Government has spent a small fortune on keeping the Magwa tea estate afloat over the years and there is another almost R50-million needed in the short- to medium-term.
But officials are pinning their hopes on finding a private investor who will take the struggling tea operation off the state’s books.
Following the high court application earlier this year, a business rescue process (BRP) is underway, led by chartered accountant Garth Voight of IDEC Consulting Services.
Government officials are hopeful the BRP will ensure that a private investor can be attracted to take the struggling tea operation off the state’s books.
Efforts to obtain an update from Voight last week were unsuccessful.
Voight is obligated to report to the Grahamstown High Court on his work to turn around the ailing tea business near Lusikisiki.
Eastern Cape Rural Development Agency chief executive Thozamile Gwanya says he hopes a private investor to take over Magwa will be identified during the business rescue.
Gwanya, whose agency is part of the department of rural development and agrarian reform, said Voight’s actions required the endorsement of creditors, including shareholder the Eastern Cape Development Corporation, the SA Revenue Service and tea estate employees who, collectively, are owed many millions of rands respectively in loans, taxes and wages.
The department has confirmed that meetings have been held with creditors, with exact amounts owing in the process of being determined.
Adjacent tea estate Majola is not part of the BRP as it is a separate legal entity, although Majola will most likely be included in final agreements once the provisions of the Company Act have been met.
The combined tea estates have been through the wringer. Magwa was part of economic investments by the apartheid government beginning in the 1960s to shore up the former Transkei bantustan and to curb migration to the cities by unemployed black rural people. According to the ECRDA, Majola was a “fashionable” initiative, formed by excising a portion of the Magwa estate for worker ownership.
There are also tea plantations in Kwazulu-Natal and Limpopo provinces.
At one stage, the combined estates produced all of South Africa’s tea.
After a slump in fortunes, Eastern Cape production was resurrected 12 years ago through the intervention of the Eastern Cape Development Corporation as a shareholder largely of R34-million in debt which had been accumulated.
At peak during this period, 2700 tons of tea were being produced at Magwa alone.
But these investment efforts were tied to South Africa’s ill-fated industrial offset programme under arms deal contracts with German submarine company Ferrostaal and an Indian operator Gokal, and it wasn’t long before that deal was scuppered.
Management and labour problems stopped activity on the estates and, by 2011, the Lusikisiki facilities were virtually abandoned by fleeing managers and idle workers.
More recently, provincial government, through the departments of economic development and agriculture, has insisted that the tea estates must not be allowed to collapse, with protection of jobs being a prime motivator.
Magwa employs 2000 people permanently and 1800 during the picking season. Majola has 600 permanent employees, with a few hundred more seasonal workers.
ECRDA expresses concern, however, about the continued sustainability of the provincial tea estates in the face of minimum wages in the agricultural sector, lack of investment in the tea value chain (notably processing operations) and price-determination by industry processors and packagers.
A historical hangover is the import control restrictions which were abolished in 1999 which had offered protection to the local industry. Around the same time, Magwa was also nearly kiboshed by a land claim by the original villagers who had been moved to make way for the estate.
Currently, Magwa production has dropped to a paltry 140 tons, although officials remain hopeful that optimal climatic conditions and the bedding down of tea trees point to the future success of the estates.
Magwa tea estate fights to stay afloat
But officials are pinning their hopes on finding a private investor who will take the struggling tea operation off the state’s books.
Following the high court application earlier this year, a business rescue process (BRP) is underway, led by chartered accountant Garth Voight of IDEC Consulting Services.
Government officials are hopeful the BRP will ensure that a private investor can be attracted to take the struggling tea operation off the state’s books.
Efforts to obtain an update from Voight last week were unsuccessful.
Voight is obligated to report to the Grahamstown High Court on his work to turn around the ailing tea business near Lusikisiki.
Eastern Cape Rural Development Agency chief executive Thozamile Gwanya says he hopes a private investor to take over Magwa will be identified during the business rescue.
Gwanya, whose agency is part of the department of rural development and agrarian reform, said Voight’s actions required the endorsement of creditors, including shareholder the Eastern Cape Development Corporation, the SA Revenue Service and tea estate employees who, collectively, are owed many millions of rands respectively in loans, taxes and wages.
The department has confirmed that meetings have been held with creditors, with exact amounts owing in the process of being determined.
Adjacent tea estate Majola is not part of the BRP as it is a separate legal entity, although Majola will most likely be included in final agreements once the provisions of the Company Act have been met.
The combined tea estates have been through the wringer. Magwa was part of economic investments by the apartheid government beginning in the 1960s to shore up the former Transkei bantustan and to curb migration to the cities by unemployed black rural people. According to the ECRDA, Majola was a “fashionable” initiative, formed by excising a portion of the Magwa estate for worker ownership.
There are also tea plantations in Kwazulu-Natal and Limpopo provinces.
At one stage, the combined estates produced all of South Africa’s tea.
After a slump in fortunes, Eastern Cape production was resurrected 12 years ago through the intervention of the Eastern Cape Development Corporation as a shareholder largely of R34-million in debt which had been accumulated.
At peak during this period, 2700 tons of tea were being produced at Magwa alone.
But these investment efforts were tied to South Africa’s ill-fated industrial offset programme under arms deal contracts with German submarine company Ferrostaal and an Indian operator Gokal, and it wasn’t long before that deal was scuppered.
Management and labour problems stopped activity on the estates and, by 2011, the Lusikisiki facilities were virtually abandoned by fleeing managers and idle workers.
More recently, provincial government, through the departments of economic development and agriculture, has insisted that the tea estates must not be allowed to collapse, with protection of jobs being a prime motivator.
Magwa employs 2000 people permanently and 1800 during the picking season. Majola has 600 permanent employees, with a few hundred more seasonal workers.
ECRDA expresses concern, however, about the continued sustainability of the provincial tea estates in the face of minimum wages in the agricultural sector, lack of investment in the tea value chain (notably processing operations) and price-determination by industry processors and packagers.
A historical hangover is the import control restrictions which were abolished in 1999 which had offered protection to the local industry. Around the same time, Magwa was also nearly kiboshed by a land claim by the original villagers who had been moved to make way for the estate.
Currently, Magwa production has dropped to a paltry 140 tons, although officials remain hopeful that optimal climatic conditions and the bedding down of tea trees point to the future success of the estates.
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