FRANCISTOWN – Despite the interventions that were put in place to try and sustain the Francistown Botswana Meat Commission (BMC) Plant which is currently making losses mainly due to low throughput of cattle, the Chief Executive Officer of BMC Chief Executive Dr Akolang Tombale says the abattoir is bleeding BMC millions of funds and it is better off closed.
Last year the loss making BMC made some interventions during its Francistown Farmers Pitso in a bid to reduce costs and sustain its Francistown operations. The interventions included among others, reduction of staff , usage of one crew for both slaughter and deboning, increase slaughter price to P23 per kg for carcasses of 180kg.
Addressing a BMC Baruakgomo Pitso in Francistown on Friday last week, Dr Tombale said that despite some of these interventions being implemented the BMC plant in Francistown continues to impact on BMC production as it is making losses.
“As per its operational history the average throughput for past 10 years was at 44 percent whereas the break even for the plant is at 85 percent. Gradual decline in slaughter numbers can also be noticed. This has contributed to poor performance of the plant and become uneconomical to operate,” he said.
Dr Tombale said BMC submitted a proposal to government in 2006 to mothball the plant as it was making losses and draining the cash flow. He added that however the government through the Presidential Directive cab.13 (a) 2006 advised that BMC continue to operate the plant and be reimbursed the losses year on year.
“P93 million is due from government for 2014 to 2015 losses. Except for 2006, the Francistown operations made continuous loss and eroded the net assets and cash reserves of the BMC. The highest losses were recorded in 2013 at P63 million, but currently stands at 49 million pula showing a gradual reduction in losses,” he said.
Dr Tombale said with the current state, cost of production and producer payments are more than revenue realization. In addition he lamented on poor quality of cattle with CDM of less than 200kg per carcass resulting in high cost of production. He explained that the industry sector requires a minimum of 220 kg.
“When considering the slaughter numbers, plant capacity utilization for 2015, Lobatse accounted for 78.8 percent, Maun 76.6 percent while Francistown was on the red
at 29.7 percent. Only Lobatse and Maun were closest to the required minimum utilization requirement of 85 percent,” he emphasized.
Dr Tombale said that there were reforms which included reduction of operational costs in 2016. He said management has already reduced staff complement by about 33 percent and reduced the wage bill from P2 million to levels below P1.4 million. He said improvements made in Francistown show good results but at the same time not sustainable. He also said the cattle supply has improved towards the year’s midpoint, but the quality of stock delivered is still a challenge.
“Sale of product has improved since May 2016, but started the year on a very low note due to unavailability of slaughter numbers,” he said.
According to Tombale the IDI analysis of BMC production profile between the years 1966 and 2004 has shown that with an annual production capacity of 250 000 cattle in its three plants, it only achieved peak production between the years 1976 and 1984 of between 200 000 and 250 000 cattle. He however said that the peak period fell in the period when only Lobatse was operating since Maun was commissioned in 1983/1984 whereas Francistown was commsissioned in 1987 and 1988. Dr Tombale said by 2004 the throughput had fallen to 130 000 cattle or about 51 percent plant utilization capacity on the basis onf 220 production days.
“If international standards of 250 production a day is applied to BMC, the utilization capacity falls to 45 percent. The adoption of international standards of 250 production days means that annual slaughter capacity of the Lobatse Plant is excess of the total slaughter capacity of BMC. This capacity under-utilization is unsustainable. Run commercially, BMC cannot operate both Francistown and Lobatse together especially for European Union(EU) market. BMC Francistown and Maun now solely depends solely on BMC Lobase for financial support,” Dr Tombale explained.
He said that the current business environment does not support intended reforms as losses are weighing heavily on the enterprise or plant’s cashflow. He also said climatic conditions also pose even greatere challenges to sustaining cattle supply to BMC including the quality of cattle supplied to BMC. Dr Tombale also said the Cab Memo of 2006 by government which discouraged closure of BMC Francistown and reimbursement on operational losses now amounting to P93 million is not being fully implemented as instructed.
“The above directly impacts on BMC cashflow and its ability to pay farmers within stipulated ttime frame,” he said.
In part of his recommendations he said BMC Francistown and Maun should be separated from BMC group and be operated solely under government funding. He also said that Francistown BMC could be made a value addition plant where meat is processed.