The main catalyst for the estate's woes is a R5-per-kilogram drop in the global black tea price - from R16 p/kg to R11 p/kg.
The estate is believed to have asked for R12 million in aid from the government, but was granted a R16m lifeline at a meeting with Department of Agriculture MEC Gugile Nkwinti and Economic Affairs MEC Mbulelo Sogoni at the end of last month.
The money will be paid out over a three-year period and aims to cushion the blow dealt to South Africa's largest tea estate by low market prices.
In justification for the bail-out, Nkwinti said the government had a “moral and a political responsibility” towards the Magwa tea estate and hoped that the workers in future buy and own the Magwa factory.
He urged the tea estate to diversify its operations in order to make up for its losses.
University of Cape Town agri-democracy researcher Professor Lungisile Ntsebeza said it was not surprising that a rural project was negatively affected by the global market prices as rural projects often do not have the capacity to compete with established market leaders.
“If the benefits of the cash injection by the government accrue to the community, as opposed to the management of the project, it is worth investing in the project,” Ntsebeza added.
Agri EC president Cerneels Pietersen said reasonable steps must be taken to ensure the project can sustain itself and compete on the global stage.
“The project caters for a large group of farm workers and is labour-intensive. It is reasonable that the government would bail the project out.”
However, steps must be taken to ensure the project is sustainable in terms of creating employment and competing globally
“To increase productivity and reduce costs, personnel on the farm should be trained and equipped because training is linked to cost saving.
“Saving costs translates to the project being able to supply at globally competitive prices,” he said.
Pietersen said there was vast agricultural potential in the Eastern Cape which, if used efficiently, could see an influx of revenue into the province.
“There is no reason to import a possibly inferior quality product from the East while it is possible to produce it in the Eastern Cape and have revenue flowing into the province.”
Pietersen said the project could also be supported by marketing to encourage consumers to buy South African products.
The Magwa tea estate management declined to comment on the matter.
Source: Daily Dispatch
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