Investment’s a fantasy when infrastructure is broken, says Astral Foods’ Chris Schutte
Investment is a fantasy while infrastructure is all but nonexistent
● Chris Schutte, CEO of SA’s largest poultry producer, Astral Foods, says his “only plea” to President Cyril Ramaphosa is to “give us infrastructure, and we as business will release cash, will expand, will invest and will create jobs”.
Astral’s profits halved in the year to endSeptember due to water shortages in Standerton because of broken infrastructure. The company has to truck water from the Vaal River to keep its operation in the Mpumalanga town going.
Three years ago, its power supply was cut after Lekwe municipality racked up a R300m debt to Eskom. The crisis only ended when Astral obtained a high court order permitting it to buy directly from the utility.
Schutte says he is “absolutely cynical” about Ramaphosa’s calls for investment and promises of economic growth while across SA critical infrastructure is broken or nonexistent.
“If you do not have infrastructure you cannot develop this economy. You can talk until you get blue in the face about investment conferences and people bringing money to the country, but if you drive 20km outside any of the big metropolises it’s all falling apart.”
Astral stopped receiving municipal water five months ago, which was “devastating” for a poultry business wholly dependent on it.
Without Astral’s assistance over the past five years, the collapse of the water supply would have happened sooner and been much worse.
“We were pivotal in maintaining certain parts of their infrastructure. All their water pumps we serviced, replaced and repaired without a charge, just to keep the water coming.
to such an extent that they cannot keep up with the quantity we require.”
Over the next two years, Astral will build its own pipeline to the Vaal, 7km away, at a cost of R120m.
Meanwhile, it relies on 130 truckloads a day from the Vaal. The water has to go through its filtration plant before it can be used. The water-supply interruptions have cost it R93m so far, plus R2m a month in diesel and rental costs.
“That’s 13% of our net profit just gone. Lost on something that was there once but was just not maintained. And still we don’t see any action with regards to maintenance.”
Relocating to the Western Cape, “where things work better, everyone knows that”, is not an option “because you have to be close to your raw materials, soya beans and maize, which are up here”.
Schutte has had full audits done on the electricity and water infrastructure and received a “stern warning” that both are “under siege”.
So although the company is getting electricity for now, “we know that every day the system is deteriorating more and more, and it will collapse somewhere”.
Developing an independent source for its massive plant in Standerton is not feasible.
Astral runs its farms on solar, and has generators for hatcheries and feed mills.
“Our abattoirs are of such a size you can’t have generators to run all the cooling systems and so on. You need Eskom, but you need a consistent supply.”
Six months ago, it sent lawyers’ letters to provincial and local government and the presidency reminding them of their constitutional obligation to supply water and electricity services.
It said it has it “on record” that essential infrastructure is not being maintained, “and we need to know who is ultimately responsible and accountable”.
For six months, Astral had no feedback. Then the president asked for a further six months followed by a letter from the minister of co-operative governance and traditional affairs, Nkosazana Dlamini-Zuma, asking for more time because the municipality was “working on a plan”.
“But the municipality has known about this for ages, and they always talk about a plan. But as far as we are aware they could never activate or execute a plan,” even if they had one. “You’ve got all these plans, and there are audits and they send people, and they have telephone calls and meetings and more meetings, but on the ground absolutely nothing happens.”
Astral has just committed in writing to set aside R10m to fix some of the infrastructure that will give the municipality some of the water it needs.
The municipality has asked Astral to hand the money over, which it refuses to do.
“We say you will not put your hands on our cash, it will go towards the fixing of the infrastructure. We will pay the creditors, and we will see that the right job is done at the right price.
“So now nothing happens.”
Schutte says he gets “absolutely no sense” that the government understands the “devastating” impact of dysfunctional municipalities on businesses.
Businesses are being driven out of small towns like Standerton “where we need to create jobs, otherwise 90% of the people are going to be living in the cities in 10 years’ time”.
His experience is that the central government has “absolutely no influence over the municipalities”, and the municipalities have no understanding of how important local businesses are to their towns as employers and taxpayers.
Astral is the largest employer in Standerton. It directly employs 2,600 people at its poultry-processing plant, and indirectly another 1,500.
Without Astral, the town would have almost no income, he says.
But “this is a conversation the municipality is not even interested in having”.
He says he is exasperated by government calls for “business to come to the party”.
“We are part of SA Incorporated and we will do that. But I work with other people’s money. And if I don’t have secure infrastructure and support I will not reinvest.
“And what government also doesn’t understand is that international investors look at what local investors are doing, and then they follow them.
“You’re making a joke of yourself to go and look for foreign investors, and then they come here and you don’t have water and electricity. I don’t even want to talk about the railroad system.”
Astral used to transport all its maize to the mills by rail, “which is completely dilapidated. It’s gone.”
Now, like the water, it has to go by road, at an extra cost of R40m a year.
If you do not have infrastructure you cannot develop this economy … 20km outside any of the big metropolises, it’s all falling apart