Opposition rejects R66m for failed ventures
THE embattled Magwa and Majola tea estates in the Eastern Cape need a further R66-million bailout.
If the request for the additional funding from the provincial department of rural development is granted, this will bring the amount invested in the failed estates to more than R200-million in five years.
Speaking at the tabling of his administration’s 100 days in office, premier Phumulo Masualle said rescue processes were under way, and an administrator would be appointed to run the Lusikisikibased Magwa and Majola tea estates.
The request for additional funds has been opposed by both the UDM and DA, with both parties saying the estates were unsustainable. But Masualle said an interim business plan for Magwa and Majola had been developed and submitted to provincial treasury to source interim funding for the two.
There was a R62-million bailout for Magwa and a R5-million bailout for Majola in 2011-12.
For the current financial year the Eastern Cape rural development department set aside a rescue package of about R2.67-million for Magwa and R1.5-million for Majola.
The funds are for outstanding wages.
“These amounts have all been paid to the entities during this financial year,” said rural development and agrarian reform spokesman Mvusiwekhaya Sicwetsha.
“The interim-funding request for Magwa is R46-million and for Majola R20-million, and this should cover a 12-month period.”
Sicwetsha said the money would cover operational needs such as electricity for the factory, chemicals and fertilisers, coal, diesel, cartage, insurance, maintenance and compensation of employees.
He said the funding was conditional on the facts that both estates had proper corporate governance structures in place and developed and implemented prolific business strategies for sound and gainful operations.
According to Eastern Cape Rural Development Agency’s annual report, R14-million was spent on Magwa and R11.5-million spent on Majola between April 2013 and March 2014.
“The funds were used largely to cover operational costs. The largest portion of which was compensation of employees, and then electricity coal, diesel and maintenance of some of the operational equipment,” Sicwetsha said.
Magwa employs 767 people, but during picking seasons an additional 600 casual employees are drafted into picking operations.
Majola currently has between 150 to 200 permanent employees.
Sicwetsha said department MEC Mlibo Qoboshiyane was working around the clock to see the implementation of a turnaround strategy for the estates.
Sicwetsha added that both estates needed technical support including tea production management, leadership development and financial management.
Despite millions invested in the estates and mentoring from two international companies they have not yielded results.
India’s biggest tea producer, Gokal, was sourced as a future partner and management agent for Magwa while German submarine builder Ferrostaal was also roped in to assist.
Gokal has a wide range of green, black and granulated teas and provides a number of leading retailers with tea under its own house labels. However, both these initiatives fizzled out.
About R42-million was received by the Magwa estate in 2012 from the national government after production came to a halt following incidents of violence and looting during a labour dispute.
United Democratic Movement MPL Max Mhlathi yesterday said he did not support the bailout. Mhlathi said the continuous pumping of state money and resources into both Magwa and Majola had never yielded benefits. “We are just not getting any value for money, especially at Magwa,” said Mhlathi, adding this was “a typical example” of how state money was being wasted. He said the UDM had previously proposed that the two institutions be closed down.
“We have said government should close them down or give them to a private entity to run so that the state can be relieved of the burden of having to pump scarce public resources year in year out while no positive changes are recorded.”
DA MPL Athol Trollip said the estates had for years proved unsustainable. “Until the government changes their management models, they are going to continue, as do Eskom and South African Airways, to rely on state bailouts,” said Trollip. “The only thing that needs to change there, if we are to see any improvements, is the management model they are using.”
Tea estates in cash crisis
THE embattled Magwa and Majola tea estates in the Eastern Cape need a further R66-million bailout.
If the request for the additional funding from the provincial department of rural development is granted, this will bring the amount invested in the failed estates to more than R200-million in five years.
Speaking at the tabling of his administration’s 100 days in office, premier Phumulo Masualle said rescue processes were under way, and an administrator would be appointed to run the Lusikisikibased Magwa and Majola tea estates.
The request for additional funds has been opposed by both the UDM and DA, with both parties saying the estates were unsustainable. But Masualle said an interim business plan for Magwa and Majola had been developed and submitted to provincial treasury to source interim funding for the two.
There was a R62-million bailout for Magwa and a R5-million bailout for Majola in 2011-12.
For the current financial year the Eastern Cape rural development department set aside a rescue package of about R2.67-million for Magwa and R1.5-million for Majola.
The funds are for outstanding wages.
“These amounts have all been paid to the entities during this financial year,” said rural development and agrarian reform spokesman Mvusiwekhaya Sicwetsha.
“The interim-funding request for Magwa is R46-million and for Majola R20-million, and this should cover a 12-month period.”
Sicwetsha said the money would cover operational needs such as electricity for the factory, chemicals and fertilisers, coal, diesel, cartage, insurance, maintenance and compensation of employees.
He said the funding was conditional on the facts that both estates had proper corporate governance structures in place and developed and implemented prolific business strategies for sound and gainful operations.
According to Eastern Cape Rural Development Agency’s annual report, R14-million was spent on Magwa and R11.5-million spent on Majola between April 2013 and March 2014.
“The funds were used largely to cover operational costs. The largest portion of which was compensation of employees, and then electricity coal, diesel and maintenance of some of the operational equipment,” Sicwetsha said.
Magwa employs 767 people, but during picking seasons an additional 600 casual employees are drafted into picking operations.
Majola currently has between 150 to 200 permanent employees.
Sicwetsha said department MEC Mlibo Qoboshiyane was working around the clock to see the implementation of a turnaround strategy for the estates.
Sicwetsha added that both estates needed technical support including tea production management, leadership development and financial management.
Despite millions invested in the estates and mentoring from two international companies they have not yielded results.
India’s biggest tea producer, Gokal, was sourced as a future partner and management agent for Magwa while German submarine builder Ferrostaal was also roped in to assist.
Gokal has a wide range of green, black and granulated teas and provides a number of leading retailers with tea under its own house labels. However, both these initiatives fizzled out.
About R42-million was received by the Magwa estate in 2012 from the national government after production came to a halt following incidents of violence and looting during a labour dispute.
United Democratic Movement MPL Max Mhlathi yesterday said he did not support the bailout. Mhlathi said the continuous pumping of state money and resources into both Magwa and Majola had never yielded benefits. “We are just not getting any value for money, especially at Magwa,” said Mhlathi, adding this was “a typical example” of how state money was being wasted. He said the UDM had previously proposed that the two institutions be closed down.
“We have said government should close them down or give them to a private entity to run so that the state can be relieved of the burden of having to pump scarce public resources year in year out while no positive changes are recorded.”
DA MPL Athol Trollip said the estates had for years proved unsustainable. “Until the government changes their management models, they are going to continue, as do Eskom and South African Airways, to rely on state bailouts,” said Trollip. “The only thing that needs to change there, if we are to see any improvements, is the management model they are using.”
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