Banyana Farms under the hammer
Goitsemodimo Kaelo | Monday February 27, 2023 06:00
According to information from the report of the Auditor General (AG) for the financial year ended March 31, 2021, government has decided that the company will close once its privatisation has been fully completed.
Banyana Farms is a government ranch of about 149,000 hactres located at Mabule, which was established to promote cattle ranching in the country. With the farm continuously incurring losses, the Auditor General, Pulane Letebele has noted that once its privatisation is concluded, it would be within the Board's plan to recommend the company for closure to the shareholders.
The privatisation is meant to fully address the going concern status of the company. Letebele indicated that the management had indicated that the process to privatise Banyana farms will be carried out in accordance with the Presidential Directive CAB 8/2014 dated April 3, 2014. The envisaged date for closure is June 30, 2023.
From the report, the auditors noted that the company has been incurring losses for the past few years. While the report shows that revenue increased in the current year by P347 387 compared to the previous year, which showed the company`s performance turnaround efforts, operating expenses increased significantly resulting in increase of net loss for the year by P389 488 compared to the previous year. In the year under review, Banyana Limited recorded a loss of P609 051 compared to a loss of P256 705 in the previous year.
The report states that the increase in loss was due to 26% increase in operating expenses from P1.83 million in the previous year to P2.31 million in the year under review. “These accumulated losses gave rise to significant doubts on the going concern status of the Company,” reads the report. Letebele noted that the company’s management had agreed with the observation and indicated that strategies were in place to generate more revenue by subleasing the remaining three centre pivots.
These include pivots measuring approximately 380.000 hactres, 207.1824 ha and 220.000 hactres which they said would be leased for commercial fodder production while another measuring 364.4806 hactres was envisaged to be leased for commercial small stock production with expectations that the leased plots would generate more revenue for the company.
Meanwhile, in a brief interview with Mmegi, the Minister of Agriculture Fidelis Molao said Banyana Farms has been affected by the broader restructuring exercise across government which also involves merging and or dissolving some parastatals for efficiency. He said the whole restructuring exercise is ongoing and will follow the necessary technical and legal processes. “The leased land will go back to Lands Department. Obviously those who had signed long leases will have a chance to decide whether they want to be bought out or renegotiate with the new owners. These are the technicalities that I can't talk about now but the whole exercise will follow a legal liquidation process," Molao said. Banyana Farms has always been in the spotlight for the wrong reasons especially regarding the process of leasing the farms. At some point in 2013, some foreign farmers who had leased the farms complained after government turned down their request for a financial bail-out as they were told to look elsewhere for funding. In 2020, the enterprise again became a subject of controversy after it was reported that President Mokgweetsi Masisi was amongst the people who were leased a large portion of the farm land. Media reports then indicated that Masisi had been awarded the farm even though his bid did not meet the brief. The President had been accused of acting unethically and flouting procurement rules by seeking to lease a large portion of Banyana Farms.
On other matters, the Auditor General also noted that motor vehicles were over-insured by P224 722 compared to net book value as at the year end while farm buildings with a net book value of P239 312 were not insured. Furthermore, the auditors noted that the company did not maintain proper schedules for leave and gratuity and no provision was made during the year. Only leave and gratuity payments were accounted for, which resulted in significant audit adjustments amounting to P 290 576. Letebele warned that in accordance with IAS 19 (employee benefits), a company should recognise a provision for short term and termination of employee benefits (leave, gratuity, and severance) in the period in which the employees render service.