Govt’s funding of Vrede Dairy Farm didn’t make sense, Zondo hears
The witness says the business plan for the project was 'unrealistic' and 'inconsistent', which any serious investor would have rejected.
File image: Dairy cows on the Vrede dairy farm in the Free State. Picture: Neil McCartney
Agricultural Economist David Andreas Maree told the Commission of Inquiry into State Capture that it did not make sense for the government to invest in the Vrede Dairy Farm project.
The commission resumed on Monday to hear testimony on the multimillion-rand siphoning of state funds through the Gupta-linked Estina Dairy Farm project in the province.
Maree also told the commission, chaired by Deputy Chief Justice Raymond Zondo, that he had reviewed documents required for the establishment of the dairy farm – a project proposal, business proposal, business plan and feasibility study.
Maree said following his review of these documents, he was of the view that some had been copied and pasted from other sources when they were compiled or were “inconsistent”, “unrealistic” and “academic” and not what they were purported to be.
Maree said an investment of R15 million at that stage should have ensured there was a state-of-the-art milking parlour at the dairy farm.
He said R5 million would have been enough money to purchase the equipment for the farm.
Maree said it was questionable why the government would need to fund the project if it was commercially viable.
The project proposal contained “reasonably high” costs, including the price of cows and equipment, the commission heard.
Maree said he did not think an in-depth cost analysis had been done before the project was set up.
The witness said a project of this nature does not always 100 percent benefit the local economy, specifically the Vrede district and Free State at large.
Furthermore, most of the equipment needed for the farm would have to be imported from countries such as Australia, New Zealand or European countries, which means “you can’t say it benefits the local economy 100%”, Maree told the commission.
Maree said he was of the view that the business proposal for the project did not address risk mitigation.
He said the six-page business proposal, with three additional pages – seemingly excel sheets – was “unreadable in certain parts”.
The business plan was “unrealistic” and “inconsistent”, Maree told the commission.
In the plan, the dairy cows had been over-budgeted at R25,000 each, compared to the average price of R15,000, he said.
Another “unrealistic” target set out in the plan is that each cow on the farm would produce 45 litres per day when on average cows produce 20.1 litres per cow per day and under good conditions they produce between 30 and 38 litres per cow per day, the commission heard.
“Forty-five litres per cow per day is definitely unrealistic,” Maree said.
Based on this yield of milk per cow each day, the plan envisaged “overstated” income numbers, in Maree’s opinion.
An example of how the plan had been inconsistent, Maree said one page of the plan talks of 500 cows farmed at the dairy and in the very next one it speaks of 1,000 cows.
Maree said many of the initial assumptions in the plan are unrealistic and “it would be difficult to attain those numbers” and so it should have been revisited at the time.
Zondo commented that the business plan contained unacceptable discrepancies.
“If I was the investor in this type of project I would immediately send [the business plan] back,” Maree said.
These documents are on the letterhead of the Free State department of agriculture and rural development, the commission heard.
Zondo further commented that the business plan “definitely” did not give reasons why the government should spend money on the project.
Maree said those who had drafted the business plan did not know what they were talking about, adding that at the time he was reviewing it he was not aware that the Vrede Dairy Farm project was already in existence.
Maree said the feasibility study was “extremely academic” with little on the feasibility of the project.
“It’s more a document about farming and not a feasibility study itself,” Maree said, adding that it lacked in a number of elements for the document to be called a feasibility study.
He said the feasibility study did not add any value and was done for the sake of being done.
Zondo said this was worrying because it begs the question who the department had approached to get the study done.
Maree is expected to conclude his testimony on Monday.
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