The Free State agriculture department has cancelled its contract with Estina, the controversial company at the centre of a scandal-plagued R570-million Vrede dairy project – but Estina nevertheless has done very well out of the debacle.
A Free State cabinet memorandum seen by amaBhungane states that the province invested a total of R144-million in the dairy farm.
In February, amaBhungane revealed that the department had paid grants directly into Estina’s account. This emerged from the transcript of an interview conducted in October last year between treasury investigators and the Free State agriculture department’s chief financial officer, Dipatle Dlamini.
The transcript, leaked to amaBhungane, also revealed that Dlamini had no clear idea of how the money was spent. The Free State department of agriculture has yet to respond to amaBhungane’s questions regarding the project.
It also showed that provincial funds were channelled to Estina without market research, proper budgetary provision, monitoring of how the money was used, or compliance with supply chain procedures.
A Free State cabinet memorandum seen by amaBhungane states that the national agriculture department has decided to stop funding the project in the current year and withheld R30-million from the Comprehensive Agricultural Support Programme because of an investigation by the national treasury.
The memorandum said that this had resulted “in a serious funding shortfall, creating a financial crisis for the project, and that the [provincial] department will not be able to meet the obligations of the contract”.
Project mired in controversy
The project was initiated July 2012 and was envisaged as being completed by July next year. The memorandum states the provincial cabinet will allocate the 49% previously held by Estina of the Vrede Integrated Dairy Project to the Free State Development Corporation (FDC).
It is not clear whether the contract was terminated with immediate effect, but sources in Vrede said nothing had changed on the farm.
In terms of its original contract with the Free State government, Estina was to invest R228-million in the dairy, while government would invest R342-million as well as providing 4 400 hectares of agricultural land. Estina would also be responsible for establishing a processing plant and sourcing markets for the processed goods, but how much the company contributed is a mystery, as both it and the department have not responded to questions.
Previous amaBhungane articles have cited allegations that the Gupta family are close to the project. There is no direct evidence that the Guptas are beneficiaries of the dairy, but their alleged proximity to it has raised questions of whether political connectivity played a role in the province’s support for the scheme.
Following the articles, the treasury launched a full-scale investigation. However, treasury spokesperson Phumza Macanda refused to answer questions on the progress of the probe this week, saying: “We do not comment on investigations.”
FDC chief executive Ikhraam Osman confirmed that the contract had been rescinded, saying the provincial cabinet had made the decision on April 26 this year.
Responding to a comment by the Democratic Alliance’s Free State leader, Roy Jankielsohn, that “the FDC has less experience in dairy farming than Estina and has experienced various problems relating to its own financial management”, Osman said: “I don’t have to be a farmer to manage a dairy. The FDC will appoint appropriately skilled managers to do that.”
Concerns were raised as early as 2012 about Estina’s dairy farming experience, as the director of the company, Kamal Vasram, is a computer sales manager who told amaBhungane that he has no farming background. He hired Chandrama Prasad, a former top Indian civil servant, as farm manager.
“Centre of excellence” no more
In February this year amaBhungane visited the farm and saw the carcasses of about 30 cows that had been dumped in a ditch near a river which supplies Vrede with water. This prompted the Blue Scorpions to investigate Estina for polluting water sources and not having the required permits under water legislation.
Department of water affairs spokesperson Themba Khumalo said the agriculture department had done the right thing by terminating the contract, and his department had recommended the cancellation.
The cabinet memorandum states that under the FDC’s management, the project will become an integrated agri-business which will in turn “be a centre of excellence for Free State”.
Jankielsohn said this was an attempt to justify expenditure and cover up a scheme that had embarrassed the province and incurred a multimillion-rand cost to the taxpayer.
A DA councillor in Vrede, Doctor Radebe, said in an interview this week that he had raised concerns when the project was first mentioned in council, but had been ignored.
“This project was doomed to fail from the beginning. I am not surprised that the contract was terminated. Sadly we are left with more questions than answers,” said Radebe.
* Got a tip-off for us about this story? Click here.
The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.