Amid persistent talks regarding the potential downfall of Meatco and the growing demand for restructuring, CEO Mwilima Mushokabanji has expressed confidence in the company’s progress and is optimistic about its resurgence.
Despite facing financial challenges in recent years, with minister of agriculture Calle Schlettwein describing the company as being in a critical state and finance minister Iipumbu Shiimi advocating for its restructuring, Mushokabanji asserts that Meatco is steadily making its way towards recovery.
While acknowledging a challenging financial period over the past two years, he confidently said, “When considering the performance of our business, it is evident that we are firmly on the right path. We have successfully established a resilient organisation, capable of weathering any potential liquidation threat.
“There is a bright future for Meatco,” Mushokabanji told New Era in an interview.
In recent months, discussions surrounding the potential downfall of Meatco have spread rapidly across various platforms, capturing widespread attention. Experts from diverse backgrounds have actively engaged in the conversation, offering insights on potential strategies to salvage Meatco’s future.
Adding to that is the forensic report by Ombu Capital, a firm owned by former Standard Bank Namibia CEO, Vetumbuavi Mungunda.
Mungunda’s report dated 22 March 2023, portrays a bleak future of the entity.
According to the report, “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.”
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,” reads the report.
It further indicates that 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.
During the audit, it was discovered that Meatco’s debt had reached an all-time high, approaching nearly N$1 billion.
Nevertheless, Mushokabanji remains steadfast in his optimism, confidently stating, “The past three months have demonstrated the boundless potential of Meatco.”
Further dismissing the report, asserting, “It doesn’t hold water.”
“In layman’s terms, if you slaughter 5 600 cattle in a month for 12 months, that translates to 66 000 cattle, and you will break even,” explains Mushokabanji. “But if you slaughter 1 000 cattle in a month, that will translate to 12 000 in a year, and you will definitely make losses. So the number of cattle that come to the abattoir determines to a large extent the performance of the business.”
He elaborated comprehensively, stating, “practically, in May and June, we slaughtered more than 8 000 cattle and made a profit of N$180 million. So, as long as you are slaughtering above 7 000, you will be able to make a profit. The market is not a challenge, so to argue that Meatco is making losses on a weekly basis doesn’t hold water.
“Meatco will make losses on a weekly basis when there is no raw material because the variable cost and the operational cost eat up your margins. But if your cattle numbers are above 5 600, you are able to make a profit, and that is why we have been having a positive performance,” he said, adding that Meatco is directing its energy towards exploring and maximising these promising opportunities.
He stated that natural disasters such as severe droughts, floods, and disease outbreaks have led to a decrease in the country’s cattle population, impacting the company’s financial position, particularly in the last two years.
However, he pointed out that despite slaughtering fewer cattle the previous year, the company’s annual financial reports showed a 15% increase in revenue.
He further mentioned that as of April, they had achieved a break-even point, and in May and June, they made a profit.
In addition, he highlighted several recent achievements, including accessing untapped markets within the country, allowing products from the northern regions to be consumed in the southern areas.
He also mentioned the discovery of new markets for communal farmers in Ghana and Angola, while emphasising the ongoing efforts of a team exploring opportunities for northern farmers in the Middle East.
When asked about the potential pressure faced by Meatco, particularly with the emergence of Savanna Beef Processors, he said Meatco has managed to maintain its markets and continue exporting to countries like China, Europe, and the USA.
“Our ability to generate revenue and maximise returns for farmers involved in primary production serves as a source of assurance for the organisation. We welcome competition, competition is good and we can co-exist,” he said.
Asked about the rising talk of privatisation, Mushokabanji said that is not the way to go for Meatco and for the country.
“We strongly believe that public-private partnership can help. To make any role of agriculture competitive, you need the role of the private sector and the role of government and that is what we believe in,” he said.
Way to go
To keep Meatco’s head above water, Mushokabanji said what needs to be done is already what Meatco is doing.
“One of the sources of sustainable competitive advantage is throughput. So, there are interventions that have to be in place to make sure that Namibia’s agro-processing industry remains relevant and sustainable. One of them is the need for 66 000 cattle to make sure that we break even, anything more than that will begin to be profitable,” he said.
He added, “You cannot be allowing to export 250 000 cattle when your own processing plant is dry and have no throughput, so what has to be done is exactly what we have done, which is to make sure we invest in our green schemes so that as a country we are able to produce our own feeds and not rely on other countries, like now we buy feed in South Africa and Zambia.
“Secondly, we need to make sure we have made investments in fodder production.”
He emphasised a need to turn around the industry from being a net producer of raw materials to being a net producer of value-added products.
“That way you create employment, generate more revenue from foreign exchange earnings and contribute to GDP and that is the strategy Meatco is driving,” he noted.
Further dismissing talks about organisational changes, Mushokabanji said any other changes do not make sense other than the strategy they are operating on.
“We are making sure that we build a competitive value chain, fodder production in the country and make sure we don’t export live animals and we keep them in the country through our backgrounding so that all out meat processing plants in the country are able to operate sustainably, competitively and that is what is good for Namibia,” he said.