F/town BMC plant bleeds losses
Pini Bothoko | Tuesday September 13, 2016 15:47
Speaking at the recent second BMC Francistown Baruakgomo Pitso, Tombale said the low supply of cattle has resulted in the plant running at a loss hence pleading with farmers to consider selling their cattle to BMC.
The Pitso was held under the theme, ‘Quality beef industry: The lifeline of Batswana’ and had attracted a number of northern region farmers.
Tombale said since 2006, the BMC plant in Francistown has made continuous losses as a result of inadequate supply of cattle for slaughter.
Prior to 2006, BMC Francistown plant used to slaughter around 400 cattle a day, but now the number has gone down to between 150 to 250 cattle per day.
“This contributed to poor performance of the plant and has become uneconomical to operate. We then submitted a proposal to government to mothball the plant as it was making losses and draining the cash flow,” Tombale explained.
Tombale added that the highest losses were recorded in 2013 at P63 million, but currently stands at P49 million showing a gradual reduction in losses.
He said with the current state, cost of production and producer payments are more than the revenue. He added that poor quality of cattle with a mass of less than 200kg per carcass results in high cost of production, whereas the industry requires a minimum of 220kg.
He said in 2015 during the first Pitso with achieved slaughter numbers over the years and cattle demography as well as the quality of beef, BMC management took a decision to reduce the plant capacity. “The capacity was reduced to 250 cattle slaughtered per day from 380 cattle per day and the reduction took effect in April this year. This was made to reduce the unnecessary fixed costs and (for the) plant to operate at a breakeven level with more efficient and full utilisation of the asset,” Tombale said. He said accordingly the headcount was downsized to match the production level.
“When considering the slaughter numbers, plant capacity utilisation for 2015, Lobatse was 78.8% while Francistown was at 29.7% with Maun at 76.6%. Only Lobatse and Maun were closest to the required minimum utilisation requirement of 85%,” Tombale said.
He stated that following this since 2005, 2008 and early this year they have been reducing the numbers of Francistown BMC staff, dealt with internal issues and took required drastic measures hence pleading with farmers to support the plant.
“We reduced staff complement by about 33% and reduced the wage bill from P2 million to P1.4 million and improvements made in Francistown show good results, however, not sustainable,” Tombale said. He said during the 2015 Pitso they resolved to increase producer prices to P23 per kg and removing grading cattle numbers.
Meanwhile, farmers raised concerns that BMC prices are very low and blamed BMC for taking a long period of time to pay them after supplying it (BMC) with cattle something that discourages farmers to supply them with animals to slaughter.