Meatco continues investment in NCA despite loss
Lack of access to high value markets for redmeat producers in the Northern Communal Areas (NCA) due to International Animal Health Zones has led Meatco to acquire a N$200 million loan from the Development Bank of Namibia to help farmers.
Meatco’s plan is to create a local weaner market in five years of 126,000 animals per year. Its five feedlots are expected to produce 25,000 weaners by expanding current infrastructure.
However, due to the restriction placed on the import of Namibian weaners by the South African veterinary authorities, the Meatco project in its first year, produced figures only projected to be attained in the third year. With 150,000 weaners exported to South Africa, this is more than 50% of cattle marketed per year.
Meatco spokesperson, Mario Poolman said that the company decide to change its approach by creating a strong local weaner market. This, Poolman said, was planned before the new veterinary changes prohibited the import of cattle into South Africa.
Meatco then decided to approach the Development Bank for a loan facility due to the unexpected increase in the growth of the local market. Value addition through creating a viable local weaner market will help farmers, especially communal farmers, Poolman said.
The Development Bank financing to farmers is the first step to ensure higher production which Meatco needs for its micro-feedlots in the communal areas. Meatco acts as the underwriter when farmers apply for loans.
Poolman pointed out that feed-lots are capital intensive and can only be operated when there is a guaranteed supply of weaners. The loan facility intends to help NCA producers to breed and supply the required number of weaners. Communal producers must also be convinced of selling their animals for slaughter instead of keeping them for herding.
Recently, Meatco announced it has acquired a 25% stake in Global Protein Solutions Food Group based in the UK. Global Protein Solutions also markets and sells meat products form other countries such as Botswana.
“Meatco hopes to access earnings from the trade of other sources of protein internationally while offering security over critical resources in ensuring growth for the future.” GPS Food Group manages Meatco’s international sales, marketing and logistics functions.
Meatco and GPS have a long standing relationship dating back to 2009, Poolman said in an earlier interview after the deal was announced.
“GPS needs both Meatco and Botswana Meat Corporation and potentially more meat processors to service markets, because our volumes are just too small and the global demand for protein is great. It is in Meatco’s interest that GPS does well, because of our shareholding and the returns we are able to realize from the organisation.” Poolman said.
“The purchase of shares in GPS makes it possible for Meatco to access earnings from the trade of other sources of protein internationally, while giving us improved security over critical resources we need to ensure continuous growth for the future without inherently raising prices.”
Poolman said GPS’s marketing for both Botswana Meat Corporation and Meatco products presents little conflict of interest as this is managed from a Corporate Governance point of view “with the best decision being taken for the GPS business.”
He said Meatco choose a niche market specific approach to compensate for the small volumes.