Due diligence not done on Estina, Zondo hears

Former Free State department of agriculture head Peter Thabethe on Friday told the commission of inquiry that due diligence on Gupta-linked Estina Pty Ltd was not done before the company was involved in the Vrede Dairy Farm project.

The commission is focusing on evidence relating to the failed Vrede Dairy Farm project, which involved Gupta-linked Estina Pty Ltd.

Thabethe had approached a dairy farm in India – Paras – with the intent of adapting its business model to use it for the project.

During a visit to South Africa, Paras’ Mr Kumar indicated interest to invest in the project, the commission heard.

However, Thabethe told Kumar that it would be difficult to enter into such an agreement with a company based in India and suggested that Paras register in South Africa or look for a locally based partner, the commission heard.

Thabethe said after Kumar’s visit, the department was approached by Estina who said they had a relationship with Paras and would partner with the dairy farm on the project.

Thabethe said he asked for confirmation of this relationship, saying he was given a signed agreement between the two entities and that he confirmed the relationship with Paras who indicated that they would forward a memorandum of understanding between the two companies.

“Did you do due diligence on exactly what Estina Pty Ltd was?” evidence leader at the commission, advocate Leah Gcabashe asked Thabethe.

Thabethe said a government portal was used to check if Estina was a registered company with a company number and to check the type of business it did and whether it was tax compliant.

Gcabashe further asked Thabethe if he had been able to establish that prior to October 2012, Estina had been registered as a commercial business before changing to an agricultural, farming and related field one around that time, as well as changing its director.

“It had nothing to do with agriculture, would you dispute that?” Gcabashe asked.

Thabethe said he would not dispute that, however, he said according to recordings he obtained, Estina was operating in the agricultural sector.

The witness said he could not recall exactly when – the month – Estina’s records were checked by the department, explaining that such a check was an exercise that would be the responsibility of the department of supply chain management.

Thabethe said when Estina’s business was checked he was not told what it did “but the compliance had to be checked” and had there been issues with that, he would have been informed.

The chairperson of the commission, Deputy Chief Justice Raymond Zondo, asked Thabethe whether he was not interested in the type of business that Estina was involved in.

“Not really, chair. Chair, my interest was in Paras because that is where the expertise is, Estina was being used as a company that is local that I would then be able to deal with,” Thabethe responded.

Zondo questioned Thabethe whether his only interest in Estina had been that they are tax compliant and was not interested in whether the company was involved in illegal activity.

“Chair, it’s a very difficult one to answer,” Thabethe said.

Zondo responded: “I would have thought that, to say the least, you would be interested in whether [Estina] is involved in the same sector and even if it is involved in the same sector, what experience they have and what type of company are they and how are they run, who are their directors, will you be dealing with a credible company, will you be dealing with credible people who run this company, as a provincial government, will the provincial government’s association with this local company not embarrass the government. I would have thought that you would be interested in those types of things.”

Thabethe said this type of check on Estina was not done because a check of that extent had not been done to any other company before, with requirements being to check compliance.

Zondo asked the witness if he did not mind getting Estina involved in an agricultural project even if it did not operate in the same sector.

“Yes, chair, because they were not my main focus,” Thabethe responded, saying Estina would only be required in case a litigation matter arose.

Zondo noted that if Estina was not checked if it was a credible company, then even that litigation would not be a success.

“Chair, we had never done that exercise before, that’s why it’s very difficult for me to respond,” Thabethe said.

Zondo asked Thabethe a hypothetical question whether he, personally, would not want to do his “homework” before partnering with someone in business.

“My response, chair, would be we had dealt with companies in South Africa but we had not done that research,” Thabethe responded.

The commission continues.

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