Beef Sector

Background

Agriculture remains the critical source of livelihood for most Batswana. The Government of Botswana, through the National development plan 9 (NDP9), underpins the importance of boosting agricultural yields and productivity in order to expand incomes and create sustainable jobs.  In 2003/04, agriculture contributed 2.3 % of Gross Domestic Product (GDP), out of which about 70% - 80% is attributable to cattle production. Notwithstanding this contribution, cattle production remains an important factor in the rural economy as a source of income, employment and investment opportunities. It also has strong linkages with the rest of the economy as a supplier of inputs for meat processing, leather and other industries.

The cattle population has fluctuated between 2.5 and 3 million.  The commonly accepted estimate, which is used in most publications, is that Botswana has a population of 2.5 million cattle.  Cattle are kept under two production systems (Traditional/Communal & Commercial). Currently, the traditional system accounts for approximately 80% of the national cattle population, while the commercial system accounts for 20%.

The Botswana Meat Commission (BMC), a cooperative owned by farmers, has a monopoly over the export of both live cattle and beef products. It also sells beef products directly to retailers in the local market. BMC currently operates two abattoirs in Lobatse (800 cattle/day capacity) and Francistown (350 cattle/day capacity) with a combined capacity to slaughter over 300,000 cattle per annum. The Government of Botswana is however currently reviewing BMC's export monopoly to identify opportunities for liberalisation of this sector.

Over the years, the number of cattle supplied to the BMC has been declining whilst domestic consumption has increased and local butcheries have attracted an increasing number of cattle made available for slaughter. As a result, throughput at the BMC abattoirs has declined leading to excess capacity. The table below shows a declining trend in the number of cattle offered to BMC.

Table 1: BMC Throughout

Figures 1 shows BMC sales by destination for 2005.

Figure 1: BMC sales - 2005

Cattle Prices

BMC implemented a 40% increase in the price for cattle in January 2006. Figure 3 provides an indication of cattle price trends and the impact of the recent 40% price increase.  The impact of the 40% adjustment is to increase carcase value by some Pula2.5/kg and average boneless meat prices by some Pula3.6/kg.

Figure 2: Average Producer Prices

Source: Botswana Meat Commission Annual Report 2005

In addition to the 40% increase in January 2006, BMC introduced a new grade in July 2006, the Sound Prime (SP), in order to encourage the movement from the oxen production to the weaner/feedlot system. The Sound Prime grade reflects Export Parity Pricing with South African prices and it changes in line with beef prices in South Africa and the Pula/Rand exchange rate. Table 2 shows the cattle prices as at August 2006. BMC also removed the penalty for measly beef, which used to be discounted at 70% of the original value.

Table 2: BMC Price Structure by Grade, Week 31st July - 06th August 2006.

Investment Opportunities

Development of feedlots

To achieve an annual throughput of 400,000 head at the BMC abattoirs will require a standing feedlot capacity of 125,000 head. Botswana currently has capacity of only 25,000. Development of additional feedlot capacity will require an estimated P165 million to P200 million in capital expenditure and is expected to generate a 10-year internal rate of return of about 22%.

Animal Feed Production

An increase in feedlot throughput will substantially increase feed requirements, which in turn create an opportunity for a feed-mill to produce approximately 7000 tonnes per month at an estimated capital cost between P22 million and P33 million and an annual turnover between P 66 million and P77 million.

Investment in Livestock Transport

The development of a viable weaner-feedlot sector handling 400,000 cattle per annum would require a significant investment in livestock transport operations. The sector would require the movement of around 35,000 cattle per month.

Rebuilding the Maun Abattoir

Maun is the third BMC abattoir, which has been closed for lack of demand. As annual off take increases as a result of the shift to feedlot production, demand could increase. Maun is not EU-certified, but it could process 100 cattle per day, or up to 35,000 per year, for sale to the domestic market and regional export markets. Rehabilitation of the facility would cost an estimated P13 million to P19 million and would generate an estimated annual turnover of about P70 million to P80 million.

Flexible Pouch Products

This is an opportunity that could be tied in with the re-establishment of the Maun processing plant. As off take increases, there is an opportunity to produce shelf-stable flexible pouch products in over-pressure retort systems for domestic and export markets, mainly to customers in the hospitality and catering sectors, including the growing take-away lunch market now supplied largely by supermarkets. The flexible pouch process can transform a wide range of products, including cooked or partially cooked boneless and bone-in beef and mince, as well as prepared meals such as oxtail or various stews. A production facility with a daily production capacity of 5 tonnes per day would require an estimated P10 million and would generate an estimated P15 million to P20 million in annual turnover.