The imminent sequestration of the Magwa and Majola tea estates was yesterday put on ice after the provincial government agreed to a massive three-year R110-million bailout.
The provincial treasury was galvanised into an immediate R15-million bailout with a firm, written promise of more over the longer term after provisional liquidation papers were served this week.
With this guarantee in writing, business rescue practitioner Garth Voigt, who had initially sought to have the Magwa Enterprises Tea state-owned company wound up, instead applied to the Grahamstown High Court to extend his business rescue mandate to May 23. Judge Murray Lowe yesterday did so.
The company was placed in business rescue in February last year and Voigt was appointed to put in place a turnaround strategy.
Voigt said in an affidavit that the strategy required a R110.4-million investment over three years, of which R23-million was needed upfront to repair damaged facilities.
The two tea estates have suffered from long-term mismanagement and zero accountability. Massive labour instability after 2010 resulted in assaults, destruction of property and the murder of a security guard.
Management was ousted and tea production dropped from 2700 tons in 2010 to just 140 tons in 2014.
Voigt said the state had spent R13.6-million since February last year on the projects, mostly on salaries and wages. He said the additional R15-million committed by the state would not have provided a final solution and would amount to wasteful expenditure.
It was on this basis that he had initially applied to the high court to end business rescue proceedings and place the company in liquidation.
However, he said once a set of the liquidation papers were served on the stakeholders the implications of the abandonment of the two projects had given the provincial decision-makers reason to reflect. “The upshot of this is that the provincial treasury has now made a commitment to fund the implementation of the business rescue plan (BRP).”
A letter from finance department head Bongani Gxilishe confirms that: “Provincial treasury, therefore, supports the BRP process and guarantees the funding for the implementation of the Magwa business rescue plan and sustainability of Magwa and Majola Tea estates.”
Voigt said the two estates were in a remote and impoverished part of the province and walking away from it would have significant implications for those who lived there.
While Voigt put the winding up application on ice, it continues to hang over the head of the two projects. At the request of Voigt’s attorney, Mark Nettelton, Lowe postponed the winding up application to May 23 to give Voigt the opportunity to finally ascertain if the funds would come through.
Voigt said the shareholders – the province and the ECDC – planned to transfer the shares to the provincial agriculture department.
7-week freeze for tea estate crisis
The provincial treasury was galvanised into an immediate R15-million bailout with a firm, written promise of more over the longer term after provisional liquidation papers were served this week.
With this guarantee in writing, business rescue practitioner Garth Voigt, who had initially sought to have the Magwa Enterprises Tea state-owned company wound up, instead applied to the Grahamstown High Court to extend his business rescue mandate to May 23. Judge Murray Lowe yesterday did so.
The company was placed in business rescue in February last year and Voigt was appointed to put in place a turnaround strategy.
Voigt said in an affidavit that the strategy required a R110.4-million investment over three years, of which R23-million was needed upfront to repair damaged facilities.
The two tea estates have suffered from long-term mismanagement and zero accountability. Massive labour instability after 2010 resulted in assaults, destruction of property and the murder of a security guard.
Management was ousted and tea production dropped from 2700 tons in 2010 to just 140 tons in 2014.
Voigt said the state had spent R13.6-million since February last year on the projects, mostly on salaries and wages. He said the additional R15-million committed by the state would not have provided a final solution and would amount to wasteful expenditure.
It was on this basis that he had initially applied to the high court to end business rescue proceedings and place the company in liquidation.
However, he said once a set of the liquidation papers were served on the stakeholders the implications of the abandonment of the two projects had given the provincial decision-makers reason to reflect. “The upshot of this is that the provincial treasury has now made a commitment to fund the implementation of the business rescue plan (BRP).”
A letter from finance department head Bongani Gxilishe confirms that: “Provincial treasury, therefore, supports the BRP process and guarantees the funding for the implementation of the Magwa business rescue plan and sustainability of Magwa and Majola Tea estates.”
Voigt said the two estates were in a remote and impoverished part of the province and walking away from it would have significant implications for those who lived there.
While Voigt put the winding up application on ice, it continues to hang over the head of the two projects. At the request of Voigt’s attorney, Mark Nettelton, Lowe postponed the winding up application to May 23 to give Voigt the opportunity to finally ascertain if the funds would come through.
Voigt said the shareholders – the province and the ECDC – planned to transfer the shares to the provincial agriculture department.
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