By Phillimon Mhlanga
Government has finally approved a business turnaround strategy for the country’s debt-stricken beef processor, the Cold Storage Company (CSC), four years after the company made the proposals, the Financial Gazette Companies & Markets (C&M) can report.
The company’s board had presented its strategy to government in 2012. The strategy spelt out the roadmap to improve the business and included plans to mobilise funding internally through measures such as the disposal of idle assets in Harare, Kadoma and Gweru, with an estimated value of US$4,5 million.
However, the strategy had not been approved as government wanted a forensic audit first before it granted the meat processor the green light.
It now appears that government has changed its approach and approved the plan.
Agriculture, Mechanisation and Irrigation Development deputy minister in charge of livestock, Paddy Zhanda, told C&M that the plan had now been sanctioned and that the CSC board could now go ahead with implementation of the strategy.
“CSC should be fully operational before the end of this year after government’s approval of the company’s turnaround strategy,” Zhanda said.
He said the development meant that CSC, once Zimbabwe’s premier supplier of beef on both the local and export markets, should become fully operational by December this year.
The parastatal, which has been reportedly operating at less than 10 percent capacity, owns abattoirs in Bulawayo, Masvingo, Chinhoyi and Kadoma and several ranches across the country.
The majority of the abattoirs are currently derelict, with only the Bulawayo unit functional.
The CSC’s farms have a carrying capacity of 8 533 animals, but currently has a herd of about 700 cattle on its farms across the country.
CSC used to be the largest meat processor on the continent, handling up to 150 000 tonnes of beef and associated by-products per year.
However, it has fallen on hard times owing to a myriad of challenges that include difficulty in raising adequate working capital, cattle disease outbreaks, decline in the commercial herd, huge debt and an aged transport fleet.
The company stopped exporting beef in 2007 because of outbreaks of foot and mouth diseases.
The European Union, one of its biggest markets, stopped importing from the country after CSC failed to meet requirements for meat exports to the EU.
Since the ban on beef exports, CSC has been on a financial free fall.
The company’s fortunes were set to improve when Zimbabwe and Botswana signed a Memorandum of Understanding to have the CSC slaughter Botswana’s cattle, but it bungled the deal after failing to pay for delivered cattle.
In July 2011, the government signed a Memorandum of Understanding with Botswana allowing for the importation of cattle for slaughter by CSC.
The deal saw CSC recruiting additional workforce to cope with the workload.
The Zimbabwe-Botswana cattle deal, however, later collapsed in 2012 when CSC reportedly misappropriated the funds and ended up failing to pay the Botswana Meat Commission more than P2 million, leading to Botswana pulling out.
C&M could not immediately contact either the CSC board chairman or the managing director for comment, but there were indications work has already begun to implement the strategy.
C&M reported two years ago that there were also frantic efforts by the CSC board and its management to hive off a US$30 million debt from its books to government.
The debt was put on the CSC books by government in 1996 even though the borrowing had been done by another State-owned entity, the now unbundled National Oil Company of Zimbabwe (NOCZIM), which had been lent US$39 million by two Nordic financial institutions in the 1990s.
NOCZIM, which was unbundled by government into Petroltrade and the National Oil Infrastructure Company, accessed the loan from Ekspofinans of Norway and Nordbankemn of Sweden around 1990.
Government then transferred the debt to CSC, which was then a profitable meat producer with lucrative export contracts to the EU markets. The debt transfer was structured by First Merchant Bank, now BancABC, in 1996, and signed for by CSC.
CSC stopped the loan repayments after a foot and mouth outbreak crippled Zimbabwe’s beef industry in 2001, forcing the EU to discontinue beef imports from the country.
CSC had an annual quota to the EU of 9 100 tonnes of beef. It also had a US$15 million revolving payment facility with the 27-member bloc under which it was paid in advance. The company used to earn the country at least US$45 million annually. Financial Gazette