Events at the embattled Botswana Meat Commission culminated with the sacking of some Board Members, and cabinet approving P104 million as a top up loan in an attempt to stabilize the beef industry.
Information passed to the Sunday Standard indicates that BMC was no longer able to meet its financial obligations with cheques written to cattle suppliers no longer being honored.
There was also a standoff between Chief Executive, David Falepau, and the Board. Other Board Members wanted the Chief Executive sacked, but Government backed him on account of the reforms he has brought to the beef industry since he arrived a little less than two years ago.
Instead, the shareholder opted to get rid of some Board members.
Board members whose stay at BMC has been terminated in the Botswana Meat Commission Board with immediate effect are former Chairman, Norman Wright, Niel Fitt, Rowland Munger and Douglas Kono.
Ian Thomson has been appointed the new Chairman of the Board while Thapelo Matsheka becomes the Vice Chairperson.
Other new faces are Tekolo Modungwa, Joyce Keitumetse Maphorisa, Legodile Serema and Leonard Morakaladi.
Permanent Secretary in the Ministry of agriculture, Marcus Chimbombi, has been re-appointed to the Board with immediate effect as the representative of the Ministry.
In an interview, the BMC Corporate Communications Manager, Tiro Kganela, said the Commission’s recent difficulties are a result of a number of factors that have conspired to undermine the trading conditions.
Kganela said the outbreak of Foot and Mouth last year was one of the factors.
He said there was a closure of feedlots resulting in BMC slaughtering only 91 000, a big shortfall from the 200 000 that had been projected.
As if that was not enough, BMC was delisted from the lucrative European Union Market.
He said despite these disruptions on the BMC supply chain, the Commission continued to honour the export parity price code under which BMC pays prices pegged to the South African market. This is over and above the fact the cattle prices increased by 19 percent in real terms.
There was also an unpaid overdue debt of P20 million from creditors in Zimbabwe.
Kganela said these factors conspired to make the BMC financial situation untenable.
At the end of 2011, Botswana started the slaughter of cattle about two weeks late as a result of maintenance work that had to be done.
The issue of access to the European Union market had also not been resolved, adding to the already uncertain and difficult trading environment.
Sunday Standard can confirm that attempts by BMC management to delink BMC prices from those of South Africa were rejected by the board as were attempts to reduce cattle price.
Up until the minister sacked some of them this week, the board was heavily skewed in favour of the white cattle barons, especially those from the Ghanzi farms.
Kganela said going forward there are major governance issues that have to be resolved regarding the relationship between Management and the Board.
Key among these issues is the need to allow the management the leeway to reduce and increase cattle prices based on the financial situation of the Commission.
“This is a major strategic decision that industry needs to make a decision on otherwise the long term viability of cattle industry will remain uncertain and fragile.
Kganela said there is also the need to have contingency funds that will take care of emergency situations as that which BMC found itself in the last few months.
One way of doing it is by establishing a statutory fund which is replenished by levying a fee from every animal sold to BMC.
“In some countries, the industry under government statute, levies farmers directly to maintain an emergency contingency fund which, when drawn down, is matched dollar for dollar by Government. In Botswana, it appears historically that directly or indirectly through BMC, the GOB has funded most of the losses incurred by such extreme market or supply volatilities,” said Kganela.
He said entering 2012, with market assurances for the EU still unresolved and a 2-week delay in the commencement of slaughter at Lobatse, “we hit another cash flow shortfall last week”.
He said BMC was in turn saddled with a significantly increased debt to service from 2011, which brought the Commission very close to a tipping point.
“These events were unforeseen and led to farmers’ cheques being dishonored by the Banks last week. This week, we received funds from the GOB to address the current cash flow position.”
Because of the vulnerable financial position it finds itself under, BMC has had to take a drastic step of suspending its much cherished direct purchase under which large sums of money are advanced to big farmers to guarantee supply of cattle to the abattoirs.
“We had to suspend direct purchase for two reasons. The first was because funds were not immediately available to purchase the cattle on 48 hour terms and secondly, there are already an estimated 10,000 cattle in feedlots overdue for slaughter. It would have been irresponsible to purchase more cattle under the direct purchase until the current inventory in feedlots has been at least partially liquidated.”
On whether farmers can now be in a position to trust that BMC will be able to pay them if they delivered their cattle, Kganela said cabinet has already stepped in by approving P104 million to keep BMC running.
“BMC viability was never an issue. The recent negative cash flow position is the result of continuing trading losses in 2011 that were not averted due to historical governance processes inherent between the Board and Management that prevented a reduction in cattle prices to farmers in the face of major market and supply disruptions.”
He said going forward the Commission will make it a point to approach suppliers with an annual budget to avoid major unplanned surprises.
“Based on this budget, we intend to report to industry and stakeholders on a quarterly basis. This will avert any surprises as we will all know if we are trading viably,” said Kganela.