The Meat Corporation of Namibia (Meatco), is facing significant financial challenges, according to a recent organisational review conducted by consultancy firm Ombu Capital.
The review was commissioned by the Development Bank of Namibia (DBN), which recently provided a N$200 million loan to the company.
The review found that the combined impacts of low slaughter numbers, rising producer prices, and high fixed overhead costs have put significant pressure on Meatco’s cash reserves and ability to operate on a month-to-month basis.
The report noted that Meatco is currently slaughtering only 2,250 animals per month, far from the 5,000-6,000 required for the company to break even.
To reach this level, the company will need an additional N$192 million in funding, excluding DBN capital and interest repayments.
Meatco’s current low throughput is expected to result in a monthly operating loss of N$22 million.
The exclusion of deferred tax assets and the revaluation reserve is estimated to result in liabilities exceeding assets by N$238 million, potentially leading to technical insolvency for the company.
Analysis of Meatco’s performance since 2010 shows that its market share has declined from 48% in 2015 to just 16% in 2022.
“While the prolonged periods of drought experienced between 2015 and 2020 impacted the overall beef value chain, it meant higher slaughter numbers for export abattoirs. The decline in market share is therefore a steady trend irrespective of peaks in years of drought.”
At the end of the 2022 financial year, the company’s current liabilities exceeded its current assets, leading to commercial insolvency and difficulties in meeting creditors’ payments.
“This position intensified during the period March – July 2022 when producers where not being paid on time. At end July 2022, this position improved temporarily due to the receipt of the N$200 million from DBN.”
According to the review, Meatco’s debt facilities have been moved from commercial banks to DBN, but this has not significantly improved the company’s cash position or month-to-month trading ability.
Finance Minister Ipumbu Shiimi acknowledged the report and the challenges faced by Meatco and emphasised the importance of the company to the agricultural sector, stating that its absence would leave a large gap in the livestock sector.
“Meatco is facing certain challenges and therefore I think it is important to understand that why those challenges are experienced and what are the main causes of the challenges and how can they be resolved, thus we have enlisted Ombu Capital to help us unpack the challenges, advise and give recommendations to us as to how best we can support Meatco so that it can still deliver on its mandate,” he said.
“We also have to recognize the importance of Meatco as an entity as the corporation is very critical to the well-being of the meat industry and we want to see stability in the meat industry because if there is no stability in the meat industry, there will a negative impact on the agricultural sector as the sector is predominantly dominated by the livestock sector and therefore Meatco is critical to the livestock sector.”
Agriculture, Water and Land Reform Minister Calle Schlettwein recently described Meatco as being in critical condition and operating on life support. He called for an immediate decision on whether the company is still viable and needs to be saved or if it’s time to cut losses. Schlettwein also stated that Meatco has failed farmers and that they have taken matters into their own hands by developing their own abattoirs.
Schlettwein emphasized the importance of unlocking market opportunities and restoring effective production and market conditions for abattoirs across the country.
The Beef Value Chain Forum (BVCF) is also planning to start construction of its new export beef-processing facility, Savanna Beef Processors, in May.
