Magwa and Majola Tea Estates in financial trouble, again

Issued by Nomvano Zibonda, MPL
Member of the portfolio committee for Rural Development and Agrarian Reform

The Magwa and Majola Tea Estates are proving to be an ongoing drain on the Eastern Cape’s finances, providing no return for the hundreds of millions of rands of taxpayers’ money that have been sunk into the estates for decades.

These tea estates are sucking the lifeblood out of the Department of Rural Development and Agrarian Reform’s funding, which could be far better spent on supporting drought relief for viable farms.

Last week the Eastern Cape Rural Development Agency informed the portfolio committee that, less than six months after being taken out of business rescue, the estates are again in financial difficulties.

The committee was informed that operational costs from November to March 2020 stand at R42-million, while just R9-million in funding is still available. Over the medium term, an estimated R132-million is needed, while just R33-million is budgeted for.

As a result, the Department has adjusted their budget and provided an additional R41-million to the estates, while hundreds of farmers around the province wait in desperation to hear if they will receive drought relief funding.

Since the tea estates revival 20 years ago they have operated at a loss. To quote the ECRDA presentation, the hundreds of millions of rands of government funding “has merely kept the tea estates in ICU.”

Premier Oscar Mabuyane’s comments during SOPA and the budget speech, that Magwa Tea must be procured by government departments, as well as municipalities, is a grave concern. This directive flies in the face of the Public Finance Management Act, which has as one of its pillars, open and effective competition.

Government departments must take care that everybody has a reasonable chance to compete for tenders and that there is no favouritism towards any bidder. The premier cannot dictate that a single service provider be used to supply tea to the entire province, no matter how good his intentions.

To put it into perspective, The R116 million spent on these two tea estates during the three years of business rescue alone, at the current bulk rate of R30/kg, would have purchased over 3 866 tonnes of tealeaves, or enough to make roughly 155 million cups of tea. The extra R41 million could buy an additional 1,366 tonnes, or enough to make another 550,000 cups of tea.

Why does the Premier see fit to spend more of the taxpayers’ money, in an uncompetitive environment, to purchase tea for government employees that the taxpayer has already paid to produce?

I will be submitting questions to the MEC for Rural Development and Agrarian Reform, Nomakhosana Meth, to give a full account of all government funding to the two tea estates, as well as a breakdown of where those funds have been spent.

The intentions of creating employment in one of the most impoverished areas in the Eastern Cape is noble, but this needs to be balanced against other priorities.

After more than two decades of failure, it should be apparent that the Magwa and Majola tea estates are not viable, and serious consideration should be given to finding alternatives.