The Namibian government is under increasing pressure to privatise the Meat Corporation of Namibia (Meatco) as concerns mount over the company’s  financial instability.

A recent report by Ombu Capital (Pty) Ltd, led by former Standard Bank Namibia Holdings CEO Vetumbuavi Mungunda, has put forth a strong case for privatisation to prevent the state-owned entity from collapsing.

Commissioned by the Development Bank of Namibia (DBN) in consultation with the Ministry of Finance and Public Enterprises, the report evaluated Meatco’s sustainability and proposed alternative business models to ensure its survival (Ombu Capital, 2024).

Ombu Capital’s report paints a grim picture of Meatco’s financial health, highlighting its insolvency, recurring losses, declining producer confidence, and unsustainable debt levels. 

The report outlines four strategic options: maintaining the status quo, cost-cutting, industry consolidation, and consolidation with specialization. The first two options were dismissed as unviable, while consolidation through a new business model was recommended as the most feasible approach to ensure Meatco’s long-term sustainability.

Under the proposed restructuring, Meatco would be transformed into a new entity, NewCo, with private investors and farmers holding a 75% stake. 

This new entity would operate through four specialised subsidiaries focused on procurement, abattoirs, processing, and marketing. The restructuring plan would require amendments to the Public Enterprises Governance Act of 2019 to facilitate the necessary changes.

The urgency of Meatco’s financial predicament is underscored by the government’s recent investments. According to a report by The Namibian, the government has pumped over N$700 million into Meatco over the past two years to support its operations and stabilise its finances. Despite these efforts, Meatco’s financial woes persist, leading to renewed calls for privatisation as a solution.

One key issue in the ongoing debate is the fact that Meatco managed to pay off its debts to commercial banks but had to borrow N$437.3 million from the DBN to do so. This manoeuvre has drawn criticism for merely shifting the debt rather than solving the underlying financial issues. 

As Agriculture, Water, and Land Reform Minister Calle Schlettwein pointed out, despite paying off its debts to commercial banks, Meatco’s financial position did not improve, raising concerns about the long-term viability of the entity under government ownership. Moreover, the report highlights the challenges Meatco faces due to the recent drought, which drastically reduced the throughput of slaughter cattle. This led to a pre-tax loss of N$206 million, with Meatco’s revenue plummeting from N$1.7 billion to N$752 million over two financial years. 

The drought’s impact on cattle availability has been severe, with Meatco only managing to slaughter 36 000 head of cattle in the 2021/22 financial year, far below the 60 000 needed to break even.

Despite these challenges, Meatco’s leadership remains optimistic about its strategy to stabilise the industry and expand into new markets. CEO Mushokabanji Mwilima has emphasised the company’s success in maintaining access to traditional export markets and developing new ones, such as China and the United States of America.Meatco is the only export abattoir in Namibia certified to export beef to the USA and China, a significant achievement given the stringent import requirements. Additionally, during the devastating drought between 2019 and 2020, Meatco paid more than N$2 billion to producers, contributing 50% to the livestock sector’s output and sustaining primary production during a critical period.

However, the debate over Meatco’s future goes beyond its financial struggles. Critics argue that Meatco’s role as the sole public livestock market for farmers, particularly those in previously disadvantaged communities, cannot be underestimated.

The potential privatisation of Meatco raises concerns about the impact on marginalised farmers, particularly in northern Namibia, where access to markets is crucial for their livelihoods. Minister Schlettwein has emphasised the importance of keeping Meatco under government control to ensure inclusivity and resilience within the industry.

On the other hand, proponents of privatisation argue that Meatco’s status as a parastatal has contributed to its inefficiencies and financial troubles. Economist Omu Kakujaha-Matundu has pointed out that state-owned enterprises in Namibia often suffer from a “culture of no consequences” and continuous financial bailouts, which do not address the root causes of their problems.

Moreover, according to Meatco’s latest annual report, the company’s balance sheet continues to reflect significant financial strain, with total liabilities exceeding total assets, raising concerns about its long-term solvency. The report also indicates that Meatco’s fixed operating costs remain disproportionately higher than its reduced revenue, making its current business model unsustainable without substantial restructuring.

In summary, the proposed privatisation and restructuring of Meatco present both opportunities and risks. While privatisation could inject much-needed capital and expertise into the entity, it also raises concerns about the future of Namibia’s meat industry, particularly for small-scale and communal farmers. The government’s decision on Meatco’s future will have significant implications for the industry, requiring careful consideration of both the financial realities and the broader social and economic impacts.

As Namibia grapples with these challenges, the fate of Meatco will be a litmus test for the country’s approach to managing its state-owned enterprises and addressing regional economic disparities.

*Lot Ndamanomhata is a graduate of Public Management, Journalism, and Communication. This article reflects his views and is written entirely in his personal capacity.