Loss making BVI optimistic

SHARE   |   Monday, 19 October 2015   |   By Phillimon Mmeso
Matlho Matlho

Botswana Vaccine Institute (BVI) which for the past two years has been operating on deficit budget is optimistic that they are on the right track to profitability. Appearing before the Parliament’s Committee on Statutory Bodies and State Enterprises, BVI General Manager Dr. Onkabetse George Matlho said they have developed a turnaround strategy for the long term sustainability of the business in order to improve the performance of the company and to return BVI to profitability.

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BVI has engaged Kago Capital to undertake a diagnostic study of the company, which is expected to be completed this year. The diagnostic study came up after BVI recorded a reduction in sales revenue in 2014 standing at P78.4 million against a set budget of P107.9 million. This represented a significant deficit of 26% against budget and represented a decline in performance when measured against the 2013 sales of P95.1 million and the 2012 sales of P92.6 million, the  last time BVI made some profit.
Dr Matlho said last year BVI experienced high costs of production, which were largely attributed to the high incidents of destructions due to product contaminations. In the year ending December 2014 BVI recorded a loss in excess of P17 million. Most of the BVI costs are fixed and therefore a reduction in sales revenues resulted in the institute reporting operating losses in 2014, said Dr Matlho. “It is however important to note that a number of initiatives are being implemented to reduce this cost,” said Matlho, adding that management has also intensified the control of operational costs.
Improvement in Foot and Mouth Disease (FMD) situation in the SADC region which is BVI's main market also contributed significantly to reduction in the number of doses of FMD vaccine sold over the three years. BVI whose mandate as state enterprise is to carry out the business of research and manufacture of all kinds of vaccines and sell the same throughout the world is making 80% of their revenue from FMD vaccine, said Matlho. “There has also been a general decline in doses of Anthrax and Blackquater vaccines sold locally and regionally due to reduced uptake by the Department of Veterinary Services Botswana and Zimbabwe, who are our main customers as they struggled to procure enough vaccines," he said.
Another concern for BVI is the transport logistics as Air Botswana does not have a big enough aircraft that can transport large cargo. Asked why they cannot outsource the transport logistics, Matlho said they will consider the suggestion but caution that their products are very sensitive and need experts in the field when transported.
On when BVI plans to expand into the rest of Africa and the world, Finance Manager Mmabasotho Tibe said they have already penetrated West African markets in countries like Togo, Mali, Kenya and Uganda. The challenge they are facing is competing with low quality vaccines which are cheaper from other countries, she said. However, she boasted that there has been increased uptake of PPR vaccine, which she attributed to a BVI contract funded by Bill and Melinda Gates Foundation and rolled out under the auspices of the World Animal Health Organisation (OIE) to supply Ghana, Burkina Faso and Mali.

The eloquent Tibe, who impressed Moyo Guma-the chairman of the committee-with her confidence on financial figures, said they have also been awarded another contract funded by the World Bank to supply PPR to Togo. On their turnaround strategy initiatives, Tibe said they plan to re-negotiate the old agreement with MERIAL to reduce the high cost of the partnership and secure exclusivity in targets markets. BVI currently uses MERIAL technical expertise to market their vaccines and pay technical fees, export commission, royalties and cost of raw material supplies. Tibe revealed that have partially agreed to reduce the cost in the new agreement.
“As a way of reducing the technical fees, the MERIAL expatriates were reduced from three  to two,” said Tibe, further informing the committee that the export commission for the sale of FMD vaccines was revised so that lower commissions are paid for low sales volumes. She said in the old agreement the applicable percentage for lower sales was 15% compared to 5% in the new agreement. On partnership with other players within the region, Tibe said that though unofficially Onderstepoort Veterinary Institute Exotic Centre (OVI) of South Africa which also manufactures FMD vaccine wanted a partnership they are not comfortable partnering with them. “OVI is our direct competitor and we cannot really commit to partner with them,” said Tibe.
Taking a cue from the Finance Manager, Dr. Matlho added that as part of their diversification process they have expanded their FMD laboratory and introduced the purified FMD vaccines as a form of product diversification. He said the purified vaccine was used to control FMD outbreaks in Zone 7 without the need for mass slaughter and compensation.



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