The Meat Corporation of Namibia allegedly terminated its contract with British marketing firm, GPS Food Group UK Ltd, citing financial constraints but without providing evidence to backbone this claim.
Details about Meatco’s decision are contained in a forensic report by Ombu Capital, a firm owned by former Standard Bank Namibia CEO, Vetumbuavi Mungunda.
Yesterday, Meatco’s CEO Mwilima Mushokabanji defended their decision, clarifying that the agreement with GPS was not terminated. It ended in April, he said.
“The contract between Meatco and GPS came to end in April 2023. We already informed GPS that we will be domesticating and taking over marketing and sales and we are doing it ourselves as Meatco,” the CEO said.
According to him, it was prudent for Meatco, which has the capacity and responsibility to market Namibia’s meat products to take over its core responsibility that was outsourced to GPS for more than 15 years.
While Meatco was required to pay 5% of its total internal revenue to GPS, it also paid for the freight, shipment, inbound logistics within Europe and cold storages, which was unsustainable, he said.
“In our new strategy, we said we don’t want to pay the commission, and we would rather keep that money in the business. We also did not want to pay for the inbound logistics. The costs are too high. We don’t have to do that… we as Meatco have enough capacity to make sure that we are able to drive marketing and sales,” Mushokabanji said.
To further justify Meatco’s decision, he pointed to Beefcor and Botswana Meat Commission’s who also cut ties with GPS.
“Basically, as Meatco, we need to be able to maximise luxury meat markets internationally, so that we maximise returns from those markets and generate revenue so that ultimately, we are able to maximise producers’ returns and keep producers in business, among our core functions as per the Meat Act,” he said.
GPS, which operates as a meat protein products supply chain provider’s agreement with Meatco, dates back to 2008.
The company offers beef, lamb, pork, and poultry through the use of global procurement, supply chain management, marketing and brand development as well as distribution.
The last agreement was signed in August 2018. It ran for five years.
“We have been informed that Meatco has cancelled the marketing agreement with GPS on the basis that Meatco will save in marketing costs,” Mungunda states in his report.
Mungunda and his team, however, found this decision by Meatco rather peculiar.
“However, Meatco could not provide us with the business case in support of this decision, nor with the marketing budget, transitional plan, marketing plan and the settlement agreement agreed with GPS, all very important information that should have been presented to and deliberated by the board before such a very strategic decision could be taken,” Mungunda said.
To this, Mushokabanji said: “We did not share the details with Ombu Capital because its confidential… we were not comfortable to do that. But we shared the needed high live strategy. So, it’s not right to say we terminated the contract. It came to an end and we already had a strategy to take over marketing and sales.”
New Era has seen the contract.
GPS Food Group is responsible for maintaining customers on Meatco’s behalf, keeping records of stocks of the products which Meatco holds, overseeing commercial operations of Meatco and providing administration and business services to support its business operations and deal with customs clearance shipment and distribution.
The entity was also responsible for the storage and onward distribution of the products upon arrival, arranging for the handling, storage in marketable condition, transport and insurance by contractors of all products, assisting with production planning, specification development and allocation of stocks to specific markets and customers.
On average, GPS would earn around N$35.1 million for services it rendered to Meatco.
During the forensic audit, Meatco’s management informed Mungunda and his entourage that they were in the process of leasing out its feedlots.
Meatco, however, did not provide supporting documentation to support its decision.
“Despite our requests, we have not been provided with copies of the board submissions prepared in support of this decision, extracts of the board resolution, access to the procurement process undertaken to choose the preferred tenants and copies of the lease agreements entered into with the tenants,” Ombu Capital complained.
Based on Mungunda’s submissions, Meatco’s checks and balances appear to be vague and secretive.
“During our review, we have noted differences between the reported losses for the financial year and the movement in retained earnings which may point to some expenses being recorded directly against retained earnings.
“Management explained that these expenses relate to subsidiary expenses paid by the holding company, but we have not been able to confirm the appropriateness of the accounting treatment,” Mungunda said.
While at that, Meatco’s disgruntled employees are set to stage a peaceful demonstration today at 12h00.
Superior among their issues is a plea for improved wages and working conditions and alleged mismanagement by those at its top echelons.
“Meatco is on autopilot,” said a disgruntled employee yesterday.
What is more, Ombu Capital also conducted an electronic survey with Meatco staff members who have email access.
Strong patterns emerged where staff views overlap on issues of concern, specifically regarding Meatco’s organisational performance, leadership and internal communication.
“In general, staff felt positive about the role and contribution they could make to Meatco and how they viewed their own abilities and skills,” the survey revealed.
But the surveyed staff had their own misgivings, particularly in those leading them.
“There seemed to be a general lack of trust in the board and management’s leadership over the company, in part because decisions are not well communicated internally, or the reasons for decisions are opaque,” the seasoned banker found.
One thing, however, stood out from Mungunda’s observation: “Staff members are not overly optimistic about the company’s future.”
At the moment, Meatco reportedly loses at least N$5 million a week.
The report is dated 22 March 2023. It documents a seven-month process of analysis and sector-wide consultation and recommends what the authors view as a viable business model for Meatco’s long-term sustainability.
“Meatco is currently incurring monthly losses exceeding N$20 million per month, which must be stemmed before these place Meatco’s operational existence and the livestock sector at risk, a sector which sustains over 60% of Namibia’s livelihoods,” Mungunda says in the report.
At the time of its compilation, Meatco’s liabilities exceeded its assets by N$133.2 million.
“There is a presumption of reckless trading when conducting business under these circumstances,” he states.
According to the report, Meatco is on the brink of existential risk.
It was discovered that the company also operates in a highly secretive world.
“We have been refused access to the Meatco board’s meeting packs and minutes, as well as the meeting packs and minutes for the executive committee meetings. This highly unusual act from Meatco and the lack of transparency is concerning,” Mungunda emphasised.
Meatco has experienced shrinking gross profit margins, which, combined with reduced throughput, has resulted in losses since 2018.
These losses increased significantly to N$119 million in 2021, N$205 million in 2022, and an estimated N$196 million in 2023.
That is not all. At the time of the audit, Meatco’s debt was at an all-time high, nearing almost N$1 billion.