Government is finalising a scheme of arrangement to clear over $25 million in Cold Storage Company debts ahead of the $18 million fresh investment by National Social Security Authority, as part of a broad strategy to revive Zimbabwe’s once vibrant beef industry.
Deputy Minister of Agriculture, Mechanisation and Irrigation Development, (Responsible for Livestock) Paddy Zhanda said CSC revival had covered significant ground with only a few logistics remaining.
He said the High Court sanctioned debts clearance plan would be completed by end of this week and ensure one year moratorium on debts payment by the State-owned meat processor. Once Zimbabwe’s main beef producer and Africa’s largest processor, CSC is now a pale shadow of its former self, largely dogged by crippling debts and perennial viability challenges.
But Government says it now has an elaborate scheme to rebuild the company, a stepping stone to reviving the entire beef industry, with one eye on exports in the medium term. Zimbabwe used to export up to $45 million worth of beef to the EU, under a $2 billion export quota, but had exports halted in 2001, following the outbreak of foot and mouth in the country.
Markets still abound in Europe, but not in terms of the Lome agreement, as was previously the case, and the country needs to decisively deal with lingering issues of diseases. Already, Government has set aside $6 million through Treasury for extension services and veterinary department, expected to enhance livestock monitoring and disease control.
Government intends to build the national herd to 5,8 million, from the current 5,5 million, as efforts to rebuild the beef industry continue, before the country can resume exports. Part of the strategy entails restoring once famed breeder and meat processor CSC to olden glitter.
“This is going to be long term, the sooner we start on the right path the better. We have made a lot of progress, it is not a secret anymore; that we have an investor in the name of NSSA,” Deputy Minister Zhanda told Business Weekly in an interview earlier this week.
Questions, though, whether CSC could ever be revamped to its old glory, given the overbearing debts, including $3,5 million the meat processor owes to about 433 employees.
“Business is about people, it can (be revived), if we politicians know who exactly should be appointed and to do what. We have to desist from this business of appointing cronies and friends and thinking that we are doing ourselves any favour,” the deputy minister said.
“We are working to finalise the scheme of arrangement, we negotiated for the debt to be paid under a scheme of arrangement, there was one outstanding issue, that is what is being finalised this week. Once it has been finalised, then we are on to the next stage, ” he said.
Much of the investment estimated from NSSA, amounting to $13,3 million, will be used to purchase feeder steers and feedlot costs (infrastructure were cattle are fed and fattened).
But for the 21 statutory creditors owed in excess of $11,1 million, there will be one-year moratorium on repayments, and thereafter payments will be made over a five-year period.
Similarly structured deals have been negotiated with regards to debts owed to the current workers amounting to $2,1 million and the Pension Fund, which is owed $4,4 million.
Scheme members include lenders; preferred or statutory creditors; workers and a pension scheme; former and concurrent creditors (trade suppliers; and National Social Security Authority).
Opportunity for NSSA
The investment by NSSA, Deputy Minister Zhanda said, was a shareholder injection, meaning the funding was not borrowed and would therefore not come at further costs to CSC.
“NSSA is not investing because it is a Government entity, NSSA is investing because of the opportunity they are seeing. Given the opportunity for running it in a manner that we think, then obviously it is a business that can pay itself,” Deputy Minister Zhanda said. NSSA would recoup its investment through a dividend to be paid based on performance of a revamped CSC. “We believe CSC will be a catalyst for livestock production in both Matabeleland and the country and will be a catalyst in terms of our ability to export,” he said.
Exports could come in handy for a country battling with growing external payments backlog due to crippling shortage of hard currency on poor industrial performance, low FDI inflows and limited access to lines of credit from both bilateral and multilateral institutions. At its peak, CSC business entailed processing and marketing beef, lamb, goat, and related products. Activities included animal handling, stunning and bleeding, de-hiding and evisceration, cutting and de-boning, cooling and freezing, and blood meal processing.
The meat processing company also offered various products, including boneless chilled and frozen beef, tallow, by-product meals, meat frozen, meat-bone meal, gall stones, and ox gall. It also sold canned products, such as corned beef and stewed beef.