Despite having amassed a loss of N$206 million in the most recent financial year, the Meat Corporation of Namibia (Meatco) has outlined a clear vision towards recovery which among others includes cost reduction mechanisms, increasing productivity and revisiting its strategy to cope with Volatility, Uncertainty, Complexity, and Ambiguity (VUCA), both upstream and downstream.
Having been hit by a threefold epidemic of challenges in the last decade inclusive of climate change, a robust drought in 2019 and the outbreak of Foot-and-Mouth Disease (FMD), CEO, Mwilima Mushokabanji highlighted in the 2021/22 Annual Report released recently that the Corporation has still remained a strategic catalyst in the livestock sector and meat industry of Namibia.
This had mildly culminated in the average producer price increasing from N$44.74/kg in 2020/21 to N$54.54/kg in 2021/22 financial year and subsequently, Meatco paying N$492 million to producers, which included a premium of N$146 million above the South African parity price.
“Looking ahead, we are excited with what the 2022/23 financial year will bring. We are targeting to slaughter 60,000 cattle procured from SVCF and 10,000 from NCA producers,” remarked Mushokabanji with sheer optimism in the report.
The increase in slaughter number is expected to significantly push revenue upwards coming for a financial year in which the Corporation anticipated lower throughput due to herd re-building which resulted in only 35,127 cattle being slaughtered and processed against a budgeted number of 40,000.
In the report, Mushokabanji admits that the myriad of challenge that engulfed the Corporation resulted in a critical hindrance in terms of operating a competitive, sustainable, and profitable agro-processing company during the past two years.
In addressing challenges, Meatco needed to revisit its strategy to cope with a VUCA world. Upstream, the supply side was affected by drought, disease outbreaks, the number of weaners leaving Namibia into South Africa, as well as the scarcity of raw materials. Downstream, Meatco could not meet its supply agreements in the US, China, Europe, and the UK, because of the low volumes that were produced out of the abattoir.
“The action we took to mitigate these challenges was, firstly, to realign the business, as the cost of production, logistics, sales, marketing, and wages were extremely high. We undertook a retrenchment exercise, focusing on people who were older than 55 years, as they are experienced in their areas and will be able to survive, rather than retrenching our younger employees who are in the early stages of their careers.
“In this way we were able to align the human resources, the structure, the systems, the logistics, the markets, the outsourced services, and the processes to the available raw material to be a leaner, more agile business that needed to remain not only relevant, but that can still meet and exceed the expectations of its stakeholders,” Mushokabanji said.
He went on to say that due to the severe drought of 2019/20 and herd re-building in 2021/22, Meatco implemented the block slaughter principle by scheduling two days for slaughter and another two days for deboning on a weekly basis.
“We continued to process almost 100 per cent of the animal slaughtered. We processed carcasses into various products according to client specifications in standard primal cuts, round cuts, steaks, bone-in cuts, manufacturing beef, as well as products developed specifically for some of our global clients under the Natures Reserve brand.
“The primal cuts such as rib-eye, striploin, fillet, rump, and sirloin are also available locally through selected restaurants and retailers to accord Namibian consumers the same quality that Meatco produces for international markets,” he said.
In the same financial year, Meatco also added another offering in its bouquet to the producers, namely the provision of agricultural advisory extension services to the farmers, while simultaneously intensifying research and development to the farming community in collaboration with universities and other research institutions.
Apart from this, the Corporation moved to mainstream the communal farmers North of the Veterinary Cordon Fence by setting up Meatco NCA.
This, Mushokabanji says, will operate as an independent agency of Meatco to drive primary production, agro-processing, as well as access to lucrative markets for the abundant resources in the NCA.
The current data shows that out of the 2.5 million head of cattle that we have in Namibia, 1.2 million are found in the NCA.
“In our strategy, we wanted to make sure that we capitalise on that raw material, because our goal is to maximise Meatco’s contribution to the country’s GDP, as well as to maximise the dynamic capability of Meatco to mobilise and generate foreign exchange earnings, more so than if Meatco only exported raw material from SVCF.”
Meat from the NCA could find its space in markets in the southern part of Namibia, as well as in the rest of Africa. Meatco has already visited potential markets in West Africa, such as Ghana, Uganda, and the DRC.
Mushokabanji also expressed rebuilding the Meatco’s relationship with government as a key strategic pillar that is driving the entity’s vision going into the future.
“A positive relationship with Government will make it easier for us to penetrate niche markets, as it will allow us to operate on country-to-country level and open up more sustainable and lucrative markets. Therefore, in our new strategy, Namibia’s embassies and ambassadors in other countries are playing a critical role in enabling markets, unlike in the past,” Mushokabanji said.
Critical in Meatco’s market diversification strategy is its reliance on the African Continental Free Trade Area (AfCFTA) agreement, which came into place in January 2021. Essentially, by promoting more intra-Africa trade amongst Africans, huge markets will open up for Namibia.
Livestock farming contributes to approximately two-thirds of agricultural production, with crop farming and forestry making up the remaining one-third (excluding fishing sector). Meat processing (which the Government accounts for under manufacturing) contributes to another 0.2-0.4 percent of GDP.
Worth N$6.3 billion, Namibia’s livestock farming sector is in dire need of growth. Growth starts at farm level, but will only happen when it is profitable to producers. Meatco notes that only a conducive policy and regulatory environment, as well as a common vision for the red meat industry, will enable substantial growth to take place.
As has been since its inception, Corporation stabilises the industry in the national interest and plays a leading role in setting the domestic price for beef, using South African prices as the benchmark. This is despite the fact that production systems and marketing conditions are different in Namibia from those prevailing in South Africa.
“It is evident that the Namibian producers continue to receive best prices just as their international counterpart farmers in Australia, USA and EU where they are subsidised by their governments. Without Meatco’s involvement, Namibia’s red meat industry will revert back to being a commodity-driven industry, which will result in producers receiving much less for their cattle,” the Corporation highlights.