Vrede Dairy Project controversy deepens - MEC's reply creates more questions than answers
03 August 2015
The Vrede Dairy Project continues to be shrouded in controversy. In replies to written questions posed in the legislature, the Department of Agriculture and Rural Development have admitted to have initially budgeted only R6 million for the project, but have so far spent R183 950 000 on this endeavour. They are continuing to spend money on the project that remains dependent on the Department.
In terms of a now cancelled agreement, an Indian company named ESTINA would have received a 49% share with a R228 million investment in the R570 million project, while the 80 local beneficiaries would jointly have received 51% of the shares through a government investment of R342 million.
This implies that ESTINA would have obtained a 49% share with an investment of only 40% of the projected cost of the project. Without investing any money in the project, ESTINA received R183 950 000 as the implementing agent to develop infrastructure and purchase some dairy cattle. ESTINA was thus the implementing agent and shareholder until the contract was cancelled.
The management of the project has subsequently been taken over by the Free State Development Corporation (FDC). The FDC have indicated that the cow housing shed is inadequate, and that the processing plant that was built by ESTINA would require additional investment should research that is required indicate that it is at all viable. The replies also state that the project is a “community project”, however the FDC have admitted in a meeting of the Portfolio Committee for Economic Development in the Free State Legislature that none of the 80 beneficiaries are currently involved this project.
The replies also indicate that National Government discontinued its support for the project after a National Treasury investigation. Among the recommendations of the investigation was that the Head of the Department and Chief Finance Officer face disciplinary hearings. The MEC for Agriculture and Rural Development has however indicated in the reply that no disciplinary action will be instituted. The investigation was carried out at a cost of R868 447.33 and has subsequently been ignored.
The replies strengthen the DA’s belief that the project was never meant to milk cows, but rather the taxpayers. The latest replies will be forwarded to the Public Protector for inclusion in her investigation and findings into this project.
Member of the Executive Council for Agriculture and Rural Development
FREE STATE PROVINCE
Dear B.F. Mothupi Table Assistant
Free State Legislature
RE: FREE STATE LEGISLATURE: QUESTION PAPER: WEDNESDAY, 04 MARCH 2015 [No 1-2015] SECOND SESSION, FIFTH LEGISLATURE
Question 2.1 What do the terms of the contract pertaining to the Vrede Dairy Project between the Provincial Government and ESTINA prescribe regarding the cancellation of the contract?
Answer: 2.1 Clause 11 of the Agreement: Termination of the Agreement clearly stipulates that:
11.1 The Parties shall have the right to terminate the Agreement without prejudice to any of its other rights upon the occurrence of any of the following acts:
11.1.1 On breach of this Agreement as stipulated in clause 10: Breach of the Agreement:
In the event of a breach by any one party of any of the terms and conditions of this Agreement and in the event that the said party fails to remedy such breach within ten (10) working days after receiving written notice from any other party to do so, the other party shall, without prejudice to any other rights that they may have, be entitled to exercise all or any of the following rights:
10.1 To terminate this Agreement with immediate effect without prejudice to any other rights it may have;
10.2 To suspend further payments to the defaulting party
11.1.2 On commencement of any action for the dissolution and/or liquidation of any one of the Parties, except for purpose of an amalgamation or restructuring approved in advance by the other Parties;
If any one party receives a court order to be placed under judicial management or to commence liquidation procedures that is not withdrawn or struck out within 5 (five) working days;
If a party informs the other Parties in writing that it is incapable of completing the project as described;
If it can be established that any one of the Parties acted dishonestly .
Upon the termination of this Agreement, the Parties agree to co-operate to conclude an orderly termination of their relationship.
Completion, suspension or termination of the Agreement shall not prejudice or affect the accrued rights or liabilities of the Parties.
Question 2.2. On what date was the contract cancelled?
Answer 2.2 The DEPARTMENT cancelled the Agreements with ESTINA (Pty) Ltd on the 13 August 2014
Question 2.3 Whether any claims were made by ESTINA against the Provincial Government regarding the cancellation of this contract; if so, (a) what is the nature of the claim, (b) the amount?
Answer 2.3 No claim was made by ESTINA since the cancellation of the contract.
Question 2.4 Whether the department intends to pay any amounts relating to this claim; if not, why not, if so, how much?
Answer 2.4 No claim was made by ESTINA since the cancellation of the contract.
***
Question 6.1 : Whether the disciplinary action was instituted against Senior Officials, as recommended in a report following investigations by the Office of the Accountant General in the department of National Treasury into the appointment of Estina as a partner in the Vrede Dairy project, if not,why not, if so,what are the relevant details?
Answer (6.1): No disciplinary action was instituted.
0.66 Question: 1) Whether, with regard to Estina being appointed as both the (i) service provider and (ii) partner in the Vrede Dairy Project, any supply chain management procedures were followed with the appointment,if not,(a), who appointed Estina, and (b) on what grounds, if so, what are the relevant details?
Answer 1: Yes, Supply Chain Management procedures were followed through the approval of the deviation by the accounting officer as prescribed in the treasury regulations.
2) Is the Vrede Dairy Project a (i) Public Private Partnership or a (ii) sole service provider?
Answer 2) No, it is a Community Project.
Question 3: Whether Estina made any financial contributions to the project, if not,why not, if so, (a) what amounts, (b) on what dates were payments made and (c), in terms of what were the payments made?
Answer 3) Estina was to make contributions into the second phase which is dairy value-chain processing plant. However the contract was terminated before the completion of phase 2 of the project.
Question 4: Why were two contracts with Estina signed by the Head of the Department?
Answer 4) Only one agreement was signed with Estina.
0.68 Questions 1) Whether, with regards to the department's invested funds into the Vrede Dairy Project, was budget available for the project when the agreement with Estina was signed, if not, why not, if so,(a) how much money was made available and (b), how much money has been invested in the project up date?
Answer 1) Yes, an initial budget was made available by the department and latter upgraded to a Mega Project, (a) an initial amount of R6,000,000 was budgeted for Vrede Dairy, (b) a total of R183,950 ,000.00 has been invested so far at the Vrede Dairy Project.
Whether the national government has ceased investment in the project, if so, what were reasons given for this?
Answer 2) Yes, due to National Treasury investiations.
Whether the department made any payment to Estina, if so, how much money was paid?
Answer 3) Payments were only made for the implementation of the Vrede Dairy project development.
Whether these payments were made based on any deliverable, if so, what were the deliverables, if not, on what basis were payments made?
Answer 4) Dairy farm perimeter fence constructed, 2 x dairy parlours were developed (1 milking parlour 18- animals at one time and the second milking parlour 70 cows at the go), 800 dairy and the milk processing facility and cows were purchased. Machineries and implements were also purchased for the establishment of the pastures, office equipments and farming equipments.
068. Question: 1) What criteria was used to identify the local beneficiaries for participating in the Vrede Dairy Project?
Answer: 1) A criteria used were based and focused on the following ; focused on those people who demonstrated as having experience in working in dairies fanns, those who were engaged in dairy farming business before, and those who are currently in the dairy farming businesses. The beneficiaries that were prioritized are coming from nearby fanning areas such as Vrede, Memel and Warden,
Yours Sincerely,
Me S M Mlamleli
Acting MEC Agriculture and Rural Development
28/04/2015
ENDS
Statement issued by Roy Jankielsohn, DA Leader of the Official Opposition Free State Legislature August 3 2015
