BMC on the brink of collapse

The Botswana Meat Commission (BMC) has nearly no cash left and is not even complying with the Financial Intelligence Act (FIA), a report by the Auditor General has observed. 

In her newly released report, the then-acting Auditor General, Keneilwe Senyarelo indicated that BMC’s auditors noted that BMC Group and the Commission continued to realise crippling losses on an annual basis. 

The Auditor General has warned that “it is becoming increasingly difficult” for financially troubled BMC “to effectively implement its mandate and its strategy going forward.” 

This has been the case over the previous financial reporting periods including current year’s loss of P112 million for the Group and P117 million loss for the Commission, said Senyarelo.  “The losses had resulted in the accumulated deficit for the Group of P1.4 billion and P1.4 billion for Commission.” 

As a result of the losses, the Auditor General’s report says; “BMC was not in compliance with Section 17 of the Botswana Meat Commission Act which stipulated that it was the duty of the Commission to make sufficient revenues to meet its ongoing obligations.”  

According to Senyarelo; “Given the cumulative impact of limited financial resources available to the Group and Commission annually, it may increasingly become difficult for the Group to effectively implement its mandate and its strategy going forward.”  

The report says whilst the auditors acknowledged that the “Commission’s objectives were to produce quality meat and value-adding products for global markets, there was a requirement in terms of the Commission Act for the Commission to be profitable and build up financial reserves.”
According to the report, the Commission was established through an Act of Parliament, suggesting that both the Group and the Commission are likely to continue receiving government support.

The Auditor General’s report also shows that BMC was not complying with the Financial Intelligence (FIA) Act of 2019. 

“It was observed by the auditors that BMC did not carry out vetting for customers that transacted over the Act’s prescribed limit as well as maintaining a list of customers. It was stated that this was in contravention of the FIA Act,” the report says. 

The auditors of BMC also observed that the Group structure included a number of dormant entities. It was noted that there were administrative costs associated with maintenance of the subsidiaries. 

The report shows that, in response, Management indicated that in recognition of the continued exposure of BMC to the going-concern risk as evidenced by the negative balance sheet, a four-year turnaround strategy tagged Meriting Strategy was developed and approved in September 2021. 

“The strategy was expected to provide a structured approach towards the implementation of initiatives that are geared towards returning BMC to profitability and sustainability by the year 2024,” the report says. 

Regarding non-compliance with the FIA Act, the report says, management agreed that they would develop an anti-money laundering policy during the 2022 financial year to comply with the requirements of the Financial Intelligence Agency Act of 2019  and that they would ensure compliance at all times.  Management further acknowledged that currently customers were not vetted in line with the provisions of the Act. 

With regard to dormant subsidiaries, the report says, in response, management noted that the auditors’ recommendation was aligned with the Board’s decision of 2019 wherein management was instructed to liquidate or revive dormant companies as appropriate. 

“This process was negatively impacted by lack of internal legal capacity which had been addressed. Mainline Carriers was reinstated in the CIPA registry in 2022. Allied Meat Insurance and BMC Meat Importers were in the process of liquidation,” the report says. However, the report says, as these companies were owned by Lobatse Leathers, which has been deregistered itself, the liquidation was stalled. The process was underway to re-register Lobatse Leathers with the help of external attorneys.