Tea estates’ R200m+ flaws

THE two bankrupt tea estates, Magwa and Majola, are a legacy of the former Transkei homeland’s agricultural schemes. These, like so many others of this era, have just not been able to become self-sustaining and rely on continuous heavy state subsidies.

They were previously subsidised by the National Party government while trying to justify their policy of separate development. They are now subsidised by the ANC government in an effort to justify their failing land transformation and agrarian reform policies.Both these scenarios illustrate how the “road to hell is paved with good intentions” especially when these intentions are based on ideologies and policies that are not sustainable. Separate development proved to be fatally flawed and the ANC’s land transformation and agrarian reform based on state patronage and patronisation without ownership transfer is also proving unsustainable.

Magwa is a unique national asset mismanaged to such an extent that is again on the verge of collapse. There are few, if any other places on earth where good quality tea can be grown at such a low altitude and so close to sea level. The abundant rainfall and onshore breezes combine to create a perfect environment to grow tea. But these important pros are negated by the many cons that undermine the potential of this tea plantation.

The ravishes of the 1913 Native Land Act and consequences of separate development coupled to the alienation of black Africans from their land and dumping them into homelands must surely be redressed, no sane South African can gainsay this. It however, cannot happen if restitution is not coupled to reconciliation, education and transfer of ownership of state acquired land to appropriately identified, selected beneficiaries.

None of these basic fundamentals have been followed or implemented at Magwa and Majola. Rather, the former workers on these estates where promised the world by the government but in the abgets sence of those basic fundamentals being put in place, have been bequeathed a millstone that has plunged them into penury and dependency.

These estates can essentially be described as impaired assets that have technically been “bought” over and over again yet cannot be considered a capital asset on the state’s balance sheet because they are incontrovertibly bankrupt due to a flawed management model.

This is the lamentable state of most former homeland schemes despite hundreds of millions spent by the state o “revitalisation” and “recapitalisation” . Recapitalisation and revitalisation are “code words” describing a free for all for certain connected individuals who feed out of the government tender and board management trough.

Given this context I cannot help being sceptical about MEC Mlibo Qoboshiyane’s “around the clock efforts” to see to the implementation of a turnaround strategy for the tea estates. There have been so many such strategies that have come to nought.

An example is the intervention of the German submarine builder, “Ferrostal” and Gokal, India’s largest tea producer. The Ferrostal/Gokal intervention was not an authentic partnership endeavour but an “offset” fulfilment by a winning bidder in the controversial arms deal. There is no doubt Ferrostal got the better end of the stick.

There have also been many undertakings over the past 15 years that the province would source its tea requirements from Magwa to improve the estate’s viability. These too have come to nought.

The state bailouts for Magwa and Majola to date have exceeded R200-million. This excludes the “acquisition” and budof the projects for the so-called beneficiaries, have been to cover operational costs.

This in and of itself is an indication that they are unsustainable. They periodically cannot even pay salaries to the workers/ostensibly owners, let alone other running costs.

These plantations provide work opportunities to approximately 1 700 workers in a depressed rural area and the state’s commitment to keep them running is clearly strategically important. This laudable effort however, must be accompanied by tried and tested management protocols where accountability and consequence are critical watch words.

It is clear that the Eastern Cape Rural Development Agency (ECRDA) that replaced ASGISA and its highly paid appointed board members have no idea, not only of how to grow and process tea, but how to manage these substantial enterprises either.

The provincial department of rural development and agrarian reform, the ECRDA, the national Department of Agriculture and the Department of Land Reform and Rural Development should all assess which agricultural projects are succeeding or failing and then adopt best practise principles to all failed projects.

There are not many successful projects but there are some. Their success is based on private public partnerships where the state provides the land and development capital with the private partners investing at risk and providing the necessary management and commodity production expertise.

There are two such impressive initiatives in this province that are showing all state led initiatives a clean pair of heels. The Ncera Macadamia nut project outside East London is not only producing top quality nuts, but has had a marked social impact on the beneficiaries and the community.

The other example of success is the partnership between the state and the Amadlelo Agri Pty, dairy producers. This partnership not only produces good quality milk efficiently, it too has had a positive social impact for participating communities.

The lesson here is partnership and the principle of “horses for courses”. The two mentioned private enterprises specialise in agricultural production/farming and the state should specialise in creating/facilitating an environment for this production and subsequent job creation to flourish. Where the state tries to do both, the result has almost without exception resulted in failure.

The other issue of concern is who the state selects as its partners in rural development and agrarian reform. A number of partners have identified the state and its assets as a lucrative cash cow that they can milk for their exclusive benefit. One such notorious partnership is the Kangela citrus estate “bought” for double its value by former MEC Max Mamase, from his friend, Norman Benjamin who “helped” him and his wife acquire their Bonnie Doon mansion.

Not only did this initiative cost the state more than it should have, it has presented absolutely no benefit to the beneficiaries who, like those of Magwa and Majola, remain labourers in an enterprise that periodically struggles to pay them and almost never pays them any dividends, despite exporting fruit.

Despite these partnerships being selfevidently one sided and prejudicial to beneficiaries and indirectly the state, they are allowed to continue exploiting the situation.

Until the ANC government makes a conscious and concerted effort to denounce one sided, self-serving partnerships and terminates ineffective and inefficient management models overseen by boardroom beneficiaries, the road to hell will continue to be paved by good intentions.

Athol Trollip is the Eastern Cape DA leader and shadow MEC for rural development and agrarian reform