Cabinet’s approval last week of an “intervention plan” on the part of the national government to rectify the poor service delivery provided by the Lekwa Local Municipality in Mpumalanga brings Astral Food one step closer to ensuring that it gets regular access to clean water and electricity.
This move by the cabinet follows the country’s largest poultry producer taking the government to the Pretoria High Court to force it to intervene on the matter.
In April, the owner of chicken brands such as Festive, Goldi and Country Fair won this case, when it successfully argued that it could hold both the provincial and national government accountable for the failures in municipal service delivery in Standerton, where one of its largest facilities is.
Speaking on Monday at the group’s results presentation for its half-year to end-March, Astral MD for commercial, Frans van Heerden, said according to the ruling by the Pretoria High Court, the state needs to take action to rectify the utility supply issues “with a sustainable plan” within six months.
Not enough water
Astral was forced to address the issue of service delivery when it could no longer reliably secure clean water from the Lekwa municipality.
In June 2019, it took the unprecedented step of warning shareholders that up to 40% of its production was under threat because of the water issue.
This was despite the availability of water from the nearby Vaal River.
Its Standerton plant needs five megalitres of water a day to operate at full capacity but suffers from regular interruptions in supply, and was only receiving 1.8 megalitres per day at the time.
Read: Dysfunctional municipality chokes Astral (June 2019)
Van Heerden says the group has taken steps to be less dependent on the municipality, like spending R50 million on filtration infrastructure that will allow it to reuse 50% of the water in the plant.
Government is on its side
Though the specifics of the intervention plan still need to spelled out, Van Heerden thinks things will move quickly.
“We are expecting to see the details of that intervention this week.”
Astral might be struggling with the local government, but its relationship with the national government is on sounder footing, in spite of it taking it to court.
“We can, however, mention there that there is an open communication line between us and national government in that regard.”
Astral is also an active participant in the Poultry Sector Master Plan, which is part of the government and the industry’s efforts to grow the sector.
So far, about R1 billion of the R1.7 billion pledged for expansion by 2022 has already been invested, of which R710 million was invested by Astral. The plan is expected to create as many as 4 600 jobs.
Although Astral’s water matter has been somewhat addressed, this is not the only issue it has with the municipality.
“Electricity remains a concern because of failing infrastructure”, Van Heerden says.
The issue around infrastructure was also pointed out by the Auditor-General in the Municipal Finance Management Act 2018-19 General Report.
“As at 30 June 2019, the municipality had a balance of R741 million in infrastructure but management did not spend anything to maintain this infrastructure to ensure that service delivery capacity was sustained. This contributed to electricity and water distribution losses of R112 million and R63 million, respectively.”
Almost unsurprisingly, the municipality is also in dispute with power utility Eskom, to which it owes R1.08 billion according to Eskom’s 2020 annual report.
Earlier this year, Eskom was forced by the Johannesburg High Court to restore electricity supply to adequate levels after the power provider had strangled supply.
Lekwa is one of the worst municipalities in the country according to the Ratings Afrika Municipal Financial Sustainability Index for the fiscal year to June 2020.
Municipalities are scored on a scale of one to 100, with those closest to a 100 considered better performing.
The Lekwa municipality has a score of 13.
Listen to Nompu Siziba’s interview with Gary Arnold, Astral MD: agriculture (or read the transcript here):