BMC in the red
Tsaone Basimanebotlhe | Thursday April 9, 2015 16:01
The acting minister of Agriculture, Patrick Ralotsia, however, told Parliament this week that the commission is not insolvent, only facing cash follow challenges. Last year the National Assembly approved that the government guarantee P300 million short-term facility from Standard Chartered Bank. As a result, BMC pays a substantial P86 million as financial costs.
Answering a question from Ghanzi North MP Noah Salakae, the acting minister said these losses had put immense pressure on the cash flow management of the organisation to the extent that a proposed scheme to improve the operations of the commission could not be implemented.
“This was because of the commission borrowing heavily from both private financial institutions and the Government. It is now heavily indebted and struggling to manage these debts.
The situation was made worse by external factors such as the closure of plants due to Foot and Mouth Disease outbreaks. In addition, the introduction of the current EU market requirements relating to Livestock Identification and Tradeback system (LITS) also affected the commission negatively,” Ralotsia said.
He said the implementation of LITS put so much pressure on BMC such that schemes proposed and implemented to respond to market requirements resulted into serious cost overruns.
The minister noted that this was due to the immaturity of the beef industry, which was not in state to sustain these new developments meant to make cattle eligible for EU market thus putting the onus on the BMC both operationally and financially.
He said lack of expertise in this field resulted in BMC shouldering the responsibility of the development and financing of feedlots thus suffering losses in feedlots in the process.
Ralotsia said while BMC is paying farmers, they are not meeting the 48 hours time frame.
“In this respect it had delayed in paying farmers some of whom may have been waiting for up to 30 days.
This was made worse by the influx of cattle at the buying points due to farmers de-stocking because of drought. The operating model of BMC, with regard to the supply of cattle for the European Union market whereby it buys cattle cash up-front, put them through the feedlot to slaughter and to market results in five to six months lag period for the commission to realize the proceeds from the cattle it had already paid for.”
He said this lag period of up to six months is what creates the cash flow challenges for the commission.