BMC secures facility to ease cash flow woes
Keikantse Lesemela | Friday July 25, 2014 15:02
Speaking in Parliament last week, the assistant Minister of Agriculture, Oreeditse Molebatsi said BMC is required to pay farmers within three days of cattle delivery. But this creates a cash flow problem as the commission only receives cash from the sale of the meat after about six months from the time of procurement of cattle.
“The problem arises from having to pay farmers cash within three days and wait for the six months to realise the cash from sale of meat products from cattle it has already paid for. The set up results in BMC having its cash tied in stock.
“The commission has negotiated with bankers for facilities that will assist with the payment of farmers and ease the cash flow problems of BMC,” said Molebatsi.
He added that the commission “is also negotiating with farmers that sell large number of cattle to be scheduled over the production cycle of BMC and also to be paid after an agreed longer period than the current three days”.
BMC buys cattle and places them in feedlots for 90 days so they attain European Union market status and the required slaughter condition. Currently BMC has up to P156 million in meat stock in its plants, P17 million stock on transit to EU, P27 million sales still to be paid for meat supplied to local customers and P162 million being cattle standing in feedlots numbering 27,090 and P19 million being cattle in holding farms.
Molebatsi was responding to a question from the MP for Kanye North, Kentse Rammidi who wanted to know if the minister was aware that banks are refusing to honour cheques issued by BMC to cattle suppliers and transporters.
Molebatsi told Parliament that he is not aware of any bank refusing to honour cheques.
“I am not aware of such cases. What I am aware of is that between the 30th June and 4th July 2014, BMC underestimated the cash requirements to pay the influx of cattle bought through the Direct Cattle Purchase (DCP) programme after the resumption of cattle procurement on the 23rd June following its temporary suspension for three weeks,” said Molebatsi.
Molebatsi explained that some cheques were not honoured during the July 1 holiday because of insufficient cash availability.
“As a result of no foreign currency transaction on 1st July 2014, there was a serious cash flow problem resulting in some cheques and notices issued during that week not being honoured because of insufficient cash availability,” said the assistant minister.
He said in the period of June 20 to July 11, BMC bought cattle through the DCP for a total value of P17 million and made other commitments including transport costs, which together totalled P25 million for that period.
“Because much of BMC sales are outside Botswana, the problem arose because BMC under estimated the impact of the bank holiday of 1st July 2014 on the foreign currency transfer remittance,” said Molebatsi.
Molebatsi explained that the influx of cattle especially from communal farms compelled BMC field officers to continue buying and issuing notices for the payment, which was to be honoured in three days after delivery of the cattle. Since 2010 BMC has been experiencing financial constraints recording high levels of losses which stood at close to P300 million in 2012.