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DRDAR seeks private investor buy-in to revive Magwa Tea Estate

Oct 12, 2017
DRDAR seeks private investor buy-in to revive Magwa Tea Estate

As part of the processes to rescue the province’s two tea estates, the Eastern Cape provincial government has resolved to issue an expression of interest call aimed at attracting the private sector to invest into the incorporated tea estate.

The Majola Tea Estate was incorporated into the Magwa Tea Estate following a court process after workers resolved to join the two tea estates to form a single incorporated tea estate.

With the 100% Magwa Tea Estate ownership having been transferred from the Eastern Cape Development Cooperation (ECDC) to the Department of Rural Development and Agrarian Reform (DRDAR), government has developed a new shareholding structure to attract private sector investors.

"The proposed new shareholding structure of the incorporated tea estate will give the private investor controlling 51% shareholding, 26% to the community, 13% to the employees of the tea estate and government will hold a 10% shareholding stake in the tea estate," describes Eastern Cape Rural Development and Agrarian Reform MEC, Mlibo Qoboshiyane.

"The private equity partner will be required to fund the 51% equity share by contributing 51% of the funding required in the approved business plan. A lease agreement with the community in lieu of the 26% shareholding may also be considered in proposals."

Qoboshiyane adds that all stakeholders associated with the operations of the tea estate are being consulted and engaged on the process of the business rescue as well as on the long-term financial sustainability and operations of the tea estate.

"The business rescue practitioner engaged workers, managers, shopstewards of Magwa and Majola tea estates, traditional leaders, communal property associations and potential investors on the business rescue processes.

"I tabled this plan and process to the Executive Council (cabinet) of the Eastern Cape provincial government and the submission was approved and supported by the Exco," the MEC says.

"The provincial Treasury has committed to allocate R116 million for the tea estate rescue process to improve tea production on the incorporated tea estate and this will add on the R20 million our department, DRDAR has already transferred to the business rescue practitioner for interim operational requirements."

Interested investors will be expected to submit a detailed approach and methodology explaining how the tea estate could be turned into a profitable and sustainable operation.

"The submission by the bidders must show capital requirements to operationalize the factory, capital and operational requirements to commercialize the plantations, ramping up to full production capacity and timing thereof, options available to reduce costs of production, market accessibility, quality improvement and competitiveness, introduction of out growers, detailed 5 year CAPEX and OPEX budget," Qoboshiyane explains.

"We invite private individuals or corporations interested in investing in tea production to respond to this expression of interest to commercialize tea production in the Eastern Cape so that we can contribute towards economic growth, create jobs and improve rural economy of the province.

"Government will provide support to the investors and this will ensure that production goes unhindered. Such support includes that of the affected communities and other local stakeholders. It is in the best interests of all of us to see commercial tea production grow in the province."