Debts weigh on BMC profitability
Business
BMC chief executive Dr. Akolang Tombale
The foremost cattle farmers’ cooperative in the country, Botswana Meat Commission has shed its scandalous history that entailed mismanagement, unprofitability and incompliance to high value buyers’ specifications, to emerge as a profitable organisation.
While the Commission has managed to return to profitability and operating efficiencies after being delisted from the lucrative European buyer markets in 2011, due to Foot and Mouth Disease (FMD) concerns, it has been laden with debts sourced from both Government and private commercial lenders.
BMC chief executive Dr. Akolang Tombale, who was brought in to calm the waters in 2012, managed in part to return some semblance of order at the Commission registering unprecedented revenue figures of over a billion pula, largely due to “improved marketing and sales.”
“To finance our operations, we use the costly short term financing combined with sale whose proceeds come only 5 to 6 months later,” said Tombale, resignedly.
Due to compliance standards set out by the European buyer markets, that stipulate that cattle slaughtered for sale there, have traceability records, the weaners that are sold to the Commission are placed in feedlots for three months to satisfy that requirement. “Currently we have 27, 000 head in feedlots costing over P200 million and we spend P100 million to feed them; that is P 3 million in stock tied up for three months before we can slaughter and market the product,” said Tombale.
The Commission’s debt currently stands at P769 million in loans, the major portion being the P569 million circumvented to it during the 18 month EU delisting period of from 2011, when there was virtually no production. A P125 million loan was also sourced from First National Bank for the upgrading of the Francistown abattoir as well as a P50 million loan from P50 million from BancABC to resuscitate the Maun plant.
The Commission was delisted from the in EU market in 2011 and 2012 for 18 months and relisted, only to be fail and EU audit at the Francistown abattoir resulting in a suspension because of FMD concerns. Some products were also recalled after from the same EU markets in the same period, compounding the debt issue. During the closure the Commission racked up losses of P233 million in 2011 and adn P300 million in 2012.
“As a result of these losses, and high gearing BMC resorted to using short term loans to address its working capital needs.”
In 2014, Government provided a guarantee for loan facility of up to P300 million from Standard Chartered Bank Botswana for the Commission’s working capital needs.
Tombale said that the Commission is in talks with Government to restructure its balance sheet and loan book to take away the burden of finance charges.
These, challenges, Tombale said, are some of the reasons that famers have been experiencing delayed payments for the cattle they have been selling to BMC, also mentioning that he appreciates that especially small farmers sell their cattle in emergency situations when they require money to solve emergency situations.
The Commission pays P45 million yearly in interest charges for loans taken from First National Bank Botswana and P7,6 million to BancABC, bringing both capital and interest repayments to P86 million a year.
Tombale said that the Lobatse plant, which is the mainstay of the Commission’s operations, seriously needs refurbishments, with an estimated cost of P500 million, to increase efficiencies and reduce maintenance costs which are in the region of P40 million a year.
Another long standing challenge to the Commission is measles infested cattle which accounts for 13 to 15 percent of head sold to BMC and an opportunity cost of P57 million annually. This is in contrast to only a 3 percent measles rate for neighbours, South Africa and Zimbabwe. As many as 300 measles infested cattle weekly, are quarantined for 14 days at a go, bringing up costs further.
The measles hurdle, described as ‘an issue of national concern’ by BMC management, is caused by cattle ingesting tape worm infested human excrement.
“Although we are part of a Government wide strategy to fight measles, we will soon launch our own strategy as this costs us dearly,” Tombale declared.
Tombale said that he engaging municipalities on the across the country about setting up low cost ablutions along high ways to avoid travellers using the bush to relieve themselves. However, authorities are slow in taking some action, he said.
He said that farmers should invest in pills that immunise cattle for six months at a go, in order to help fight the measles challenge.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Business
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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Business
Moody’s Reaffirms African Trade Insurance’s A3 Rating & Revises Outlook to Positive
Moody’s Investors Service (“Moody’s”) has affirmed the A3 insurance financial strength rating (IFSR) of the African Trade Insurance Agency (ATI) for the fifth consecutive year and changed the outlook from stable to positive.
Moody’s noted that the change in outlook to positive reflects the strong growth in ATI’s membership base – that has resulted in improved portfolio diversification, strengthened capital adequacy, and the good profitability despite the challenging operating environment. In addition, ATI benefits from its preferred creditor status (PCS) amongst sovereign member states which protects it from the risk of default by member sovereigns through securing recoveries against claims paid on guarantees.
The strong membership and equity growth are some of the key considerations for the consistent reinstatement of ATI’s A/Stable rating by Standard & Poor’s and Moody’s rating, over the years. Also supporting the rating affirmation are; consistent improvement in financial performance, commitment of its shareholders who continue to uphold the preferred creditor status, its high quality and conservative investment portfolio as well as strong relationships with a number of global reinsurers that provide significant risk-bearing capacity.
With the change in outlook to “positive”, ATI is now better placed to provide enhanced support to its member countries, attract additional shareholding and grow its portfolio. The positive outlook is an indication that if ATI continues to demonstrate its strong underwriting performance and ability to recover claims under the preferred creditor arrangements, among other factors, an upward pressure towards an upgrade may be generated. The Moody’s press release can be accessed from here
Commenting on the rating, Africa Trade Insurance Chief Executive Officer Manuel Moses said: “This positive revision is in line with our 2023 – 2027 strategic objectives in which we set to improve our rating outlook to positive in the first year, and achieve an upgrade of at least “AA”/Stable rating by both Moody’s and S&P within this Strategic Plan period. We aim to achieve this by doubling our exposures and increasing our capital to more than USD1 billion.”
ATI’s mandate is to provide trade-credit and political risk insurance, as well as other risk mitigation products to its member countries and related public and private sector actors. These insurance products not only directly encourage and facilitate foreign direct investment as well as local private sector investment in our member countries, but also contribute to intra- and extra-African trade.
About The African Trade Insurance Agency
ATI was founded in 2001 by African States to cover trade and investment risks of companies doing business in Africa. ATI predominantly provides Political Risk, Credit Insurance and, Surety Insurance. Since inception, ATI has supported US$78 billion worth of investments and trade into Africa. For over a decade, ATI has maintained an ‘A/Stable’ rating for Financial Strength and Counterparty Credit by Standard & Poor’s, and in 2019, ATI obtained an A3/Stable rating from Moody’s, which has now been revised to A3/Positive.