Vrede Dairy Project cost R1bn when R30m would have sufficed, Zondo hears

The commission of inquiry into state capture heard on Tuesday that the Vrede dairy farm project in the Free State was given the green light by the national department of agriculture’s national assessment panel, despite the panel not having seen certain documents.

The chairperson of the panel when the project was approved, department of Agriculture, Forestry and Fisheries programme management coordinator Elder Mtshiza, took the witness stand on Tuesday to give testimony related to the project, which was meant to be implemented by the Gupta-linked Estina Dairy Project.

Mtshiza said the panel, which comprises of various specialists, had met from January 30 to 31, 2013, and that the provincial department of agriculture was granted the comprehensive agricultural support programme (CASP) conditional grant after the set standards were met by the province.

Mtshiza said the panel had been “excited” and “happy” about the project following a presentation.

She said the panel had given the project the green light because it had trusted that the provincial department and its head were sufficiently satisfied that the necessary documentation and procedures had been followed.

She told the chairperson of the commission, Deputy Chief Justice Raymond Zondo, that all was in order and nothing was irregular in the panel approving the provincial department’s request for funding without seeing the business plan, water licences and other relevant documents.

However, Mtshiza gave further testimony that National Treasury then sent a letter in July that year in which it indicated that it had noted that the project had been a private-public partnership and that due processes had not been followed when entering this agreement and that the CASP conditional grant should be withdrawn from the project.

Treasury had concerns that the private-public partnership should have been registered with it, and that it should have been notified of what expertise the private partner offered.

Mtshiza said a letter of intent to withhold the grant was sent to the provincial department, which was asked to give reasons why this should not be done.

This was followed by a site visit by the national department of agriculture. However, Mtshiza said only officials from the provincial department were involved in this inspection because the intended beneficiaries were not present.

Mtshiza said the delegation from the national department had requested a feasibility study for the project as well as a business plan, presentation, the list of beneficiaries, an environmental impact assessment and an application for water rights licences, all of which were not provided.

The delegation was also not shown the signed contracts of the 80 beneficiaries of the project.

The commission further heard that by February 24, 2014 the application for water rights had still not been concluded.

The department later compiled a report in which it raised concerns over the feasibility study used for the project, as well as the profitability margins which had been set, among other elements of the project.

On the basis that the approval by the national department had been false, the report recommended that the provincial department should conduct a proper feasibility study and a proper business plan and conclude application for water rights, Mtshiza told the commission.

The R53 million grant was eventually withheld, the commission heard.

The national department also picked up a number of flaws in the feasibility study including, among others, that large parts of it had been theoretical information.

The commission also heard testimony from Johannes Theron, a former dairy farmer who was consulted by Ashok Narayana on behalf of Estina, the commission heard.

Theron told the commission of a visit in 2012 by Estina officials, Vrede mayor John Motaung, and other municipal officials who were part of a 20-person delegation to a dairy farm he managed.

Responding to a question, Theron said it would be “totally impossible” for any person to learn about a dairy farm in the two hours the visit lasted on that day.

“But it will give you an idea,” he said.

Theron also told the commission that after this visit, Narayan arranged to meet with him in Saxonwold for a consultation on the project.

“I was under the impression that he spoke for the Estina group,” Theron said.

Narayan had wanted to meet with Theron urgently, which gave the former dairy farmer the impression that the urgency was borne from the enormity of the project.

“I mean R1 billion to be spent on a dairy farm is enormous,” Theron said, adding that he also had the impression that Narayan had been “shocked” and nervous about the project.

At the meeting, Narayan told Theron, who was accompanied by his employer, that he was the mediator between Estina and the municipality as well as the provincial department, and that this was a key project for the premier of the Free State at the time, Ace Magashule, which must succeed.

Theron said he also had the impression that Narayan was “very nervous” every time he spoke of Magashule “and he wasn’t able to place his cards on the table, he kept them close to his chest”, adding that this made him and his employer suspicious.

Theron said he also learned at the same meeting that a young student would manage the project.

“I could see at that stage he had no experience [to manage such a big project],” Theron said of his encounter with said student.

He said of the project: “I think it was a stupid decision to produce milk in the most difficult part of the country.

“I realised they were in for a big surprise and I was proved right because a lot of animals died [a few months after they brought in].”

Theron said the R1 billion that was set to be injected into the project was too much at a time when many dairy farmers were going out of business and when only R30 million would have sufficed.

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