The Meat Corporation of Namibia (Meatco) says it is sailing off the turbulent waters after it paid off debts totalling N$634 million it owed to two local banks.
The company, which has been experiencing financial troubles for many years, is now working towards settling a N$400-million debt to the Development Bank of Namibia (DBN).
Meatco CEO Mwilima Mushokabanji said the firm paid N$540 million to the First National Bank, N$94 million to Bank Windhoek, respectively.
Meatco incurred these debts after operating on overdraft and borrowing to offset other expenses, at a time the company was recording losses.
“This was a turnaround through a debt driven strategy in which we were able to settle the owed amount. This was creating a problem for the institution over the years for underperforming, as it even reached a point where we had a bad relationship with the banks and were no longer willing to do business with us because our debt-to-equity ratio was extremely unhygienic,” he said, adding that the loans date back as far as 2011.
“However, with this debt-driven strategy of debt-equity ratio, we are certain we will also settle the remaining N$400 million with DBN. If we were able to pay off the other banks, what will stop us now when we are focused on one debt? I am also happy to say that for the last two years, Meatco has operated without an overdraft from any commercial bank, while simultaneously servicing the existing debt then. These are historical debts, but we managed.”
In addition, he said, Meatco has now retained the assets such as the abattoirs, feedlot, office building as well as stock and data, which were attached to the bank.
Meatco recently incurred losses of N$206 million before tax, and subsequently the government advanced a N$200 million financial injection.
“The N$200 million is not a loan, but a financial injection we received from the government even though we got such funds from DBN. The government will be the one repaying DBN,” clarified Mushokabanji.
“This is a public institution, and we are mandated to stabilise the industry, in the past five years where we had droughts, farmers were shaking and wondering where they are going to sell, but we paid them N$2 billion so far since 2016, but this was specifically to farmers south of the Cordon Fence. It was necessary because we need to pay a competitive price in order to boost the primary producers because they are cardinal to our operations and also they are employers of thousands of Namibians.”
Therefore, he said, in our strategy we have made it a priority to be a net exporter and not an importer, on that note we don’t want to see the export of livestock, by doing so we are exporting jobs.
Mushokabanji revealed that about 250,000 hoofs are exported to South Africa.
“This cannot continue anymore, we should be an industry that exports finished products, instead of raw material. Imagine exporting to South Africa, then later importing meat products worth N$3 billion, our own meat, it doesn’t make sense. Even in other markets where we trade, our competitor is South Africa, competing with us with the same meat from animals we exported raw to them,” he lamented.
The CEO further said the past two years were most difficult following droughts and Covid-19, as in 2019/20 the nation saw 50% of the 2,5 million herd of cattle being slaughtered to avoid a catastrophe of losses.
“Therefore, this meant that the succeeding years were going to be very difficult, because farmers now had to restock and have enough animals before they can sell again,” he explained.
Meatco in 2019 paid N$1.1 billion to the farmers from the N$1.7 million income generated, this, the CEO said, was to strengthen the farmers and also empower them to earn more.
Mushokabanji said Meatco slaughtering was reduced from 120,000 cattle per annum to 36,000 and before declining further to 35,000.
“How can we make profit if the throughput is very low? For us to remain stable and afloat we at least need to slaughter 60,000 cattle per annum. Last year we only managed to slaughter 17,000, but we are glad the situation is improving as to date this year we have slaughtered 28,000,” he said.
As a result of the underperformance Meatco slashed its workforce which resulted in an annual saving of nearly N$40 million in remuneration. In addition, the company’s administrative costs were reduced by 2% from N$167 million to N$163 million, while no salary adjustments were made to senior and middle management.
“Another strategy we initiated was market reduction, creating a leaner staff complement, because it was not sustainable having a huge workforce, yet you are slaughtering very few cattle, so we had to downsize to remain efficient. This downsizing saw monthly remuneration reducing from N$14 million in 2018 to N$11 million in 2022,” he said.
Currently, Meatco has a permanent staff complement of 577, a reduction from 975 in 2018.
