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ENIDC IN CASH FLOW PROBLEMS

03/09/2020 01:43:00 BY WELCOME DLAMINI

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MBABANE – A suspected lack of financial resources at the Eswatini National Industrial Development Corporation – a Category A public enterprise – has reared its ugly head.

Financial resources, as explained by CEOpedia Management Online, are the funds at the disposal of an enterprise and intended for the implementation of the current costs and expenses for expanded reproduction, for the fulfilment of financial obligations and economic incentives for employees.

The financial resources are also directed to the maintenance and development of non-production objects, consumption, accumulation, to special reserve funds, etc. For the past two months (July and August), the enterprise has been unable to release funds to a farming company it entered into a E3.9 million loan agreement with in 2018.

The company, known as Lomveshe Enterprises PTY LTD, uses these funds for, among other obligations, payment of salaries, wages and utility bills. Lomveshe is based at Gundvwini under the Manzini region and owns about 82 hectares of land on which a fruit growing project is being implemented.

Another Category A public enterprise, the Eswatini Water and Agricultural Development Enterprise (ESWADE), is monitoring the project’s implementation. ESWADE, in its 2019 annual report, gave a glowing account of the Fruit Tree Production and Marketing Project (FTPMP), which it said would assist farmers in engaging in fruit tree production and diversifying the variety of fruit trees, improving the fruit tree value chain and increasing farmers’ income.

This, ESWADE said, would be achieved through the establishment of high-quality fruit seedlings, including the production of 200 000 banana seedlings, 20 000 pawpaw seedlings, 3 000 guava seedlings and 10 000 dragon fruit seedlings.

These seedlings, it was reported, would be planted on land measuring 100 hectares (banana), 10 hectares (pawpaw) and five hectares (of guava and dragon fruit each).

“The project currently has two production areas, Lomveshe and the Demonstration Centre. The project is structured to assist three production and marketing groups, chosen by ESWADE within LUSIP, in fruit tree cultivation techniques, and enlarge the fruit tree cultivation scale annually: 70 hectares of bananas (10, 20, 30, 10 hectares respectively), 10 hectares of papayas (5 hectares per year), and 5 hectares of guavas (1 in the third year, and 4 in the fourth year), and 5 hectares of pitayas (1 hectare in the second year, 2 in the third, 2 in the fourth). The project currently has two production areas, Lomveshe and the Demonstration Centre, with the third production area currently under the HVCHP development (Sidzakeni),” ESWADE reported.

The parastatal said during the reporting period, 0.8 hectares was established/transplanted at Lomveshe in completion of the total targeted 53 hectares planted with different fruit trees, which include banana (43.8 hectares), papaya (5.6 hectares), guava (2.8 hectares) and white pitaya (0.8 hectares).

For the reporting period, yield performance was reportedly as follows; at Lomveshe 391 tonnes of banana was sold, generating revenue of E1 204 550 and 36.8 tonnes of papaya, generating revenue of E56 464 00. At the demonstration centre, 2.08 tonnes of papaya, generating revenue of E15 146.00 and 1.12 tonnes of white pitaya generating revenue of E12 420.00.

In total, E1 288 580 was generated as revenues for the 2018/19 fiscal season on the FTPMP, and the revenue was inclusive of tax.

The E3.9 million loan is meant to assist Lomveshe in carrying out this project and ENIDC Managing Director Muzikayise Dube, when the agreement was signed, encouraged Lomveshe to set their sights on the global market instead of only focusing on selling domestically. He said the motto with ENIDC-funded projects was that they should take their produce to the global market because the domestic space is quite small.

He even urged the Lomveshe leadership to be a shining example of what ENIDC-funded projects were capable of. The loan was the first one to be dished out by ENIDC following its re-establishment, hence a team that comprised of Dube and Board Chairman Ephraim Hlophe paid a visit to Lomveshe farm to get a better appreciation of where the corporation’s money was going to.

lomveshe crippled

The Times SUNDAY understands that the operations of Lomveshe have been greatly affected by a failure by ENIDC to release the funds such that employees are no longer coming to work as they are silently protesting the nonpayment of their salaries. ENIDC, it has been reliably established, has since been approached by both Lomveshe and ESWADE, who relayed their misgivings about the payment failure.

Ernest Gamedze, who is the secretary of Lomveshe Enterprises, said they had lodged a formal complaint to ENIDC to ascertain the problems the parastatal was experiencing that have led to the failure to release the funds. “This is really crippling our operations because we might soon have electricity supply being disconnected. Also, our employees haven’t been paid. The money is supposed to be released every month and the amount depends on the work done for that month as well as the farming implements that have been utilised or need to be purchased,” he said.

He said they had about 30 employees who were no longer coming to work because they could not function on empty stomachs. “The work that we do here demands a lot of energy, so you cannot work if you haven’t eaten. Some employees do come to work at times but that is only when they have been given food by their neighbours,” Gamedze said.

He lamented the damage that the crops have been exposed to because of the lack of people to tend and maintain them since they demand constant monitoring. “We served ENIDC with a letter detailing our complaint to them. We are now in the second month of not receiving any funds from the corporation. Usually our month ends on the 20th, and we are already past deadline day. The situation is really bad,” he said.

Gamedze said the further implications of this were the failure by Lomveshe to meet its tax obligations with the Eswatini Revenue Authority as well as not contributing to the Eswatini National Provident Fund. He said he had given the letter of complaint to the ENIDC receptionist he found at the corporation’s offices, who told him that management was working from home because of the prevailing COVID-19 pandemic.

Besides Lomveshe’s complaint, it has been reliably ascertained that ESWADE has also written to Dube, the ENIDC managing director, expressing dissatisfaction at the corporation’s failure to release funds to the farming project.

ESWADE’s Strategy and Corporate Communications Manager Nokwazi Hlophe said Lomveshe, as a legally registered company, with a board of directors and shareholders, has properly established internal structures which can best respond on the matter as it directly affects its business and its employees.

“The ESWADE on the other hand is aware of the matter following that Lomveshe Enterprise is still under the mentorship of the ESWADE. However, we still advise that Lomveshe and/the ENIDC be the respondents on the matter as they have a contractual relationship (loan agreement) with each other on the running of operations for the business. The agreement outlines the roles and responsibilities of each party, thus it shouldn’t be difficult to ascertain if either party is fulfilling its part of the agreement or not,” Hlophe said.

She said ESWADE was there to provide continued support and ensure financial viability of the farming company. “However, this is largely dependent on all necessary inputs being availed to the farming company on time by their engaged stakeholders, including their financier,” she added.

loan repayment at risk

An informed source close to the parastatal said ESWADE Chief Executive Officer Samson Sithole, in his letter, alerted Dube of the consequences that may arise from the non-payment of salaries by Lomveshe. “There are legal implications to this because the employees have standing contracts with Lomveshe and they might decide to take the company to court for having violated these contracts and also demand payments,” the impeccable source said.

Sithole is reported to have also alerted Dube that Lomveshe was still expected to honour its own end of the E3.9 million agreements by paying back the loan as they are obligated to do so.

“Because the employees are no longer coming to work, the fruits and other produce are being damaged and this may lead to a bad harvest period, which would mean that Lomveshe won’t be able to make profit and therefore be unable to repay the loan,” stated the source.

The ESWADE CEO is also said to have brought up the issue of electricity and other utilities being cut off because Lomveshe was now in arrears. “The crops rely on irrigation for their survival and, therefore, this demands that there be constant availability of electricity and water supply. If these are disconnected, then the project would be thrown into total jeopardy,” related the source.

The source said the farm has previously suffered disasters as a result of storm and frost; and has still not recovered from this setback. “The latest challenges will exacerbate the situation because measures that were being implemented to get the farm back on track have since been suspended because the workers are no longer coming to work. This has further caused damage to the project,” added the source.

Efforts were made to get comment from Dube but he did not respond to a set of questions that were sent to him last week Thursday afternoon through WhatsApp. The WhatsApp message information shows that the questions were delivered to Dube at 2:04pm and read at 3:25pm.

The latest financial challenges facing ENIDC come after the Times SUNDAY reported on June 28, 2020 that Dube had committed the corporation, without board approval, to the purchasing of E27.5 million worth of assets belonging to one of the country’s oldest and biggest textile companies, Spintex.

The assets included land, buildings and machinery on plot 516, Matsapha Industrial Site.

Neither had the Minister of Commerce, Industry and Trade, Manqoba Khumalo, given consent to the purchase. The purchase eventually failed after ENIDC failed to meet a number of conditions, which led to the company standing to lose an amount of around E3.3 million in respect of breach of agreement.

This amount includes E2.5 million that was the difference between the E27.5 million purchase price and the E25 million that the property was eventually sold for to a second buyer. There was then the amount of E853 875, which was 2.7 per cent (plus Value Added Tax) of the purchase price that was due to the auctioneer.

This matter is currently being dealt with.

On July 4, 2020, the ENIDC successfully went to court to seek an interdict against the Times SUNDAY to stop the publication of an investigative article regarding the corporation’s deal with an Israel company known as AquaMaof Aquaculture Technologies LTD.