SA peanut farmers left high and dry

● A suicide, massive unpaid loans, desperate and angry unpaid farm workers and heaps of rotting peanuts shrivelling in the sun on prime farmland.

These are some of the devastating casualties in a standoff between the National Treasury and the department of trade & industry (DTI) over a R1.5bn donation by the EU to the Employment Creation Fund (ECF).

The ECF was created by the South African government in 2010 for employment-creation projects but the funds donated by the EU have not been disbursed to its 31 intended beneficiaries after the Treasury suspended the release of the funds in 2016 because of concerns about governance.

But the effects of the deadlock between the two government departments have had catastrophic consequences on the intended beneficiaries, who are mostly rural and poor people.

Business Times has established that one of the beneficiaries committed suicide because of crippling debt after he could not secure the ECF funding.

This was confirmed by the Treasury this week, which said “any loss of life is regrettable” and it was “deeply concerned by the delay”.

However, it said failure to abide by its own processes and donor requirements would imperil current and future donor funding, which would affect even more poor South Africans.

Gauteng-based KwaZulu-Natal entrepreneur Zakhele Mabaso, who owns an agrifood industrial enterprise, Mabaso Mwandla Foods, is one of the 31 beneficiaries who have been dealt a huge blow by the suspension of funding.

The enterprise, which employs 160 people, is a 50-50 partnership with the Emfuleni and Emnothweni farming co-operatives owned by rural communities in Weenen, in KwaZulu-Natal.

They own a 106ha groundnut farm on the prime Tugela Estates, whose farms produce vegetables sold in supermarkets countrywide.

But their groundnuts, which were supposed to have been harvested in July, are now rotting in the sun because they do not have harvesting machines and they cannot pay their workers.

Mabaso received R3m from the ECF in July 2015, some of which he used to buy seeds and fertilisers.

He is now fighting to get the balance of the total of R6.1m he claims he was supposed to get.

He took out a R3.7m loan from stateowned Ithala bank to fix the irrigation system, put a fence around the farm and build boreholes, but is now battling to repay his debt and pay workers.

He said he had to cede his tractors, farm implements and farm vehicles under duress as collateral for the loan.

Mabaso said the company lost R4.6m in revenue last year as it could not deliver the groundnuts to customers due to a lack of funding from the ECF. The company has signed an agreement with AGT Foods, a Toronto Stock Exchange-listed Canadian processor of pulses and other food ingredients, to supply it with groundnuts.

“They are putting a lot of pressure on me to deliver. They will litigate if I can’t supply them,” said Mabaso.

“As is, we’re now harvesting the groundnuts which are supposed to be long out of the fields. I have requested the ECF to assist me with at least an additional R300,000 to properly harvest the groundnuts, sell them, and recoup whatever we can so that I can repay part of this loan.”

Mabaso, who has invested R7m in the project which supports 800 households, now fears that the groundnuts will be stolen and that infrastructure worth R600,000 will be destroyed.

He also fears that a $57m (about R820m) investment deal recently signed between Mabaso and Mwandla Foods and the International Service Group could go up in smoke.

Unpaid worker Makhosazane Sithole, 34, said: “This project brought misery for us. We have not been paid for four months.”

The DTI did not respond to queries on the ECF standoff but Treasury spokesperson Jabulani Sikhakhane said that since its inception in 2010 the ECF had operated with chronically deficient financial reporting and accounting practices.

“Some of the issues relate to the serious and persistent flaws in the management and governance structures of the ECF, in particular the project steering committee and the adjudication committee,” he said.

In 2014 the DTI commissioned a forensic audit of four ECF-funded projects and the EU requested clarity on the financial management and governance of the ECF. The Treasury said the UK’s department of international development, which also funded the ECF, had withdrawn from the programme. Sikhakhane said the EU’s concerns about the governance of the ECF were communicated to the DTI in January 2015.

“A year later no audited statements had been provided and the Treasury suspended the release of funds. Some statements were submitted, but these fell short so the Treasury undertook the audit, which concluded in May 2018.”

Sikhakhane said the reputation of SA was at stake, placing donor funding at risk.

Finance minister Nhlanhla Nene wrote to Mabaso in August to say DTI and Treasury officials were working on the issue.

In a bizarre letter to ECF beneficiaries which he later retracted, the DTI’s fund manager, Paseka Masemula, said: “If you were a Conspiracy Theorist, you would be forgiven to conclude that this is deliberate and organised to undermine African Leadership and more severely to undermine and totally distort programs of the mass democratic movement …

“I mean how do you smoke up projected leveraged investment of R3.5bn and thousands of potential rural and peri-urban jobs with such impunity whilst getting personally salaried millions of taxpayers hard earned money in such a poor country.”

Some issues relate to serious flaws in management and governance

Jabulani Sikhakhane

Treasury spokesperson