeholders on the new business model are ongoing.
Meatco is well aware of the crucial need of farmers in the NCAs to resume marketing of their livestock after the double-edged sword of drought and FMD outbreak in 2015. In this regard Meatco is waiting a crucial meeting of the meat industry on February 10.
The meeting will be attended by all stakeholders in the industry and aims to spell out the new rules of marketing livestock in the NCA after FMD, while addressing possible markets for beef originating from the NCA.
Meatco’s future operations will be guided by the outcome of this industry meeting.
When the new rules are in place Meatco will resume with buying cattle from communal farmers in the NCA. While awaiting the arrival of the mobile slaughter unit, Meatco will keep those cattle in quarantine camps, depending on the availability of grazing and the overall condition of such quarantine camps.
Meatco has 46 staff members employed on a fulltime basis in the NCA and some of them will be affected by the new business model. Meatco is currently busy identifying those staff members who can be absorbed into other Meatco operations in the NCA and in the south.
Meatco will ensure that the provisions of the Labour Act are adhered to and that all relevant institutions that have to be notified are properly and timely informed, the company said.