Once revered as the country’s premium beef-processing and marketing entity, the beleaguered Meat Corporation of Namibia is in a chokehold and facing a deepening crisis, industry experts opine. At full steam, Meatco is tasked with promoting and coordinating the interests of Namibian livestock producers and the beef sector.
When viewed from either perspective, Meatco is on the brink of becoming “a delicacy
for stray dogs”, governance expert Sam Kauapirura asserted. Alleged political interference, mismanagement, nepotism, incompetence and misaligned priorities continue to obscure a clear pathway forward for the financially-struggling meat entity.
At the centre of the storm is an alleged controversial directive from Cabinet for the Meatco board, chaired by seasoned executive Sakaria Nghikembua, to reinstate the entity’s
former CEO Mwilima Mushokabanji.
The Nghikembua-led board has already, on two occasions, declined Cabinet directives to extend Mushokabanji’s contract.
It remains to be seen if it will heed the latest one. The directive has since resulted in a headbutting contest between the board, Cabinet and line minister Mac Albert Hengari. It was recently reported that Hengari instructed the Meatco board to immediately halt the recruitment process for a new CEO.
“What government needs to do right now is to instil confidence in the public and reassure our farmers that there is no political interference in our public enterprises, Meatco included.
What Meatco needs right now is political support from the highest office, and for Cabinet to support the decisions of the board – not to interfere with the legal mandate of the board, as we are witnessing. As much as government is a key shareholder in Meatco, there is an existing Act and various governing laws on how matters of that nature should be handled,” stressed Kauapirura.
Further unpacking the crisis at the State-owned enterprise, he said the Cabinet directive to the Meatco board to reinstate Mushokabanji borders on political interference, and a breach of globally- accepted and recognised norms for good governance and accountability.
Act
His observations are bolstered by the Public Enterprises Governance Act of 2019, which states that while Cabinet must approve CEO appointments at State-owned enterprises, those appointments must or should originate from the entrusted board of directors.
Moreover, such appointments should have been carried out in collaboration with the relevant line minister.
Kauapirura said when read with a sober appreciation for good governance practices, the Act does not in any way empower Cabinet to unilaterally reappoint or intervene in the reappointment of executives at State-owned enterprises without a resolution from the relevant board of directors.
Nghikembua this week indicated that the board of directors will soon sit down with the government, and agree on a viable way forward for Meatco.
“Thank you for your enquiry. This matter will soon be a subject of consultation with the shareholder [government]. The board will comment only thereafter,” he stated.
Under-performance
Not only has Mushokabanji’s proposed reinstatement caused division within the country’s political arena, but has equally caused dismay amongst the country’s top governance experts and industry leaders.
Many question why the conversation around an entity of Meatco’s strategic importance is being narrowed down to Mushokabanji’s individual interests.
Popular Democratic Movement leader McHenry Vanaani this week asked in the National Assembly why Mushokabanji was receiving preferential treatment rather than being subjected to normal recruitment procedures like his peers, in line with governance standards and laws.
In recent years with Mushokabanji at its helm, Meatco became a perennial under-performing entity, if records in the public domain are anything to go.
Its financial assets and local market share are dwindling at an alarming rate.
Meatco’s performance since 2010 shows that its market share reduced from 48% in 2015 to below 15% during the 2023 financial year. Prolonged periods of drought experienced between 2015 and 2020 impacted the overall beef value chain and meant higher slaughter numbers for export abattoirs.
The decline in market share has, therefore, become a steady trend outside of the peaks in years of drought. It is evident that in the last four years, Meatco’s competitors’ share of the total animals marketed has seen a steady increase from 1% in 2020 to 8% in 2022.
During the same period, Meatco’s share of the total animals marketed decreased from 33% in 2011, 25% in 2020 and to a worrying 15% in 2022. Meatco’s share of the total animals slaughtered at export abattoirs has reduced from over 94 % in 2011, a high of 97% in 2016 to a low 61% in 2022 and 55% in 2023, the latest available figures reveal.
On the financial front, Meatco also took serious financial blows.
Report
A 2023 comprehensive forensic report by Ombu Capital, a firm owned by former Standard Bank Namibia CEO Vetumbuavi Mungunda, indicated that Meatco was making losses of at least N$5 million a week.
The report, conducted during a seven-month process of analysis and sector-wide consultations, further revealed that Meatco’s liabilities exceeded its assets by N$133.2 million, particularly at the time of the report’s compilation.
“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 indicated in his report at the time.
Meatco has experienced shrinking gross profit margins, which, combined with reduced throughput, have resulted in massive losses since 2018.
These losses increased significantly from N$119 million in 2021 to N$205 million in 2022, and an estimated N$196 million in 2023.
It is reported that Meatco recorded several financial losses, including a N$258 million operational loss for the year-to-date period of January 2024. Between 2021 and 2023, government, directly and through Development Bank of Namibia (DBN) debt facilities, provided support to Meatco, amounting to N$1 billion as of 30 November 2023.
The history of Meatco’s interest-bearing loans show a move away from commercial banks to 100% of interest-bearing loans being held by the DBN during the 2023 and 2024 financial years.
Government settled Meatco’s debt facilities to the DBN, amounting to N$530 million during October 2023.
It further extended direct financial support to Meatco amounting to N$83 million during the 2023 financial year, and an additional N$135 million during the 2024 fiscal year. Meatco’s remaining loan from the DBN, amounting to N$250 million and extended during November 2023, is guaranteed by government.
Conflict
In another twist of events, New Era has seen a letter from corporate and commercial law firm Bowmans Namibia, addressed to Meatco’s management.
It cites a potential conflict of interest with respect to the appointment of Mungunda’s Ombu Capital to provide consultancy services in respect of the forensic report and review of Meatco’s business strategy, business plan and financial model.
In its letter, Bowmans argued that although Mungunda represented to Meatco that he had no conflict of interest with respect to the services to be rendered, he did not declare that he had, in his personal capacity as a farmer since 2017, supplied and marketed livestock to Meatco.
He has supplied a total of 790 livestock to Meatco, for which he received compensation.
He remains an active producer in Meatco’s records, Bowmans argued.
“As supplier to Meatco, Mungunda stands to be affected by the development and implementation of Meatco’s Turn-Around Plan (TAP). Moreover, Ombu’s appointment affords it and its representatives significant access to Meatco’s internal operations and trade secrets to produce a sustainability plan, which includes price-setting.
The threshold for a conflict of interest arising is crossed where Mungunda’s personal financial interest in supplying livestock to Meatco could have a real or perceived effect on Ombu’s ability to fulfill its responsibilities, bearing the best interest of Meatco in mind,” Bowmans flagged.
Commenting on the perceived conflict of interest, an unbothered Mungunda yesterday laughed off the claims.
He said it is trivial politics at play, and a desperate attempt by some individuals to try and deflect from the real issues at Meatco.
“It is important to clarify the definition of a conflict of interest, especially from the perspective of a professional accountant, something that I have consciously and religiously followed, protected and safeguarded during my close to 30-year distinguished career as a professional,” Mungunda said.
He then said: “Conflict of interest is defined in the Handbook of the International Code of Ethics for Professional Accountants at paragraph 310.2 as ‘a conflict of interest creates threats to compliance with the principle of objectivity, and might create threats to compliance with the other fundamental principles. Such threats might be created when (a) a professional accountant undertakes a professional activity related to a particular matter for two or more parties whose interests with respect to that matter are in conflict; or (b) the interest of a professional accountant with respect to a particular matter and the interests of a party for whom the accountant undertakes a professional activity related to that matter are in conflict…”
“The above definition seems to be in line with the definition followed by Meatco through the declaration of interest form. They requested us to complete all the questions, each single question on the form, enquiring about work undertaken for competing entities, financial interests in competing entities, etc.
The author seems to attempt to use my delivering of cattle to Meatco over the last seven years as basis of his conclusion of the presence of a conflict of interest. My delivery of cattle to Meatco represented an ‘alignment of interest’ rather than a conflict of interest,” Mungunda pointed out.
He continued: “This unfortunately demonstrates his/her lack of understanding of conflict of interest, or his professional dishonesty in that if the selling of cattle to Meatco represented a conflict, it would have been one of the questions on the declaration of interest form they requested from the potential professional team.
Additionally, the Meatco management knew very well that I am a long-standing producer in that I have been delivering cattle to Meatco for a long time. In fact, Meatco awarded me with a top producer award in the month of May 2020. The fact that the Meatco management team did not raise me being producer as a potential conflict of interest is not because they did not know, but they know very well. And any professional worth their salt knows very well that this does not constitute a conflict of interest”.
Prices
Mungunda furthermore dispelled any suggestions that he might have had a hand in Meatco’s price-setting through the consultancy services he provided.
He said the letter’s claims fall flat both from a legal and practical standpoint.
“Our role did not extend to the determining or setting of the producer prices. Instead, ours was a review of the strategy, processes and business practices at Meatco, and make recommendation on the required improvements. The author unfortunately does not state how his view of a conflict could materialise or actualise if our work did not include the setting of producer prices.
I would like to conclude by educating the author of the letter that the issue he wishes to address seems to relate to independence and objectivity of the professional, but not an issue of conflicts…
“The Handbook of the International Code of Ethics for Professional Accountants at paragraph 920.5 A1 states ‘The purchase of goods and services from a client by a firm, or an assurance team member, or any of that individual’s immediate family does not usually create a threat to independence if the transaction is in the normal course of business and at arm’s length.’
“My delivery of cattle to Meatco is in the normal course of business, at arms-length, and on terms and conditions applicable to everyone delivering cattle to Meatco, and would therefore not impair my independence and objectivity,” he continued.
GPS saga
The arrival of entities such as Beefcor and Savanna Beef on the local scene, which are mainly conglomerates of private beef producers, is seen by certain key players in the local beef sector as a direct threat to the existence of Meatco.
With Mushokabanji out, the Meatco board had appointed Patrick Liebenberg as acting CEO until a substantive CEO could be found.
Liebenberg is the current executive for livestock procurement and production at the company. While Meatco’s fall from grace can be argued from various angles, there are those in the local beef sector who are convinced that Savanna Beef and other private ventures are being deliberately empowered to further cripple Meatco and elbow the State-owned entity out of the world’s most lucrative markets, especially the Norwegian and Chinese beef markets.
To compound matters, it was reported last year that Savanna Beef had secured a sales and marketing agreement with GPS Food Group in the UK, which would provide it with further access to global beef markets.
GPS is the same entity which previously provided marketing services for Meatco.
However, this service was terminated in 2023 after Meatco cited financial constraints. The contract between Meatco and GPS came to an end in April 2023 after Meatco indicated that it would be domesticating and taking over marketing and sales services through its internal departments.
At the time, Meatco argued that marketing Namibia’s meat products was its core responsibility, which had been outsourced to GPS for more than 15 years.
– ohembapu@nepc.com.na