Meatco’s troubles linger

Meatco’s troubles linger

The Meat Corporation of Namibia last week resolved to show CEO Mwilima Mushokabanji the door, defying a Cabinet directive that his services be retained.

In the directive dated 23 July 2024, Secretary to Cabinet George Simataa communicated Cabinet’s desire, and directed finance minister Iipumbu Shiimi to ensure that Mushokabanji goes nowhere.

“Cabinet directs the Ministry of Finance and Public Enterprises to ensure that the board adheres to the resolution of Cabinet Decision No. 11th/o9.07.24/012, and to further retract the non-renewal of the employment contract notice issued to the current Meatco chief executive officer,” Simataa said in the missive.

However, last week, Meatco board chairperson and seasoned executive Sakaria Nghikembua gave Mushokabanji his marching orders.

“As per our earlier briefing, with your contract ending on 31 January 2025, the board of Meatco has resolved to appoint Mr Patrick Liebenberg as acting CEO for a period of six months, or until a substantive CEO has been appointed, whichever occurs first. Mr. Liebenberg’s appointment is effective from 1 February 2025. 

The board appreciates your readiness to commence a handover process with Mr. Patrick Liebenberg over the remaining two weeks,” Nghikembua wrote to Mushokabanji.

Liebenberg is currently the executive for livestock procurement and production, and is a long-serving executive with extensive knowledge of the Meatco value chain and meat industry, the company said.

“The board has full confidence in Mr. Liebenberg’s ability to maintain continuity of Meatco’s operations and implement the turnaround plan,” Nghikembua said.

Asked why the board’s decision amounted to defying the Cabinet, Nghikembua said he does not speak on behalf of the executive.

“I am not qualified to speak on behalf of Cabinet, but can do so on behalf of the Meatco board. The board is not privy to the directive you quote,” he stated.

He continued: “However, I can confirm that the CEO’s contract is ending on 31 January 2025, and the board has put in place acting arrangements as shared with the media on Friday, 17 January 2025. 

The Board resolved already on 18 July 2024 not to renew the CEO’s contract, and informed the CEO as such on 19 July 2024. This decision was made after a robust process.” Findings by the Bank of Namibia show that Meatco has been underselling its products, compared to its local competitors.

Between 2018 and 2023, Meatco could have received around N$6.1 billion, instead of the N$2.1 billion it made during that period. Asked if this could have been one of the reasons why they opted not to renew the contract, Nghikembua was diplomatic.

“By not renewing the CEO’s contract, the board acted strictly within its mandate, in line with the law, the board’s fiduciary responsibilities, and governance best-practices,” he said.

People familiar with the matter say the Nghikembua-led board enjoys the full support of Shiimi at Cabinet.

“That is why they could defy the Cabinet decision as communicated by Simataa. Only Shiimi and President Nangolo Mbumba can overturn the board’s decision,” said a person briefed on the matter.

Efforts to get comment from Mushokabanji yesterday were futile as his phone went unanswered. Mushokabanji, however, has made terms with his imminent departure. 

“What I know is that my contract is coming to an end… I will respect that,” Mushokabanji was quoted this week.

Threat

Meatco faces an existential threat, particularly brought about by emerging competition as larger producers prefer spreading their cattle delivery between different players, a report shows.

This detailed analysis is contained in Meatco’s Turnaround Plan, seen by this reporter.

The report contains findings from the reports on the comprehensive review of Meatco’s business performance, business plan and financial model performed by Ombu Capital, as well as a report issued by the Bank of Namibia.

“Emerging competition is a key threat, as larger producers are currently spreading their cattle delivery between different players. They still utilise Meatco because they have the appetite to absorb late payments, but have begun moving away to emerging competitors like Beefcor and the planned producer-owned Savannah Beef abattoir,” the report states in no uncertain terms.

While Meatco managed to reduce employee costs, a chunk of highly-skilled individuals was lost in the retrenchment exercises implemented. This led to an increase in the use of fixed-term contractors, especially since 2022.

The added contractor costs often come at a premium per person, compared to the costs of full-time employees. Meatco’s troubles are glaring, as its asset utilisation has reduced significantly since 2016, which was followed by the closure of the Okahandja abattoir.

Moreover, the Windhoek Abattoir and the Okapuka Tannery are both currently operating at 20% capacity.

GPS

Another Meatco challenge relates to sales, marketing and distribution, which worsened during the 2023/2024 financial year, the document showed.

It exacerbated the operational challenges of the entity.

“In the past, Meatco had an exclusive marketing agreement with a company called GPS (Global Protein Solutions). The agreement was that Meatco’s products will be marketed to clients in Europe, Norway, the United Kingdom, South Africa, Asian markets and all new markets developed with the assistance of GPS. The said agreement came to an end in April 2023. Meatco now sells partially through traders, and directly to clients in these markets,” the report found.

Ironically, while Meatco discarded GPS, the company could be the Biblical stone that the builders rejected but later became the cornerstone, industry players say.

This is after Savanna Beef, Meatco’s biggest rival, has secured a sales and marketing agreement with GPS – even before setting up shop – to provide further access to global beef markets.

That relationship between Meatco and GPS lasted for over 15 years.

Neglect

In addition, the direct benefits to the communal farmers from amounts spent by the government in the beef sector are negligible, particularly those north of the veterinary cordon fence, known as the red line, the report stated.

“Despite GRN spending over N$750 million in supporting Meatco and abattoirs in the Northern Communal Areas (NCAs) over the last three years, direct proceeds or revenue to the NCA farmers amounted to only N$50 million for the period between 2021 and 2023,” it added. What is also worrisome is that in the southern part of the red line, communal, emerging commercial and resettled farmers constitute less than 5% of the producers delivering directly to Meatco.

“Meatco’s performance since 2010 shows that its market share reduced from a high of 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 report said.

It continued: “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 of 61% in 2022 and 55% in 2023.”

ICU

Back in 2023, agriculture minister Calle Schlettwein described Meatco as an entity in the intensive care unit. 

The findings further paint a bleak picture of Meatco’s fortunes. 

It is an entity that could have closed shop, had it not been for government bailouts. The government, directly and through the Development Bank of Namibia (DBN) debt facilities, has provided support to Meatco over the last three years, amounting to N$1 billion as of 30 November 2023.

The history of Meatco’s interest-bearing loans shows a move away from the commercial banks to 100% of interest-bearing loans being held by the DBN during the 2023 and 2024 financial years. 

The government settled Meatco’s debt facilities to the DBN, amounting to N$530 million, during October 2023, and has extended direct financial support to Meatco amounting to N$83 million during the 2023 financial year, and a further N$135 million during the 2024 financial year.

The remaining loan from the DBN, amounting to N$250 million and extended during November 2023, is guaranteed by the government.

“The above points to a company that has been unable to trade on its own without the continued financial support provided by the government over the last three years,” emphasised the report.

-emumbuu@nepc.com.na