Vrede Dairy Project controversy grows

Roy Jankielsohn MPL

Free State Provincial Legislature

Controversy around the Vrede dairy project continues to grow. It is becoming apparent that the people of the Free State are victims of a hastily drafted contract based on inadequate research and information. Besides the fact that the feasibility study was carried out after the project was approved, the contract blatantly benefits the private sector partner, ESTINA, to the detriment of taxpayers and beneficiaries.

The DA is concerned that an Indian company, who is supposed to supply the expert advice to the Vrede dairy project and milk processing plant, denied, in the press, that they have any involvement in the project.

The current private sector partner in the project, ESTINA, appears to have no background in the dairy industry. When this project was initiated, it was indicated that an Indian company with experience in this industry, namely PARAS, would partner with ESTINA (see attached document).

It has come to light that the project was approved based on the proposal by PARAS. It appears, however, that ESTINA is the only private sector partner with a 49% share in the venture. It is also clear that the Free State Department of Agriculture, together with the Office of the Premier, designed the contract to benefit ESTINA and must have been aware that PARAS would not be involved. The provincial government has no guarantees that ESTINA will meet its obligations to invest R228 million in addition to the R342 million allocated by the provincial government. The contact indicates that ESTINA will only invest their money “if necessary” and that the whole project will be transferred to a private company registered as Mohoma Mobung Dairy Project with Mr Kamal Vasram who has a background in IT as the sole director. The provincial government will receive no benefit from this. Only the 80 to 100 beneficiaries identified by government will own 51% of the shares and ESTINA the other 49%. It is unclear who the beneficiaries are and how they were chosen.

Furthermore, ESTINA is implementing the project using money and profiting from the government’s R342 million contribution. In the 2012 alone R114 million was given to ESTINA. ESTINA is acting as the partner, implementing agent, and supplier in this project. Even though government money is being used, it appears that normal procurement procedures have been by-passed.

Funds allocated by the provincial government for various goods and services indicate that prices have been hugely inflated. Some of these include, among others:

  • Construction of a silage bunker for R5 000 000.
  • A 2km gravel access road for R1 200 000.
  • A security gate and guard house for R2 600 000.
  • A cattle feed plant for R7 350 000.
  • A milking parlour and milk processing plant for R30 050 000.
  • tools such as spanners, shovels, grinders, air compressors, etc. for R2 513 000.
  • Administrative, legal accounting and other consulting fees for R12 000 000.
  • Irrigation equipment, pasteurizer and dairy equipment for R37 779 613.
  • 351 dairy cows for R6 212 000.

The Premier cannot deny involvement in this project when the contracts were drafted and negotiated by individuals from his office. The project is clearly designed to milk taxpayers and benefit the private sector partner, ESTINA.

The DA is aware that National Treasury have investigated this project and we await their detailed report which could lead to criminal charges being laid. The DA has also requested the Public Protector in the Free State to investigate various issues relating to the project that include the contract and the allocation of shares, the inflated prices for goods and services, procurement procedures,  the death of cattle at the project, and environmental issues.

It remains an enigma why Premier Ace Magashule has shown  little interest in pursuing a matter that is fraught with allegations of blatant irregularities and possibly even criminality. Perhaps it is because many of the controversial aspects of the project lead to his office.