In its annual report for 2011/12, Namibia’s leading beef exporter Meatco, which accounts for just over 90% of cattle commercially slaughtered in Namibia, states that it has developed an integrated strategy for minimising operational costs and maximising revenues. The central component of its strategy, marketing individual meat cuts to specific markets in line with requirements of the final retailer, involves developing both much closer direct relationships with the final retailer and the logistical capacity to ship containers directly to customers both in South Africa and overseas.
While traditionally South Africa provided a market for deboned manufacturing cuts and frozen offal, in recent years a relationship has been developed with a premium retailer in South Africa (the retail chain Woolworths) to market branded and certified free-range, high-quality meat products. This has yielded significantly higher returns on sales of forequarter cuts on the South African market, and prices obtained are significantly above those paid for South African ‘A’-graded, feedlot-produced beef. However, deboned and manufactured cuts still dominate sales volumes on the South African market, and South African markets yield only 33.53% of total revenues for Meatco, despite taking 45.72% of total sales by volume.
Premium-branded high-quality cuts sold on overseas markets continue to provide the best financial returns: Norway accounts for only 5.05% of the volume of sales but 15.28% of total sales revenues, while European markets now account for approximately 27% of the volume of Namibian beef sales and around 42% of sales revenues (see table below for details).
Meatco: Volume and value distribution of sales in 2011/12
|Sales by volume (%)||5.05||15.28||11.61||45.72||22.35|
|Sales by value (%)||15.31||24.65||17.00||33.53||9.51|
* Mainland Europe, comprising Eurozone countries, plus Denmark and Switzerland
** Southern African Customs Union markets excluding Namibia
Source: Meatco annual report 2011/12, p. 26
The marketing strategy adopted means that Meatco has been able to increase average producer prices despite a decline in the volume of cattle being slaughtered (down 7.1% overall in 2011/12 compared to 2010/11, but down 10.4% south of the veterinary control fence, in the main export production zone). Whereas Namibian producers received only N$10.25/kg in 2000/01, by 2011/12 this had risen to N$24.43/kg (see Agritrade article ‘ Quality differentiation pays off for Namibian beef farmers’, 23 April 2012). This ensured that fully 57.65% of the revenues generated in 2011/12 ended up in the hands of Namibian beef producers, due to the structure of ownership of Meatco, which is largely owned by cattle producers.
The long-term decline in cattle offered for slaughter (resulting largely from competition from the South African feedlot industry and farm conversions to game ranching and other activities in the tourism sector) represents a long-term challenge to the Namibian beef industry. Cattle offered for sale through Meatco have fallen by 27.25% since 2000/01 (from 141,133 to 102,680). In 2011/12, it was estimated that only 25% of cattle offered for sale were sold to Meatco, with 48% of cattle produced south of the veterinary control fence being sold live to South Africa (overall some 41% of marketed cattle are expected to be exported live in 2012) .
It was to address this problem that Meatco set up its Ekwatho Financing Scheme to help smallholder farmers to make the transition from weaner production to ox production, in order to ‘create value locally, while increasing throughput at Meatco’s abattoirs’. Under the scheme, officially launched in 2008, Meatco technical teams work with farmers, weighing and monitoring their stock quarterly and advising on husbandry, while also assisting the farmers ‘to obtain the bridging capital… by attaching a value to the cattle through a guaranteed minimum price’ . Meatco comments in its annual report on the growing success of the scheme: some 8,906 head of cattle were offered for slaughter under the scheme in 2011/12 and 10,778 were already registered and monitored for 2012/13. The company reports that it is increasing its activities, and has started ‘several major new projects based on the Ekwatho Scheme’.
Namibia will always need an export outlet for its lower-quality cuts, and this is likely to be South Africa or neighbouring African countries. In this context, the South African market will always provide lower returns per kilo than overseas markets. Nevertheless, South Africa also provides an increasingly important outlet for quality-differentiated meat products, and is part of a growing range of markets targeted by Meatco for the selective marketing of high-quality beef products.
The level of dependence on the EU market for quality beef product exports is being progressively reduced, although financially it remains the most attractive market for quality-differentiated beef products. Market diversification, however, is seen as necessary, in view of the uncertainties around future access to the EU market as a result of the unresolved issues in the EPA negotiations.
It is the sophisticated marketing strategy now applied which is sustaining the Namibian beef sector, despite the declining level of throughput and reduced capacity utilisation in the abattoir and meat processing sector. In the longer term, the opening up of the South African market for high-quality labelled beef from Namibia’s Northern Communal Areas and the emerging success of the Ekwatho Financing Scheme hold out the prospect of halting, if not reversing, the decline in cattle throughput. Ensuring that markets are diversified also serves to reduce the risks associated with exchange rate volatility, which created serious problems in the 2010/11 season.
The Ekwatho Financing Scheme established through the Meatco Foundation now enjoys support from a similar development foundation set up by the Danish Co-op, to which Meatco supplies prepared and packaged beef cuts. This provides an additional benefit from the development of commercial relations with ethically motivated retailers.