Minister of finance and public enterprises Iipumbu Shiimi says the government pumped N$700 million into the Meat Corporation of Namibia (Meatco) from 2021 to 2023 – money which could have been spent on other national priorities.
Shiimi disclosed this figure to The Namibian on Friday.
“Between 2021 and 2023, the government has made available about N$700 million to service and repay Meatco’s debt obligations, as well as to support its operations,” he said.
The finance minister said Meatco is eating up taxpayers’ money meant for basic services.
“Such resources are desperately needed to meet urgent priorities in social sectors such as education, health, housing, and social protection,” he said.
Shiimi said the ministry is concerned about the continuous pressure on the government’s finances to save Meatco.
“We acknowledge that Meatco’s operations have not been sustainable for the past few years. As a shareholder, the ministry continues to be concerned about the continuous pressure on government finances stemming from Meatco’s suboptimal performance,” he said.
YEARS OF WASTE
The Namibian two weeks ago reported that the Cabinet instructed Shiimi to renew Meatco chief executive Mwilima Mushokabanji’s contract.
Shiimi’s ministry appears to be against that renewal, because of concerns around the meat parastatal’s performance.
Meatco this year announced it has made a N$109-million profit.
However, the finance minister said its operations have been unsustainable for the past few years “despite what has been reported occasionally in the media”.
Shiimi said Meatco has consistently struggled to pay its debt with commercial banks.
“The ministry of public enterprises has observed these persistent losses at Meatco, which left the company unable to honour its debt commitments,” he said.
He said the ministry subsequently stepped in to facilitate government-guaranteed funding through the Development Bank of Namibia (DBN).
“This DBN funding allowed Meatco to clear its outstanding loans with commercial banks and provided short-term working capital to support its operations.”
THE FIX
Shiimi said the ministry has established a task force to address Meatco’s financial problems.
“In an effort to find a long-term sustainable solution to Meatco’s financial challenges, the ministry set up a cross-institutional task force, comprising staff from the finance ministry, the Ministry of Agriculture, Water and Land Reform, Meatco, and the DBN,” he said.
According to Shiimi, the task force brought in Ombu Capital as a technical consultant.
“Ombu Capital was hired to investigate the root causes of Meatco’s financial losses and to propose options for a sustainable operating model,” he said.
Shiimi said Ombu Capital produced a report that assessed Meatco’s internal operations and a broader analysis of the beef sector’s value chain.
After consultations with key industry players, including communal and commercial farmers, the Cabinet enriched the strategy and directed the ministry to collaborate with Meatco, he said.
According to the minister, the turnaround strategy was enforced to make Meatco sustainable.
PARTLY PRIVATISE
A 14 June 2023 report, titled ‘Meatco Review Final Report’, by Ombu Capital’s financial consultant Vetumbuavi Mungunda, advised the government to partly privatise the meat company and surrender 85% to the private sector.
Mungunda suggested the creation of an entity called New Company (NewCo), which would be 85% owned by private investors and the industry, with Meatco holding the remaining 15% stake.
According to Mungunda, this would then allow private investors to provide a contribution of N$300 to N$400 million.
“If the proposed new model is approved, the private investor will be required to provide equity contributions, including working capital to the new entity for an amount of between N$300 and N$400 million,” he said.
Mungunda did not respond to questions sent to him last Thursday.
The Namibian last year reported that Meatco chief executive Mwilima Mushokabanji said the company needed time to recover financially.
This comes as employees staged a protest at Meatco’s head office in Windhoek, voicing their frustrations and threatening to go on strike if their grievances were not addressed.
“It’s not as if we are not giving you anything. We just want you to give the business time to recover,” he said.
“I think we can always look at that once the business has recovered moving forward into the future,” Mushokabanji said at the time.
The Namibian this year reported that Meatco’s historic debt keeps eating away at its revenue.
In May the then interim board chairperson, Adolf Muremi, said historic debt has negatively impacted the company.
“Meatco’s business model is profitable at its optimal capacity, however, the Windhoek abattoir, which has a capacity of 120 000 cattle per annum, has been underutilised,” he said.
According to Muremi, Meatco sold 11 042 tonnes of beef and generated revenue of N$865 million – an increase from N$752 million during 2021/22.
He said Meatco also reported a loss of N$118 million, showing improvement from the previous year’s loss of N$206 million.
Muremi directed the latest questions to board chairperson Sakaria Nghikembua, who this week said he was unavailable to comment due to a board meeting.
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