Estina dairy project’s plan 'inconsistent, unrealistic', state capture inquiry hears

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

Agricultural economist Andries Maree has told the commission of inquiry into state capture that it did not make sense to run the Estina dairy project in the Free State, as the area was not conducive to dairy farms.

On Monday, Maree continued his testimony on his analysis of Estina's proposed business plan and feasibility study on the establishment of the dairy farm.

Most notably, the business plan stated Estina would fund the project in its entirety, but went on to request a R100m grant from the government.

Maree said this was confusing. "If a project is commercially viable and sustainable, why would you request the government to put grants into that? That's not a reconcilable comment for me."

READ MORE | Ex-Free State finance official details push for 'irregular' R30m Estina Dairy payment before any work was done

Throughout the plan, he noted multiple times there was no explanation why the government needed to be involved in the project.

Maree told the commission the business plan was inconsistent and unattainable, specifically regarding the number of cows on the farm and how much milk, on average, they were expected to produce.

"The business plan is inconsistent, in one page they talk about a 500 cows' dairy but on the next page they referred to 1 000 cows in milk.

"In addition to this, many of the initial assumptions are very unrealistic and it would be difficult to obtain those numbers, specifically referring to the 45l [of milk] per cow on average per day. It can therefore be concluded that the business plan is not realistic and should be revisited."

Maree explained 45l of milk on average per cow was unrealistic because the national average was 20.1l per cow.

READ MORE | Guptas 'could not do the job. They didn't even have a screwdriver' - Vrede businessman testifies

He was taken through the amounts budgeted for the operation of the farm, many of which were unreasonably high, he said.

As for the project's stakeholders, several people were listed but Maree said he had not seen any expertise on South African conditions and more on Indian or other types of conditions. These people, it was noted, were more research professionals than operational experts.

Maree read the reasons the report cited for the establishment of the farm, including, nutritional benefits and extra income for the community, as well as saving on the costs of dairy imports.

He said there were several reasons why this needed to be disputed and there was no in-depth cost-benefit assessment done.

Maree added the feasibility study looked as if it was done on a desktop and was a copy-and-paste report, saying it seemed more like a document on farming, rather than a feasibility study.

He said if he was an investor in the project, he would have sent the documents back.

While the feasibility study was submitted in October 2012, payment to Estina was made prior to this, according to evidence heard by the commission.

"Funding for the project has already been committed to both [the] department as well as the promoters," the report read.

Maree said this was strange to see in a feasibility study because normally one would have been done before the funds were paid.

"All Vrede documents lacked the information required to carry out a proper analysis of the project, specifically, for example, information on the detailed costing of equipment and so on. Second, the feasibility … was more of an academic study than it was a feasibility study - there is a significant amount of jargon in there.

"My recommendation is not to continue with the project in its current state since the government will not receive value for money. The costs are not reasonable or market related," Maree said.

He added he believed the department could not have come to a reasonable conclusion to continue with the project.

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