The Lekwa Local Municipality in Mpumalanga, which includes the towns of Standerton and Morgenzon, reached the attention of investors when JSE-listed Astral Foods announced a R7m loss due to insufficient water supply to its Standerton plant for the six months ended 31 March.
By the end of May, the company reported a loss of R85m due to water interruptions in Standerton.
Astral Foods’ Goldi processing plant slaughters 2m birds per week and needs around 5m litres of water a day, but municipal water supply to Africa’s largest poultry processing plant dried up in March.
Water, of course, isn’t the sole reason why South Africans across the country take to the streets against their local municipalities, with a general breakdown in service delivery – from refuse collection to municipal power cuts due to non-payment to Eskom – reportedly the norm in some municipalities.
Similarly, Standerton, where Astral’s Goldi plant is situated, struggles with potholed roads, a lack of road signs, excruciating debt to Eskom and refuse being dumped in public places.
Astral turned to the High Court in March to interdict Lekwa to restore water supply to the plant. Andy Crocker, managing director for Astral’s commercial division, recalls how the plant’s management had to deal with 2m birds that couldn’t be slaughtered.
“We had to transport some of the birds to our Cape Town plant for processing,” he said. “We also had to cut back on the number of birds we accept from our growers. In addition, we had to ask our staff to work half shifts for seven weeks.”
The impact on Standerton was far-reaching as lost wages, a cutback on purchases from local suppliers and a decline in the sales of contract growers worked its way through the local economy. The Goldi plant employs 2 425 people and Astral’s own 11 broiler farms have about 900 staff. An additional 53 contract farmers in and around Standerton supply the plant.
It seems that a game of electoral politics was at play before the water cuts, which impacted communications between the company and the municipality. According to Astral the company has supported the municipality with technical know-how before the March water crisis.
“Up until that point our relationship with the municipality was one of cooperation,” said Crocker. “They accepted our help until around April. But something went wrong when load shedding kicked in. And it was days before the general election.”
Astral turned to the High Court previously, in 2017, when power cuts to the municipality threatened its plant’s operations. The company, Eskom and municipality settled outside of court, which saw Astral paying its electricity bill directly to Eskom.
But a cut in revenue to the municipality led to inadequate maintenance being done on electricity infrastructure and Astral had to apply to the courts last year to interdict the municipality to maintain the power infrastructure.
Relations between the company and Lekwa has normalised in recent times with communication channels open again, according to Crocker. Following the March water cuts, Astral had to canvass national government departments, including the ministry of water and sanitation, to intervene.
Water supply to the plant has since returned to normal, albeit at a cost. Astral was successful in negotiating the direct supply of 3.5m litres of water from the Vaal River since 5 June.
This water, however, is trucked for 11km from one of the company’s broiler farms. The company, which constructed its new water infrastructure within 10 days, contracts transport companies to deliver 120 loads of water per day.
Crocker says one of two long-term solutions are on the table. The municipality could fix the water line that supplies the processing plant with the help of Astral. This is the most cost-effective option. Otherwise, Astral will have to continue to supply its own water to the plant.This article originally appeared in the 25 July edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.