Fish consumption trust forced to rethink prices after N$19m deficit

The Namibia Fish Consumption Promotion Trust (NFCPT) is scrambling to restore its finances after suffering a N$19 million deficit and a N$14 million negative cash flow in 2024, with management warning that its current pricing model is no longer sustainable.

This was revealed after Cabinet recently took note of the 2024 integrated annual NFCPT report and authorised the agriculture minister to table the report in the National Assembly that is due to resume on Tuesday.

The integrated annual report for the 2024 financial year indicates that the trust has instituted plans to reverse the negative performance and return to a surplus or break even during the 2025 financial year.

Despite the setback, the trust maintained a healthy financial position at year-end, although its asset base declined during the reporting period due to minimal investment of N$4.6 million in capital projects and asset acquisitions, as well as the negative cash flow movement recorded during the year under review.

The trust remains capable of meeting its current debt obligations, with a current ratio of 4.9%, compared to 8.3% in 2023.

The decline was attributed to reduced cash reserves.

However, management noted that the situation remains manageable as most current assets are held in bank funds, reflected in a quick ratio of 4.5%, compared to 7.8% in 2023.

Tough conditions

The trust experienced a challenging year, recording a net deficit of N$19 million, a decline of N$54 million, or 154%, compared to the net surplus of N$35 million achieved in the previous financial year.

Its gross surplus fell by N$57 million, driven by a N$31 million decline in revenue and a N$26 million increase in the cost of sales.

According to the report, revenue declined because of increased market competition after the introduction of an imported product similar to horse mackerel at prices below the harvesting cost of horse mackerel, resulting in reduced customer demand. In response, management lowered horse mackerel prices to remain competitive.

The cost of harvesting the horse mackerel quota also increased significantly, rising from N$15.45 to N$18.87 per kilogramme, a 22% increase.

The report identified this as the primary driver behind the higher cost of sales, noting that the trust was unable to increase selling prices due to unfavourable market conditions.

Income from quota usage fees remained substantial during the reporting year, enabling the trust to generate N$15 million more than in the previous period. Investment income also increased by more than N$4 million following the investment of additional funds compared to the 2023 financial year.

Operating expenses remained within budget but still increased by N$16 million, or 20%, compared to the previous year.

Adapting to new circumstances

According to the trust’s CEO, Victor Pea, the fishing industry continues to face mounting challenges, with rising harvesting costs remaining one of the most significant pressures.

Pea noted in the report that in addition to rising fuel costs, another factor that contributes to operational costs is that in recent years it has taken longer to harvest the same volume of fish.

"A few years ago, we made use of a fishing vessel with a capacity of 2 000 metric tonnes, which could make two or three trips in a month. Recently, especially in 2024, the vessel was able to make only one trip a month."

The report noted that there were even times when the vessel had to come back to replenish supplies without it having caught its full capacity.

“We also have to contend with new entrants into the fish supply market. They see that the demand for fish is growing, and so they start up their own businesses,” Pea noted.

“However, we don’t consider them threats, because in terms of the bigger picture their existence increases the consumption of fish overall, which is also our mandate. We need to embrace them."

Pea added that in terms of addressing the current loss-making financial situation, "we will have to re-examine our pricing strategy, as it is not sustainable in its current form".

Pea warned further: “It cannot be a blanket adjustment; any decisions made will involve following the market closely and taking consumers’ limited disposable income into account."

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