Estina promised big cash but only had R16 to its name, state capture inquiry hears

2019-08-20 15:35
The Estina dairy farm in Vrede. (Conrad Bornman, Netwerk24)

The Estina dairy farm in Vrede. (Conrad Bornman, Netwerk24)

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Despite promising to put about R200m into the Vrede dairy project, Gupta-run company Estina only had R16 in its bank account a day before the agreement between it and the Free State Department of Agriculture was signed.

Former head of the department, Peter Thabethe, was grilled on Tuesday at the state capture commission of inquiry.

Thabethe conceded that the department had not done proper due diligence on Estina.

He explained that they had agreed that funding would come from India-based dairy production company Paras through Estina.

However, Gcabashe read through a presentation to the executive council, which indicated that Estina would provide the "capital injection" and Paras would provide the "technical know-how".

This was also stipulated in a project proposal Estina prepared, which committed to funding "the entire project" and requested the government to also invest money to ensure the project remained viable.

However, Thabethe said his understanding of this was that Estina was talking on Paras' behalf.

Despite this, the final agreement between them did not mention Paras at all - only Estina and the department.

Thabethe said they interchangeably used Estina and Paras.

However, Zondo said this worried him.

"[This indicates that] you did not have the appreciation of the distinction that needed to be made between the two… What you may have had in mind had to be translated into an agreement, but the agreement here that we are talking about does not place any obligations on Paras, it places obligations on Estina.

"In other words, even what you are saying concerns me because it could reflect that you might not have had the appreciation… that could protect the department from risks."

No accountability in agreement contract

Thabethe maintained that the issue stemmed from the two agreements between the department, Estina and Paras.

Thabethe also said legal advisers from the premier's office told them the first agreement would have been "illegal".

The acting CEO from Treasury, Itumeleng Moses, expressed this point in an email, saying that, if the R30m was given to fund the project, it would bind the government to what is "essentially an illegal contract" and would make the government an accessory to financial misconduct.

He added that no contract should be entered into until the funds are made available. While the project looked good on paper, he feared it could cause embarrassment.

The department was then requested to draw up another agreement.

The new agreement was based on the advice that they should complete the project before handing it over to the beneficiaries.

No mention of Paras was made in this agreement.

Zondo expressed concern that the agreement was only between Estina and the department, despite Thabethe's understanding that a bulk of the funding for the project would come from Paras, through Estina.

The deputy chief justice added that nothing was done to prevent Paras from running away with millions that belonged to the government and there was recourse in this regard.

On the issue of who would implement the project, Thabethe said the first contract brought in the beneficiaries from the beginning, and he felt that this was the right way to do it. However, he relinquished this position once he received the legal advice that the contract was illegal.

He added that it was always their intention to hand over the project to the beneficiaries, including five cows to each, but this encountered problems within the first year and they were not able to get to that point.

Gcabashe pointed out that, to date, beneficiaries have not been involved in the project as originally intended.

She further brought in evidence from Vrede businessman, Willie Basson, who said "ribs of the cattle were already showing" and "dead cattle was lying around" as a result of Estina project manager Chandra Prasad's lack of knowledge in rearing cattle and Estina's failure to do the work.

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