Vrede Dairy Project scrutinised again



An oral question and answer session in the Free State Legislature has been postponed for the second time this week.
"Some of the questions expected to be raised by opposition parties are in connection with the Vrede Dairy Project," said DA MPL Roy Jankielsohn. But on the day (Tuesday) the oral session was supposed to happen, three changes in the Free State provincial cabinet was announced. Education MEC Tate Makgoe announced that small business development, tourism, economic and environmental affairs MEC, Mosebenzi Zwane, is reappointed as MEC of agriculture. Zwane served in this capacity before and his term was shrouded in controversy when the Vrede Dairy Project saw the light. The entire report that followed an investigation commissioned by the National Treasury was leaked to Courant. This came amid an indication by the office of the public protector, Advocate Thuli Madonsela, that the investigation has been completed. Her spokesman, Oupa Segalwe, said three investigations into the Free State provincial government are in the draft report stages. This includes the Vrede dairy project, Operation Hlasela and the multi-million rand website scandal.

The report found that the Vrede Dairy project was seriously flawed from the beginning and that the Free State agriculture department – and provincial government – spent millions and continues to do so regardless of the fact that supply chain processes were not followed and that prices were intentionally inflated with millions.

According to the report the department did not follow any tender procedures during the appointment of the controversial company (Estina) that is running the project. The then head of department was instrumental in signing up Estina and even did so without the authorisation of the Free State provincial government. He also signed a document permitting the department to deviate from procurement policies, but he could not offer an explanation for the deviation. He just insisted that he did not think it was "necessary" to follow a supply chain management process in this project.

Furthermore, the provincial department of agriculture continued to pay millions to the company without establishing whether the money paid was actually used for the purpose it was claimed or how it was spent. Payments totalling R114 million had been done from June 2012 to April 2013 alone.

Although the department insisted that the project has 100 beneficiaries, investigators received a list of only 80 and could not establish the criteria used for people to be registered as beneficiaries. Another red flag in the report is the 99-year-long rent-free agreement the department signed with Estina in respect of the Vrede project.

A senior economist from Agri SA analysed the documents that were available on the project and came to the conclusion that an "investment of this magnitude in the Free State province is considered too risky and not sustainable". He said he believes the costs associated with the project are very high – not reasonable or market-related – and there is a "good probability that the state will not receive value for money on the project in its current state".

He recommended that:
• A detailed cost analysis of the project should be done
• A proper feasibility study should be done
• A market analysis for primary production and the manufacturing level should be done.

In the report the investigators recommended that disciplinary action should be taken against the then head of department and the chief financial officer for paying out money to Estina without having the proper financial oversight control in place. It was also recommended that "no further funds be invested in the project" until all concerns and/or risk factors as set out in the report have been addressed. The project should also be re-assessed and the necessary steps should be taken to make sure it is viable. Finally the report states that "in its current form the project is not likely to yield value for money to the state".

Courant contacted Mondli Mvambi spokesman for the Free State Provincial Government for comment. He undertook that he will give a detailed progress report on the Vrede Dairy Project on a follow-up article for next week’s edition.