The Meat Corporation of Namibia (Meatco) is about to launch a new business model for its operations in the Northern Communal Areas (NCAs) aimed at providing better and more cost efficient services to communal producers.
This business model is Meatco’s new strategic approach to curb the recent operational losses of close to N$43 million in 2014/15. These losses were expected to be N$53 million in 2016 if Meatco continued with its operations in the NCAs. However, even while NCA abattoirs were closed due to foot-and-mouth disease (FMD), Meatco still incurred losses of up to N$12.9 million until the end of December 2015 due to overhead costs alone.
Meatco took over the management of these government-owned abattoirs in Oshakati and Katima Mulilo from the National Development Corporation (NDC) in 1991/’92. However, in 2011 the management agreement of said facilities was converted to a commercial lease agreement at a cost to Meatco. The financial losses incurred by Meatco between 1991 and 2014/15, is estimated to be around N$354 million.
This situation prompted Meatco members and the board to instruct management to develop a new business model to address financial losses while at the same time guarantee Meatco’s continued presence in the NCAs.
Since Meatco was compelled to reconsider the lease with government, Meatco decided not to renew said agreement. This intention has been communicated to the Ministry of Agriculture, Water and Forestry (MAWF) as well as other stakeholders.
Schedule A, Part 1 b (ii) of the lease agreement provides for the possible extension of the lease by government. In terms of this clause, the Ministry on Meatco’s request may extend the agreement by not less than 6 months prior to the expiry of the initial period.
This means that Meatco should have given notice to the MAWF of its intention to request the extension of the agreement in September 2015. Since Meatco has not done so, the agreement will lapse on 4 March 2016.
Meatco’s management developed various options that are in line with the objectives set out in the Meatco Act, which are:
i). “To serve, promote and co-ordinate the interest of the producers of livestock in Namibia, and to strive for the stabilisation of the meat industry of Namibia in the national interest”; and
ii). “To rationalise abattoirs and related factory activities, and conduct and manage such business in an orderly, economical and efficient manner”.
It is in the spirit of the second objective that Meatco’s board and management deliberated on ways to reduce financial losses in the NCAs. The board of directors considered these options at their meeting on 13 August 2015, and resolved to pursue a new business model. This new business model was communicated to the MAWF, management and the Namibia National Farmers Union early in November 2015. Subsequently, as key stakeholders, they also had the opportunity to comment of the new business model towards the end of November 2015, allowing Meatco’s board to approve it on 5 December 2015.
New Business Model
Our new business model – a Mobile Slaughter Unit – is adapted to the unique circumstances of our communal producers in the NCAs and aims to bring slaughtering services closer to farmers in these areas. In this way Meatco continues to maintain its statutory obligation and also addresses operational losses which have accrued in running the northern abattoirs which was not economical or efficient as prescribed by the Act. The benefits of the mobile slaughter unit are:
A decrease in transport costs for producers as the slaughter unit will go to farms / villages. This means that the abattoir goes to farms and producers will not need to transport cattle over long distances.
Only core slaughter staff will be employed while fixed-term seasonal support staff will be sourced in the villages where slaughtering will take place, thus creating employment locally.
Operational flexibility, as the mobile slaughter units allow any amount of cattle available to be slaughtered with ease.
Stimulating local entrepreneurship, by selling offal directly to villagers and SMEs.
A reduction of operational costs, since a mobile slaughter unit costs a fraction of a fixed abattoir.
The opportunity to deploy the mobile unit in the areas South of the Veterinary Cordon Fence in case of future FMD outbreaks in the NCA.
The opportunity to deploy mobile units for game slaughtering during the hunting season. This will eventually allow Meatco to capitalize on a new business and income stream through game meat.
The new mobile abattoir (one mobile unit and not 5 as reported earlier) is expected to be operational by early July 2016. The future demand for slaughter will determine the amount of units to be ordered and deployed. Consultations with other key ministries and stakeholders on the new business model are ongoing.
Resumption of slaughter in 2016
Meatco is well aware of the crucial need for farmers in the NCAs to resume marketing their livestock following the double-sword of drought and the FMD outbreak in 2015.
In this regard, Meatco is waiting for a crucial meeting of the meat industry on 10 February 2016. This meeting will be attended by all stakeholders and is aimed at spelling out the new rules for marketing livestock in the NCA following the FMD outbreak, while addressing possible markets for beef originating from the NCA.
Meatco operations will be guided by the outcome of this industry meeting. When the new rules are in place, Meatco will resume buying cattle from communal farmers in the NCA.
While awaiting the arrival of the mobile slaughter unit, Meatco will keep those cattle in the quarantine camps, depending on the availability of grazing and the overall condition of such camps.
Meatco has 46 staff members employed in the NCA on a fulltime basis, with some that will be affected by the new business model. Meatco is in the process of identifying these staff members, who may be absorbed into other Meatco operations in the NCA and South of the Veterinary Cordon Fence. Meatco will ensure that the provisions of the Labour Act are adhered to and all relevant institutions required to be notified are properly and timely informed.
Cattle in the Northern Communal Areas.
The Veterinary Cordon Fence in the NCA’s of Namibia