For most of its recent years, the Botswana Meat Commission (BMC) has survived only through government support, piling on hundreds of millions of pula in loans in the process. And yet as part of its privatisation, a team has been assembled to prove that the parastatal is the best-looking bull in the kraal for investors. Staff Writer, MBONGENI MGUNI writes
Further taking the shine off the BMC’s coat is the fact that government’s meat industry liberalisation strategy means more competitors coming up directly against the Commission.
These new players will have an equal footing with BMC, equal access to farmers and the export markets that the Commission once enjoyed a monopoly over.
For an entity that has nearly collapsed and been brought to life by government repeatedly over the years, the plan to sell the BMC to private investors sounds like it would have as much as success as walking a bull safely through a china shop.
According to the Auditor General’s latest report, released last month, the BMC has failed to make payments on a total of P354 million in loans owed to government, forcing the conversion of the loans to equity.
The Auditor General also noted a deficit of P242 million for the Commission’s last reported financial year, ending in December 2017.
Behind the numbers are frustrated farmers irate over delayed payments, suppliers anxious about payment, staff concerned about a restructuring exercise and BMC executives battling to steer the ship away from the rocks.
And yet for all this, the team recently put together to weigh the BMC and produce options for its privatisation before the end of August, appears confident.
Led by the Ministry of Agriculture and Food Security, the team also includes the Public Enterprises Evaluation and Privatisation Agency (PEEPA) as well as privatisation consultants, Minchin & Kelly.
Agriculture permanent secretary, Jimmy Opelo explains the optimism.
“Look, the beef business here and also in Europe, is a very highly viable business,” he tells Mmegi.
“With the BMC it was just a question of doing the business the right way.
“It is an issue of operations and looking at the finances such that the business is profitable.
“This time around, there will be competition and BMC will have to compete with anyone who comes onto the scene.
“It’s up to them to prove their relevance.”
According to Opelo, the BMC is finalising its restructuring, optimising its operational efficiency and will be shipshape for privatisation.
The BMC’s troubles stem from frequent Foot and Mouth Disease outbreaks and losses from the Francistown and Maun abattoirs.
The intensifying effects of the El Nino phenomenon over the years have also meant both lower cattle delivered to the BMC’s abattoirs and poor quality of beasts.
The few publicly available documents on the Commission’s performance over the years suggest the BMC last declared a surplus in the year ended December 2008, a full decade ago.
In the intervening years, BMC’s direct debt to government grew from about P186 million to the figure converted to equity in February 2018.
Under the Botswana Meat Commission Act, government not only has an obligation to keep the BMC afloat, but the parastatal also is free of any obligation to pay back any loans given by government.
In the past decade, government has also underwritten BMC’s loans, passing guarantees to commercial banks that have often with much resistance in Parliament.
Had government not converted these commitments into equity, investors would have had to inherit the debt without any guarantee that they would enjoy the terms the BMC did under the Act.
“Government has taken care of them and so to speak write them off. It’s a removal of an obstacle for a private investor,” Opelo says.
Even without the loans, a business case still needs to be made for the privatised BMC to operate without subventions and be able to stand up against other competitors in the liberalised beef industry.
The team leading BMC’s privatisation is hoping if investors do not see a business case for the whole organisation, they may still choose to take over individual assets such as the Lobatse or Francistown abattoirs. The BMC’s tannery, located in Lobatse, is also up for grabs.
The BMC’s immediate past CEO, Akolang Tombale had long pushed for the hiving off of the Francistown and Maun abattoirs from the Commission, saying the organisation’s perennial problems came from the Lobatse abattoir disproportionately supporting the rest.
The team privatising the BMC is not discounting any options ahead of the August deadline to produce options for Cabinet’s consideration.
“Someone may say I want Francistown and not Lobatse, the other way around or both,” explains PEEPA CEO, Ezekiel Moumakwa.“We will also be looking at the option of unbundling BMC where an investor may want to take over the tannery.
“All these options will come from the work the consultants will do.”
An easier “mini-privatisation” is also due for Maun abattoir.
The northwest facility is separate from the BMC, having already been carved out from the parastatal as part of a decision made by government last year to take over the small abattoir.
The Agriculture ministry, PEEPA and consultants, Deloitte are securing private investors for Maun abattoir, which will be offered as a private company to interested parties.
In the next 10 weeks, Deloitte will undertake a technical, legal and financial evaluation of Maun Abattoir Pty Ltd, enabling government to float a request for proposals to private investors. Deloitte will assist with negotiations towards a winning bidder.
Minchin & Kelly will be hoping their own job somehow emulates what should be a more straightforward task for Deloitte in Maun.
Minchin & Kelly are due to present the BMC privatisation options within three months and some cynics have said that with the parastatal’s battered position, these could include a recommendation that government abandon the privatisation!
Minchin & Kelly managing partner, Terence Dambe tells Mmegi the consultants are not ruling anything in or ruling anything out.
“We are not going into this with particular options in mind.
“It’s about doing an assessment of the business and coming up with the optimal structure that BMC must have to meet its objectives.
“There’s no position to say look at this option or not.
“We will look at everything, from legal, technical, financial and make recommendations to say which is more profitable to the government.”
Opelo, on the other hand, says government will immediately consider the options once they come in.
“Government will respond as soon as possible. “It has taken too long and we don’t want to waste any more time on this.
“Options come with different consequences and we will go through them and choose the one appropriate for us,” he tells Mmegi.