Following a recent outcry by farmers over delayed payments from BMC, the beef industry monopoly has finally admitted that it is swimming in debt. Cash strapped BMC has revealed that apart from farmers, it also owes the government and commercial banks large amounts of money. SUNDAY STANDARD reporter, VICTOR BAATWENG breaks down BMC’s close to P1bln debt.
Botswana Government ÔÇô P594 million
In 2011, dishonesty, mismanagement and negligence by the Ministry of Agriculture (MOA)’s Department of Veterinary Services (DVS) forced the European Union (EU) to remove BMC’s abattoirs from its list of approved export abattoirs. DVS squandered the trust bestowed upon it by the EU, which had designated it as Botswana’s “Central Competent Authority,” responsible for guaranteeing that beef meant for the EU met the set standards for animal health, identification, movement control and traceability as well as abattoir and meat hygiene.
DVS failed to enforce compliance with the EU standards. A January 2010 review of Botswana’s LITS project by the Food Agriculture Organization (FAO) also found that the bolus traceability system was in a state of systemic failure. On Thursday, Chief Executive Officer (CEO) Akolang Tombale admitted that government injected a lot of cash into BMC during the delisted period in 2011/12 when there was virtually no production at its abattoirs.
“We owe government around P594m,” he said.
First National Bank Botswana (FNBB) ÔÇô P125m
BMC also borrowed P125 million from FNBB to upgrade its Francistown abattoir, which was shut down in 2011 after being declared unhygienic by DVS. In its inspection report at the time, DVS said the abattoir was not compliant with the Livestock and Meat Hygiene Act while its structures had defects that could result in its subsidence and collapse. On Thursday, Tombale confirmed that BMC continues to service its loan obligation to FNBB with a P45m annual installment, which adds to the commission’s cash flow problems.
BancABC ÔÇô P50m
Still in 2011, BMC re-opened its Maun abattoir after closing it in 1990 following an outbreak of cattle lung disease in Ngamiland. Prior to the re-opening, BMC had always said it was expensive to operate the Maun facility due frequent Foot and Mouth Disease (FMD) outbreaks in the area. Currently beef from Ngamiland, Boteti and part of Bobirwa has been banned from the EU market because of FMD. Tombale said Thursday that the Commission borrowed P50m from Banc ABC to resuscitate the Maun plant.
“We are currently paying P638, 278 a month to Banc ABC,” said Tombale.
Standard Chartered ÔÇô P300m
In August 2014, Parliament approved a request by BMC to obtain a P300m facility from Standard Chartered Bank. The loan would be used to speed up payments to farmers seeking cash on delivery for their cattle. When requesting Parliament to approve the loan guarantee, Minister of Finance Ken Matambo cited Section 22 of the Public Finance Management Act-2011, which empowers the Minister to extend a government guarantee if the facility to be guaranteed is believed to be in the public interest.
“After evaluation of the BMC request for a government guarantee and assessment of its financial performance, it was determined that a guarantee should be extended to cover the loan facility of P300m sought by the Commission,” Matambo said in August last year.
Tombale says the P300m facility adds to BMC’s debt and increases the cost of borrowing.
Farmers ÔÇô Undisclosed
The BMC has admitted to owing farmers an undisclosed amount of money due to a costly short term financing model which is worsened by delayed sales proceeds. On Wednesday, Acting Minister of Agriculture Patrick Ralotsia told Parliament that the Commission is facing cash follow challenges, but disputed that BMC is insolvent. Tombale also explained that delayed payments to farmers were caused by a serious cash flow problem at BMC.
“We take other people’s money and tie it in cattle stick whose proceeds come five to six months later. This therefore creates a serious cash flow problem for us,” said Tombale.