As part of its reinvention process, the Botswana Meat Commission (BMC) now requires agents who sell its beef to foreign markets to pay cash up front.
Following a series of mishaps, the Commission found itself in very bad financial shape. Figures provided by the Chief Executive Officer, Dr. Akolang Tombale, show that in 2011 the abattoir made a loss of P233 million and P300 million the following year. He describes these as having been the “worst years” in BMC’s history. The Commission is getting back on its feet, with its revenue shooting up to P1.1 billion last December. This stellar performance owes partly to a level of financial prudence that reduced risk quite significantly.
In the past, companies that bought and sold BMC’s beef to foreign markets could procure stock on credit, in some instances piling up debt that burned a huge hole in the abattoir’s finances. The Zimbabwean government also got to take advantage of this lax policy, importing hundreds of live cattle but failing to pay up at the agreed time. In the new dispensation, nothing is being left to chance. Tombale says that after sealing a deal with BMC, agents are required to buy beef from BMC and sell to the market they could have identified.
“Say you have found a market in Ghana. We know what the prices there are. We take you as a customer: we sell to you and you pay cash,” says Tombale, adding that as the relationship continues the terms may be relaxed.
At the moment there are two agents who are doing this sort of trade with BMC. The third, who was supposed to serve the Nigerian market, is still experiencing some problems and has yet to start doing business with BMC.
The same goes for feedlotters. Coming into BMC in 2012, Tombale found a situation where feedlotters were given financial assistance that the company could ill afford. All along the arrangement was that the Commission assisted them with loans to set up and run a feedlotting operation, placing greater risk on the former than the latter.
Tombale says that because of where BMC was financially, this arrangement was untenable. However, that didn’t change a situation where the Commission needed feedlotters who in turn needed financial support. The solution was to negotiate with banks to take up the financing of feedlots while BMC acted as the guarantor.
“We assured the banks that we will buy the cattle from the feedlots,” Tombale says.
The result was that banks are the ones that now give suppliers loans to operate feedlot and the new arrangement has eased financial pressure on BMC.