Beef Trade and Competition in Botswana1

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The Case of Ngamiland and Ghanzi
Roman Grynberg
National Competition Conference
Maun, Botswana - 13th March 2014
FMD and the Beef Industry in
Ngamiland
 For almost eight years the cattle industry in
Ngamiland has been excluded from both domestic and
international trade altogether because of the approach
taken by DVS to the treatment of FMD – it has been
based on ever more vaccination and more fencing.
 The policy has failed because of the increasing
interaction between buffalo which are main host for
FMD and cattle.
 The consequence has been the impoverishment of the
people of Ngamiland ( Ovaherero have asked to return
to Namibia)
Commodity Based Trade Approach
 Under the OIE rules if you have FMD in your area you can’t
export but the world’s biggest exporter of beef by volume is
India and it has endemic FMD?
 How is it possible to export – there is an approach to
management of trade which is compatible with the rules of
the WTO which allows exports. This called Commodity
based trade
 As long as the animal is itself not infected with FMD there
is nothing wrong with beef from an FMD areas as long as it
is deboned, lymph nodes removed and Ph Levels
controlled. This approach is recognized by the OIE.
 It is possible to trade beef from the red zone to the green
zone but the EU will not accept this.
How do we save Ngamiland from
Economic Ruin?
 Need to move over to commodity based trade system
 Zimbabwe has abandoned the approach we are using and has
moved over to commodity based trade. It is now exporting beef to
Angola
 We need to undertake a risk assessment in Ngamiland to
demonstrate to the EU that there is no risk of our exports of beef
from the green zone infecting EU cattle if we allow trade from
Ngamiland to the rest of Botswana
 The beef from Ngamiland will not be able to achieve EU prices as
long as there is FMD- EU will never accept CBT but we can sell
Ngamiland beef to the rest of Botswana and use green zone beef
for export to the EU.
Some serious problems with this
approach
 Batswana don’t want deboned beef they want low cost brisket





on the bone for a brai.
If we accept CBT for Ngamiland we will have no scientific
basis for not allowing Zimbabwean beef to enter our market.
On the horizon is the issue, apparently distant, of Tanzanian
and Ethiopian beef which has endemic FMD and if permitted
would decrease prices substantially in southern Africa
Namibia is already moving in this direction with the Caprivi
Strip which has the same issues as Ngamiland
Botswana is a signatory to the Phakalane Declaration of
SADC which endorses CBT but does nothing to implement.
CBT at least allows some market access and decreases the
clash b/w wildlife i.e. Tourism and agriculture.
Competition in the Beef Trade
 Sir Seretse Khama nationalised the abattoir at Lobatse at
independence. He was not given to policies of state
ownership so why did he do it?
 The abattoir at the time needed a minimum throughput
of some 70,000 head to be economic. There was not
sufficient herd and off-take for one abattoir to exist
economically. It was a natural monopoly and could not
stay in the hands of a private firm such as the owner CDC.
 BMC was given a legal monopoly on exports on the
condition it paid reasonable prices.
Competition in the Beef Trade
 With the demands of EU compliance there has been no study
of what is the minimum efficient scale for an abattoir now but
BMC now requires somewhere around 230,000-250,000 head
to operate at full capacity. 2010 was its best year for along time
at 179,000 head
 Farmers in Ghanzi want another abattoir. But profitability at
BMC rests on greater throughput. More abattoirs simply
mean less profits because they divide a limited
throughput. But that does not mean that one abattoir will
make profits- witness BMC.
 In Namibia they have an independent abattoir at Vytflei which
has not yet made a profit because it does not have sufficient
throughput. Namibia has the same problem because of weaner
exports to RSA
BMC MANAGEMENT ACCOUNTS FOR FRANCISTOWN AND MAUN , 2008-2012
2009
2008
2010
2011
F'TOWN
F'TOWN
F'TOWN MAUN
F'TOWN
MAUN
SALES
166 430
156 951
266 857
1 233
75 526
18 502
LESS SELLING & DISTRN. EXP
(15 125)
(16 193)
(24 922)
(3 755)
(575)
SUB TOTAL - NET SALES
151 305
ADD/ (LESS) - STOCK MOVEMENT
(564)
ADD / (LESS)-OTHER INCOME/EXP.
(494)
TOTAL INCOME
150 247
TOTAL PRODUCTION EXPENSES
(8 614)
Process Materials
16
Packing Materials
(3 474)
Miscellaneous Materials
(998)
Fuel
(305)
Electricity Purchases
(1 873)
Water Purchases
(1 979)
140
31
21
193
(19
(4
(1
(1
(1
(2
17
2
(5
15
(6
927
913
078)
762
720)
(3)
(247)
(396)
(465)
(816)
(127)
2012
F'TOWN MAUN
206 646
45 441
(7 719)
(1 286)
758
076
708
542
007)
93
272)
203)
669)
040)
668)
241 935
(12 834)
427
229 527
(14 107)
(5 618)
(1 180)
(1 359)
(2 385)
(3 565)
1 233
295
(350)
1 178
(637)
(8)
(205)
(122)
(206)
(96)
71 771
(10 875)
373
61 269
(12 581)
(1 239)
(920)
(429)
(2 601)
(1 767)
198
5
2
207
(25
(5 625)
(45 803)
(15 427)
(301)
(13 012)
(587)
(2 931)
(4 673)
(36 931)
(4 665)
(16 062)
(3 154)
(77)
(1 945)
(322)
(426)
(654)
(6 579)
(8 670)
(47 378)
(14 062)
(750)
(14 299)
(1 301)
(3 767)
(3 603)
(37 781)
(3 611)
(24 432)
(4 096)
(160)
(2 268)
(418)
(660)
(701)
(8 303)
(8 872)
2 885
(20)
-
(9 483)
(7 020)
(5)
(9 596)
134 187
(83)
-
(16 128)
4 756
(14)
-
(4
(1
(1
(4
(4
927
727
731
385
820)
840)
849)
862)
343)
256)
44
(3
(5
35
(6
155
208)
236)
711
523)
(8)
(1 146)
(467)
(184)
(941)
(166)
Repair and maintenance
TOTAL FIXED EXPENSES
Salaries
Overtime- staff
Wages
Overtime- Hourly Paid
Staff & Labour services
Pension & Gratuities
Sub total - Staff & Labour Costs
(48 756)
(11 801)
(285)
(11 361)
(458)
(2 933)
(1 583)
(28 421)
(39 169)
(12 719)
(483)
(11 690)
(886)
(3 659)
(945)
(30 382)
(48 048)
(12 673)
(528)
(12 361)
(1 115)
(2 810)
(3 264)
(32 750)
(21 827)
(1 032)
(4)
(630)
(48)
(228)
(207)
(2 149)
Other Fixed Expenses
SURPLUS BEFORE APPRN & TAX
APPROPRIATIONS TO
Asset renewal reserve
Capital Loan Redemption reserve
Development reserve
NET INCOME BEFORE TAX
TAXATION - CURRENT PERIOD
AVAILABLE TO PRODUCER
(20 335)
92 877
(913)
(840)
(73)
91 964
92 057
(8 787)
135 366
(934)
(840)
(94)
134 431
134 397
(15 297)
167 373
(349)
(240)
(109)
167 024
167 024
(19 678)
(21 286)
(21 286)
(21 288)
(20)
2 865
2 864
(5)
(7 025)
(7 035)
(83)
134 104
(8 295)
125 809
(14)
4 742
(1 701)
1 935
PAID TO PRODUCER
(91 284)
(134 352)
(190 409)
(1 761)
(42 437)
(24 101)
(157 614)
(43 128)
PAYMENT FOR LIVE STOCK
-
-
DCP Feed costs
DCP cattle costs
DCP Commission
DCP transport
Revenue at slaughter
-
PROFIT / (LOSS) ON DCP
NET(DEF)/SUR FOR THE PERIOD
3 143
773
45
EXIT PACKAGE
BONUS TO STAFF
(1 886)
(79)
RETAINED (DEFICIT)/ SURPLUS
(1 113)
(34)
(20 242)
(23 049)
-
(20 242)
(2 896)
(3 699)
(23 049)
(2 896)
(43 272)
(31 136)
(34 700)
(1 065)
(975)
(75)
(44 337)
(32 111)
(34 776)
(41 192)
1 056
(40 136)
If we want improved performance
from BMC what should we do?
 BMC absorbs all the surplus generated by European exports- in




2010 the farmer got nothing! BMC lost P727 million b/w 20092012.
Farmer needs to be protected by a modified form of Export
Parity Pricing because otherwise they become the residual
claimant on BMC revenues
Need to assure that BMC is managed competitively and
efficiently. You have to sack some 500 workers and close at least
one abattoir.
Privatise its management – but only worthwhile if government
has the will to run it like a business and keep political
considerations out.
Allow it to operate as a custom abattoir where many companies
can pay for its services and they can export.
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