Two tea estates will have to stand or fall on their own

Magwa and Majola tea estates must soon fly or fall on their own after they were released from business rescue proceedings by the Grahamstown high court this week.

The formerly collapsed government-owned Magwa Enterprises tea company in Lusiksiki was placed under business rescue proceedings in 2016.

Over the past three years, the provincial government has ploughed over R116m into the two tea estates which enabled business rescue practitioner Garth Voigt to steer the company back onto an almost sound footing.

For the first time in years it is once again producing the tea for which it was so renowned in the 1970 and 1980s.

All was almost lost last month when the Eastern Cape Rural Development Agency (ECRDA) and the rural development & agrarian reform department failed to meet the final requirements of the turnaround plan which required it to appoint a board of directors and put in place the final funding. Without the required funding, Voigt faced sending staff home midharvest as there were no funds to pay salaries. He said he was required by the regulations governing business rescue to apply to have the company provisionally wound up.

But, according to court papers, the provincial government has now finally stepped up to the plate by appointing a board of directors. Provincial treasury has also committed to a further tranche of some R26m for operational costs to tide the company over.

“On the strength of the funds made available, operations have been enabled to proceed and will, with the assistance of income from the business and further government funding, be able to continue,” said Voigt in an affidavit in support of the tea estates being released from business rescue.

Voigt indicated in court papers that government will have to fund the plantations’ shortfalls for five years, which he estimated would cost about R138m. These were predicted to be R30m in 2019, R53m in 2020, R31m in 2021, R17m in 2022 and R7m in 2023.

ECRDA CEO Nhlanganiso Dladla said in an affidavit before court that he and rural development & agrarian reform MEC Nomakhosazana Meth were aware that the two tea estates would need further funding.

But, Voigt said, the business was no longer regarded as being financially distressed.

Judge Thami Beshe this week granted the order releasing Magwa from business rescue.