Former agricultural head's bumbling response about R106m payment to Gupta-linked firm

28 October 2019 - 16:41 By AMIL UMRAW
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Farmers in Vrede were promised jobs and skills through the Estina project, but they received nothing. File photo.
Farmers in Vrede were promised jobs and skills through the Estina project, but they received nothing. File photo.
Image: Sunday Times/Alon Skuy

Former Free State agricultural department head Peter Thabethe had few to no answers for evidence leaders at the state capture inquiry when he was quizzed about why he allowed R106m to be paid to the Gupta-linked company Estina in 2016. 

The payment was made when the province terminated its partnership with Estina over a controversial dairy project in Vrede. 

Rounding up his testimony at the  inquiry on Monday, Thabethe, who was head of the department of agriculture in the province since the inception of the project in 2012, was left bumbling when evidence leader advocate Leah Gcabashe asked him whether he believed his department got value for money when it paid Estina R106m for a "substandard" milk processing facility the company had built on the farm premises. 

Thabethe said the payment comprised money the department still owed to Estina for work done on the project, and for the government to take over the processing plant which the company had built. 

Gcabashe then made reference to a report by a company called "Dio Mart", which conducted an assessment of the processing plant in 2017.

Quoting from the report, she said: "The building needs to be rehabilitated to satisfy HACCP [hazard analysis and critical control points] and food and safety compliance. The ammonia cooling system is in the same building and not sealed off 100%. It is not bird, dust or rodent-proof.

"There is no ceiling in the building. The drains are not installed correctly. Hygiene and safety problems may occur. Drain pipes are made of PVC and will perish when subjected to hot water over time. There are no extraction fans in the building. Building needs 10% natural light. 

"The milk reception area must be outside the factory. The cooling room is too small. The fresh milk silos must be outside with their own CIP (clean-in-place) system. The process flow needs to be reconfigured." 

In light of what the assessment found about the quality of the plant, Gcabashe asked Thabethe exactly what his department paid R106m for.

He answered by explaining that the department wanted to reconfigure the plant after it took over.

"The intention of this report was to assess and configure the project because the project, in terms of the design and the specification, was done on the basis of what Paras [an Indian company which the department partnered] would want.

"Since we have terminated the contract, we now require in 2017 a reassessment to reconfigure the project. Hence it is sitting in the terminating agreement," he said.

Deputy chief justice Raymond Zondo, who chairs the inquiry, then asked if Thabethe accepted that the report provided a "correct position of what the writers of the report found on the farm". 

"If one looks at the report a number of things there seem not to have been right for which you may have paid. How could you have paid what you paid if this was the position?" he asked Thabethe. 

"If you do an assessment on the basis of putting up a new product, then there should be a reconfiguration.

"It does not reflect to be saying this has not been correct," Thabethe responded.

"In terms of the plans and designs, it was right. In terms of the designs under which the processing plant was being done, it was correct but in terms of the reconfiguration, certain things had to be changed." 

Gcabashe then jumped in again, trying to get Thabethe to answer the question.  

"What was installed was inadequate. We are not talking about the reconfiguration. We are talking about what you found and what you were paying for," she said.

"If you put up a processing plant to achieve a specific outcome you have a particular configuration but somebody else might come and do an assessment and say no. It will not be the same," Thabethe responded.

Gcabashe then highlighted other key findings in the report. She said the pipes at the processing plant needed to be replaced because of their quality, size and workmanship. The boilers had to be replaced because they were "a safety hazard and this model is no longer being made"; valves, taps and pumps were outdated; and all the manufacturing dates and information were removed from the equipment. 

"My conclusion is that you were taken for a ride - that you knew you were being taken for a ride is a completely different issue - but from what I’m reading here, what they installed is not what you expected them to install," she said. 

Thabethe responded: "I would not dispute what [you are] saying. What we had to pay for was work done on the ground up to that stage. Later, when the Free State Development Corporation did an assessment through an agent they had appointed, the question that I still wanted to know was: what is the value of what was standing on the ground versus what was paid."   

The dairy project was promoted as a tool by the provincial government to benefit small-scale Free State farmers, using their services to produce and sell milk on a large scale.

However, of the R220m transferred out of state coffers to Estina, only 1% was spent on actual farming. Most of the remaining money went to individuals and entities associated with the Gupta family. 

Thabethe was arrested last year with seven others for fraud and contravening the Public Finance Management Act but the charges were withdrawn by the National Prosecuting Authority.

The charge sheet alleged it was Thabethe who allowed his department to sign a contract with the Gupta-linked entity  Estina, and Indian-based company Paras, despite red flags being raised at the inception of the project.

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