DATE OF PUBLICATION: MONDAY 02 NOVEMBER 2009 [IQP No 26 -2009]
FIRST SESSION, FOURTH PARLIAMENT
Question 2315 for Written Reply, National Assembly: Mr. P J C Pretorius
(DA) to ask the Minister for Agriculture, Forestry and Fisheries:
With reference to her reply to question 1486 on 9 November 2009, (a) what
was the annual production achieved by (i) Magwa and (ii) Majola tea estates
in each of the past five years and (b) who are the shareholders of (i)
Magwa and (ii) Majola;
(2)(a) what has been the highest annual production achieved by (i) Magwa
and (ii) Majola since their inception, (b) when was it achieved in each
case and (c) why are (i) Magwa and (ii) Majola not operating at full
(3)(a) what total amount was spent by the State on (i) Magwa and (ii)
Majola in each of the past five financial years and (b) how is this amount
made up in each case? NW3026E
â¢ Since 2004, the operating company for the Magwa tea estate has been Magwa
Enterprise Tea (Pty) Ltd, a wholly owned subsidiary of the Eastern Cape
Development Corporation (ECDC).
â¢ The shares in the operating company have been assumed by ECDC as an
interim arrangement for facilitating the liquidation of the former
insolvent operating company, for reviving the estate and to involve and
manage an external tea expert.
â¢ The interim role of ECDC has been fulfilled, but their ownership of the
operating company remained, pending a broader sustainable solution
supported by Provincial Government.
â¢ Since 2007/2008 the funding of Magwa Enterprise Tea has shifted from
Department of Economic Development and Environmental Affairs (DEDEA) to
the Eastern Cape Department of Agriculture (ECDoA) via the Eastern Cape
Rural Finance Corporation (ECRFC).
â¢ The fiduciary responsibility to properly fund, administer, manage and
operate Magwa Enterprise Tea still vests with ECDC, and by implication
DEDEA by virtue of its status as shareholder of ECDC.
â¢ The Public Financial Management Act (PFMA) however also requires ECRFC,
and therefore by implication the ECDoA to oversee the operations and
expenditure of Magwa Enterprise Tea in order to ensure compliance with
the general responsibilities of funding via a provincial public entity.
â¢ There are also other Government Department instrumental in the future
success of the estate, including the Department of Land Affairs which
need to assist in securing land, and unlocking land restitution claims.
â¢ AsgiSA-EC (Pty) Ltd has finalised a 5-year Business Plan and Strategy
allowing for high-impact priority programmes to drive and implement their
agrarian and rural transformation policies in the Province, with the
primary focus on the Mzimvubu Basin area which includes the Magwa and
â¢ The Majola estate is still owned by the workers and community, on similar
terms and conditions as what applied to Magwa prior to the insolvency of
Magwa Tea (Pty) Ltd during 2003.
1. (a) What was the annual production achieved by Magwa and Majola tea
estates in each of the past five years.
|Years |Magwa (Kg) |Majola (Kg) |
|2004 |1445765 |383383 |
|2005 |2010095 |304010 |
|2006 |2816881 |209409 |
|2007 |1991535 |171765 |
|2008 |1641303 |130250 |
â¢ Magwa: Average production for the past five years: 1981115.8kg
â¢ Majola: Average production for the past five years: 179834.4kg
(b) Who are the shareholders of Magwa and Majola?
|Magwa |Majola |
|Total share holding held by the |In Majola Tea Estate the workers |
|Eastern Cape Development |are shareholders who have been |
|Cooperation (ECDC). |given the privilege to acquire the|
| |assets using the LRAD scheme in |
| |1997. There are about 412 of |
| |these shareholders. |
2. (a) What has been the highest annual production achieved by Magwa and
Majola since their inception and when was it achieved in each case?
| |Magwa |Majola |
|Highest annual |2816881Kg |701847 Kg |
|production achieved |(2816.881 tons) |(701.847 tons) |
|Year achieved |2006 |1992/93 |
(b) Why are Magwa and Majola not operating at full potential?
Magwa Tea Estate:
o The Project is not operating at full capacity due to the Provincial
Department of Agriculture funding delays and non adherence to adopted
business plan. These delays and non-adherences started as from August
Majola Tea Estate:
o Since September 2003, there has been no fertilizer that has been
applied by the estate. Inorganic fertilizers in the form of NPK
macro-elements are the most basic forms of plant food especially
when it is to be administered in bigger quantities. Our estate
needs a minimum of 250 tons of these fertilizers to be applied each
season. The price of this input increased in such a way that in
September 2003, Majola Tea could no longer afford to apply.
o This increase was matched against constant tea prices that were just
dropping in real terms. There has always been a shortage of labour
since working for a tea estate at that time was not that attractive.
Critical challenges to the future sustainability of the two tea
â¢ Obtaining clarity on the future role of Provincial Government in
the Magwa tea project. This involves deliberations between DEDEA
and the ECDoA and in particular if Magwa should remain with
ECDC, or whether the project should be transferred to AsgiSA-EC
or ECRFC as a project;
â¢ Continued financial support where monies are available when
required by the operating companies;
â¢ Alignment to the Department of Agriculture/ASGI-SA/other
Departments and key stakeholders;
â¢ The role and structure of the land owners (CPA), and in
particular negotiating a lease over the estate;
â¢ National Government supporting the implementation of a rebate
system for locally produced tea; and
â¢ Continuity of the current management structure.
The most important challenge for the two tea estates, and for the South
African tea industry as a whole, can be summarised as follows:
â¢ Bulk black tea's current cost of production at Magwa Enterprise
Tea at approximately R14.00 p/kg.
â¢ The current market price for the purchase of bulk tea fluctuates
between R11-00 and R20-00 p/kg, which (according to Magwa
Enterprise Tea management) is again sold at between R67-00 and
R69-00 p/kg in retail outlets.
â¢ Companies such as Unilever and National Brands buy the tea from
Magwa, and blend it with various teas purchased from other
countries such as Malawi. Tea can be purchased from Malawi at
between R8-00 and R9-00 p/kg due to lower labour costs, and the
fact that the tea is imported duty free.
â¢ The purchasers then package, market and distribute the tea and
sell it to retail outlets, who add a margin of approximately 27%
to the purchase for on sale to consumers.
The most challenging problem to overcome at this point in time is the
effects of the macro environment in South Africa and globally. These
issues consist of;
â¢ High oil prices
â¢ High inputs cost
â¢ High Interest rates
â¢ High Inflation/cost of living in South Africa
â¢ Job losses
â¢ Slowdown in economic growth
3. (a) What total amount was spent by the State on Magwa and Majola in
each of the past five financial years?
Magwa Tea Estate:
â¢ Since 2004 and up until 23rd November 2009, theÂ full amount granted by
the Provincial Department of Agriculture to the Magwa project is R72
921 581-00, of which Magwa has repaid R7 000 000-00 and with the total
due of R65 921 581.00.
|Date |Entity |Amount |
|15 December 2004 to |DOA |R12 500 000 |
|2006 | | |
|20 May 2005 |ECDC |R2 528 000 |
|12 September 2006 |DEDEA |R5 000 000 |
|27 September 2006 |DEDEA |R3 248 433 |
|23 November 2006 |DEDEA |R3 327 000 |
|15 December 2006 |DEDEA |R2 582 000 |
|26 January 2007 |DEDEA |R3 727 148 |
|28 February 2007 |DEDEA |R3 310 000 |
|30 March 2007 |DEDEA |R2 400 000 |
|30 April 2007 |DEDEA |R2 499 000 |
|2007/2008 |ECDoA |R20 000 000 |
|2008/2009 |ECDoA |R3 000 000 |
|2009/2010 |ECDoA |R8 800 000 |
|Total |R72 921 581 |
â¢ Total monies advanced to Magwa Enterprise Tea by Provincial Government
o TheÂ full amount granted by the Provincial Government to the Magwa
project is R72 921 581-00.
Majola Tea Estate:
|Period |Amount |Source |
|December 2006 |R 125 000-00 |EC Dept. of Agriculture |
|December 2006 |R 2 050 000-00 |Dept of Land Affairs |
| | |(National) |
|March 2007 |R 500 000-00 |EC Dept. of Agriculture |
|November 2007 |R10 000 000-00 |EC Dept. of Agriculture |
|March 2009 |R10 000 000-00 |EC Dept. of Agriculture |
|TOTAL |R22 675 000-00 | |
(b) How is this amount made up in each case?
Magwa Tea Estate:
o The annually allocated funds have been used for wages and
fertilizer/chemical purchases. Magwa has an annual turnover dependant
on production of R56 Million, with aÂ full production potential R80
Million at present tea prices and Rand to Dollar exchange rate.Â
Majola Tea Estate:
|PERIOD |FUNDS (AMOUNT) |ALLOCATION |
|Dec. 2006 |R 125 000-00 |Salaries (Dec. 2006) |
|Dec. 2006 |R 2 050 000-00 |Salaries (April â Nov. 2006) |
|Mar. + Nov |R10 500 000-00 |Salaries - R 6 520 000-00 |
|â07 | |Improvements + Inputs - R 3 980 |
| | |000-00 |
|Mar. 2009 |R10 000 000-00 |Salaries - R 5 560 000-00 |
| | |Improvements + Inputs - R 1 440 000-00|
| | | |
| | |Balance (Unused) - R 3 000 000-00 |