Eastern Cape vows to pay to save Magwa and Majola farms

A farmer at work at the the Magwa tea estate. Magwa and Majola tea estates, into which the government has ploughed R100m of taxpayers’ money over almost three years, faces provisional liquidation.
A farmer at work at the the Magwa tea estate. Magwa and Majola tea estates, into which the government has ploughed R100m of taxpayers’ money over almost three years, faces provisional liquidation.
Image: File

The provincial government will not allow the Magwa and Majola Tea estates to be liquidated, says acting head of the rural development and agrarian reform department Zoleka Makina.

Makina said the government had sunk R116m into the business rescue process of the two projects in the past three years and had no intention of throwing in the towel now.

Business rescue administrator Garth Voight had applied to the Grahamstown high court to provisionally wind up the company as he said they had run out of rescue capital to run the two estates.

Voight is required by law to bring an application to wind up a company if the funds run dry. He had been forced to send home casual tea workers who were harvesting crops as there was no money to pay them.

Court papers suggest that despite several letters, the government failed to formally commit to a further R26m which Voight had indicated in September was urgently required to continue the business rescue.

While the company had made significant progress towards sustainability it was not yet out of the woods and required further financial support.

It harvested some 376 tons of tea in 2017 and this increased to 845 tons in 2018.

Attached to the court papers in support of the application for winding up are letters in which Voight’s attorney, Jonathan Clark, warns the government that if there was no formal commitment to further funding, Voight would be left with no choice in terms of the law but to apply to wind up the company.

In a letter on March 29, a few days before the new financial year began, the national treasury indicated in a letter to the Eastern Cape Rural Development Agency – which is the sole shareholder of the company – that it was unlikely that the R26m could be spent by it in one day.

It said, the request for funds would therefore be rolled over for consideration in the 2019 budget adjustment process.

Further letters elicited no immediate commitment to urgent funding and Voight accordingly applied for the provisional winding up of Magwa. But on Tuesday when the matter was due to be argued, it was instead postponed to early June, indicating there was a likelihood the funding impasse would be resolved.

Makina this week said in a statement to the Dispatch that the government would not allow the liquidation to proceed and said anything published to this effect was “misinformation”. She said over the past three years, apart from the R116m government committed to the business rescue package, it had recently funded a R3.5m tea-bagging plant for the estate to improve its share of the tea value chain, thus increasing revenue. They had allocated a further R33.9m for the current financial year.

It is not clear if this will be enough. Voight indicates the projects will run at a loss for some five years before turning a profit. In the current financial year it is expected to need funding of R53m. Makina did not address this in her statement.

Voight’s correspondent attorney in Makhanda, Mark Nettelton, said the application had been postponed to June 4.

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