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Monday 25 May 2020
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Meatco loses over 100 million in one month

By Staff Reporter

 

In 2018, the Meat Corporation of Namibia slaughtered 62 000 cattle resulting in a loss of N$ 18 million. In 2019/2020, the corporation slaughtered 116 000 cattle, yet this resulted in a loss of N$ 100 million despite the projection of N$ 30 million in profit in December 2019.

 

These results provide context to an increasing fued with the outgoing board and Public Enterprises Minister Jooste. Acting Chairman of the Meatco board Ronald Kubas wrote to Prime Minister Kuukongelwa on 28th February raising concerns about governance matters at Meatco, allegedly purported by Jooste. Jooste on 16 December 2019 became the line Minister for all commercial public enterprises and Meatco was so classified. This effectively means that Meatco must make commercial sense and be in a position to pay dividends to its shareholder, in this case the State.

 

The Ronald Kubas-led board is at pains over Jooste’s decision to clip its wings by taking away its powers to take any major decisions that could have long term financial repercussions on the entity, until such a time that a new board is appointed, The Patriot can reveal. Their term although expired on 15 February 2020, but Jooste informed the Board that they will remain in office until due process is concluded. As such, Jooste sees no need for the board to make any substantial financial commitments on behalf of Meatco as their term in office has already lapsed.

 

“This letter seeks to inform the Rt Hon Prime Minister regarding the ongoing concerns pertaining to governance matters at Meatco that require urgent intervention by Cabinet,” Kubas wrote to the Premier.

 

 

The tussle

 

The PEGA came into effect on 16 December 2019. “Meatco was classified as a commercial public enterprise henceforth resorting and reporting directly to the Ministry of Public Enterprises (MPE). Hon (Leon) Jooste also highlighted that the MPE will arrange a formal handover through the line minister in order to ensure a proper and smooth transfer,” Kubas told the Premier.

 

He goes on to cry foul, saying Jooste has now taken a step back by restarting the process of appointing a new Meatco board, although this process was already in the pipeline and at an advanced stage.

 

“Rt Hon Prime Minister at this juncture I wish to register my concern that the approach that Hon Jooste has taken, namely, reinvention of the process of appointing Meatco’s Board of Directors, a process which was already initiated and to my understanding concluded by the Hon Minister of Agriculture, Water and Forestry is flawed and would have drastic consequences on Meatco’s operations,” Kubas charged in the page grievance dossier.

 

Last week, Naruseb was replaced by Calle Schlettwein at the now enlarged Ministry of Agriculture as minister.

 

Kubas laments that “The longer the current board remains disempowered to make any significant strategic decisions and the longer it takes to induct a new, representative board in line with the tenets of good governance, continuity and affirmative action amongst others, the longer governance at Meatco stands compromised.”

 

Numbers don’t lie

 

For some reasons, according to insider, the financial figures at the meat corporation do not tally.  “During the severe drought period last year, when Meatco made a call to farmers to supply more frequently than usual, the corporation had the opportunity to build cash reserves that would carry them through the next 2-3 years”, a source who preferred anonymity told this paper.

 

“How then do the board appoint a CFO who is not even a chartered accountant? They appointed a marketing executive with little or no marketing experience and topped it off by appointing a CEO with no commercial qualification or experience. Incidentally, the CEO’s term commenced days before the current board’s term expires, after they had failed to conclude a permanent appointment for more than four years after Vekuii Rukoro was suspended,” the source questioned.

 

The Meatco board had at the time charged the then suspended CEO, following an investigation it had instituted against him as head of the meat processing and marketing company in August 2017.

 

In December of that same year, the corporation coughed up N$2.35 million in a settlement amount with Rukoro, to avoid a possible defamation lawsuit.

 

Ironically, the newly appointed CEO was a member of the board and part of the board human resource committee.

 

The loss

 

The Patriot, however is made to understand through impeccable sources that people familiar with the corporation’s dealings have been left scratching their heads, trying to make sense of the numbers as the financial situation at Meatco begins to emerge.

 

It is recorded that during the precarious drought of 2018/2019, government compelled farmers to reduce the numbers of their herd and adjust the number of their cattle to grazing land available.

Consequently, Meatco opened up its slaughter capacity and slaughtered around 116 000 cattle, even though the slaughter budget was 70,000 for that period.

 

“Meatco paid over N$1,1 billion to producers for the 2019/2020 financial year, which includes a premium of close to N$190 million above the South African parity price,” Kubas further told PM.

 

More so, during the financial year 2018/19 financial year, the corporation had slaughtered 62,000 cattle and recorded a loss of N$18 million.

 

The dust refuse to settle

 

Since the resignation of Rukoro, the meat corporation has gone through a series of acting CEO’s and have only in February managed to permanently fill that position. The dust has since refused to settle.

 

Could that be the reason why the corporation is making such a staggering loss and is neck-deep in debt?

 

Meatco is a meat processing and marketing entity, which serves niche markets locally and internationally with meat products.

According to its website: “Meatco purchases cattle from farmers engaged in extensive livestock farming conditions that lend unique characteristics to the corporation’s end-product, which, after being processed through the value chain, realises a significant premium in carefully selected markets across the globe.”

 

“How then, is the corporation showing a loss of N$ 100 million after slaughtering 110,000 animals in the last year? A projected N$30 million in profits in December 2019, turned into a N$100 million loss in February 2019,” the source charged.

 

Overall, despite the financial loss, Meatco is in the red to the tune of some N$750 million with First National Bank of Namibia.

Allegedly the corporation requested a N$500 million overdraft at the financial institution, which has swelled to three quarters of a billion dollars.

 

According to Kubas’ letter to the Prime minister, “Meatco financiers of working capital of about N$500 million, FNB Namibia has put Meatco on terms to settle same by extreme short notice, which has put the entity at severe risk. We were compelled to settle around N$200 mill on these facilities, whilst under advice/ directive by Hon (Leon) Jooste not to make strategic decision.”

 

The Patriot spoke to Kubas on the issues around Meatco. He requested that questions be sent to him via e-mail.

 

“One of MEATCO’s main objectives as per the Meat Corporation of Namibia Act is to market products within Namibia or elsewhere to the best advantage of the producers of livestock in Namibia. During the 2019/2020 financial year MEATCO paid 66% of its total revenue to producers compared to 61% in the prior year. Namibia experienced one of the worst droughts in decades in 2019, and if Meatco did not perform the vital role it did the impact of the drought would have been catastrophic. In an emergency the focus shifts to assisting the producers and ensuring the agricultural sector’s sustainability is not compromised to the extent of it collapsing. Building reserves remain a key strategic pillar for Meatco.

 

It is important to note that during the 2011 – 2013 period, around N$ 400 million was paid out of Meatco reserves through producer bonuses. Since then the Corporation struggled to rebuild its reserves. However, after the implementation of the turnaround strategy during 2018/19, the Corporation is aligning its operations to successfully implement its 5-year Strategic plan during the next four years with focus on building the reserves. During this entire period Meatco is proud to have operated without any government financial injection/shareholder financial injection which speaks volumes for resilience of the entity,” he said.

 

And further that “MEATCO applied for an additional overdraft of N$270 million in 2019/2020 financial year in order to purchase cattle from Namibian producers and thereby avoiding mass cattle

mortalities and losses from producers. MEATCO also repaid N$220 million of the additional overdraft during the 2019 and 2020.”

 

The genesis

 

Meatco is regulated under the Meat Corporation of Namibia Act, (Act 1 of 2001) with the purpose to serve, promote and co-ordinate the interests of livestock producers in Namibia.




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