TAXPAYERS SPEND E23M ON REJECTED FACTORY SHELL

MBABANE – The taxpayers have spent around E23 million on rehabilitating a factory shell that is currently not serving its intended purpose.

The proprietor of Britannia Brands (Proprietary) Limited, Mobeen Anjim Medhi, a British businessman, said he was brought into the country by Eswatini Investment Promotion Authority (EIPA) to manufacture biscuits for local market and exports. He was supposed to do his business at the rehabilitated factory shell which, a fortnight ago, was used as storage for bulk of sugar. Refurbishing the building cost E23 million and this amount excludes electricity installation and other necessities. The bone of contention, as per court papers in possession of this newspaper, emanates from the decision by EIPA that the factory shell is ready for use by Britannia Brands (Proprietary) Limited.

On the other hand, Britannia Brands feels the factory shell does not meet international standards for producing food for human consumption, particularly because the company will manufacture biscuits that will be exported to foreign market. Medhi, who showed this newspaper his British passport, has been in the country for three years.  He says he is an experienced manufacturer of biscuits, crackers, snacks and other food items. Since he has taken the matter to court on an urgent application, the Times SUNDAY will stick to the court papers.

Certificate of urgency

However, it must be said that he is worried that his court application was filed on a certificate of urgency in June 2024, but he has not seen the opposing papers from EIPA. He is happy though to acknowledge a court order issued by Justice Qinisile Mabuza on June 27, 2024, directing EIPA not to remove Britannia’s equipment and machinery from Portion One and Two of Plot 482 at Matsapha Industrial Site. The judge referred the matter to the registrar for further processes.It is revealed in the court papers that the property, plant and equipment were recorded as having a value of E20 264 255 in the applicant’s annual financial statements for the year ended October 2023.

He said the pre-operational expenses incurred in connection with them stood at E3.6 million. In addition to these amounts, the attorney said Britannia spent E16 788 595.27 on costs associated with plant refurbishment and installation at the factory premises in Eswatini, inclusive of the costs occasioned with professionally installing the equipment. He attached audited statements from a reputable audit firm indicating that his company has so far spent E25 million on the activities related to the project.According to the court papers, the works that were performed at the premises were often not to the satisfaction of the applicant, as they were not in accordance with its specifications or not in keeping with international food standards.
These shall be treated as allegations until the veracity of the issue is determined by the court.

Britannia is represented by Mayibongwe Ntungwa from Dynasty Inc Attorneys, while EIPA’s attorney is Lucky Howe. The defendant is yet to file opposing affidavits. 
Of particular concern, according to the investor’s attorneys, were the services, state of the flooring and roofing at the premises. This, they said, was despite the fact that EIPA had agreed to the following addenda to the memorandum of agreement (MoA) Whirlybirds would be installed as per guidance from the respondent’s mechanical engineers;

Strip curtains would be provided;
Sensor-controlled taps would be provisioned inside the production area; Three months’ free rental from date of handover of the building would be provided to the applicant. Mntungwa, the attorney representing Britannia, submitted to the court that he refused to sign the handover certificate on behalf of Britannia on December 20, 2023, because the premises were not suitable for occupation. “This is not only because a number of the outstanding items had not been attended to by the respondent’s contractors, but also because the Matsapha Town Council Building Inspector, Mr Gumedze had declined to issue an occupation certificate for the premises,” submitted the attorney on behalf of the investor.

On December 20, 2023, he said Gumedze refused to issue the certificate because he found the following discrepancies -

• Firefighting equipment was not installed in their brackets;
• No markings for safety for fork lift; no markings for assembly point on site;
• No disabled male and female toilets; no loading bays marked on the site;
• Insufficient parking space on the site;
• Wash hand basins were not connected to water pipes and drains, passage, canteen and production area;
• Insufficient hand driers;
• External works and landscaping were not complete;

No lorry parking while waiting was provided for.In addition, he argued that Gumedze referred, in his email dated January 23, 2024, to the Matsapha Town Council report of the health and safety officers dated August 15, 2023 and indicated that those areas of concern identified must be complied with before the occupancy certificate could be issued.

Handover certificate

Mntungwa alleged that EIPA purported to place Britannia under breach on December 20, 2023, by way of the correspondence, which afforded his client 14 working days to sign the handover certificate. He said EIPA advised his client that in the event of his failure to do so, the MoA would be rendered null and void. Mntungwa said he responded to EIPA’s Chief Executive Officer (CEO) Sibani Mngomezulu in a letter in which he, on behalf of Britannia, advised Mngomezulu (CEO) that works were still required to be carried out at the factory before it would be ready for occupation. “I mentioned that the applicant would like to agree to a timeline for the outstanding work and that April or May 2024 should be targeted for the commencement of production by the applicant,” he said in the court papers.

He said it transpired that an occupancy certificate was eventually obtained on January 31, 2024. However, the attorney told the court that this certificate alone was insufficient as a Health Clearance Certificate is also required, meaning that the building is sufficient to be used as a food factory.  Despite this fact, on the very same date, he said EIPA wrote a correspondence advising Britannia that a new handover of the premises would take place the following day - February 6, 2024. He said they were made to understand by EIPA that once the handover certificate had been signed, the terms of the lease agreement would supersede all other agreement concluded between the parties.

Seek legal advice

He said Britannia objected to the short notice, but EIPA provided it with a further opportunity to prepare for handover and seek legal advice, also mentioning that the final opportunity for site handover would be February 21, 2024. On June 18, 2024, Howe Masuku Attorneys, representing EIPA, wrote to Dynasty Inc Attorneys, giving Britannia an opportunity to remove the equipment by no later than June 26, 2024. Howe’s letter attached to court papers indicates that Britannia refused to take occupation and sign the lease.It must be said that Mngomezulu, the CEO of EIPA, had also penned a letter to Medhi dated December 20, 2023, to the Managing Director of Britannia Brands, in which he handed over the factory building.

In his letter, Mngomezulu said: “Kindly present yourselves for the handover of the abovementioned factory on Wednesday, December 20, 2023 at 1000 hours,” reads Mngomezulu’s letter which serves as a reference for the court. “Reference is made to our correspondence dated August 1, 2023, which states that you shall enjoy a rental free period of three months from the date of handover.”  In his response, Medhi stated in his letter dated January 24, 2024, that it was not possible to accept the handover without an occupation certificate from the Matsapha Town Council.

Upon inspection, he said the building inspector advised MNQS, quantity surveyors, that it was not possible to issue the occupation certificate because of various outstanding works.
The attorney said a large amount of further costs would need to be expended in order to dismantle, dissemble, relocate, refurbish and reassemble the equipment properly. He said he, on behalf of the applicant and Mngomezulu, acting on behalf of the respondent, in his capacity as CEO of EIPA, entered into a written MoU pertaining to Britannia’s investment in Eswatini.
Mntungwa said the applicant wanted to invest an amount of E20 million in terms of machinery and working capital initially, with such investment expected to grow to E100 million, within a period of five years of operations. He said the term of the MoA would commence on the date of signature of the document and remain in force until cancelled by agreement by both parties on mutual consent.

Agreed to facilitate

The attorney alleged that EIPA agreed to facilitate, on behalf of the Britannia, incentives as provided by the Developmental Approval Order of 2000 for a period of 10 years, corporate income tax of 10 per cent, and exemption from withholding tax on dividends, provide factory space as per project milestones at a rental rate of E25/metre squared.He said EIPA agreed that the factory would be designed to the applicant’s specifications and would meet international standards for food manufacturing and shall also facilitate regulatory requirements and/or approvals in Eswatini.

The attorney said EIPA agreed to provide any other relevant information required for purposes of supporting the investment, assist with the facilitation of processing of necessary work permits for technical employees with necessary skills to run the machineries and long-term resident visas for top management/directors/shareholders. This was to be done if required by the parties before the orders for machineries are placed. Britannia’s lawyer told the court that it was recorded that 30 local emaSwati would be required for implementation of the initial production line.

He said the number was to increase to 150 emaSwati being required for the implementation of the three production line operations.On the other hand, he said Britannia agreed to distribute the products manufactured to the local market, but mostly to export markets upon completion of the construction works, accept handover of the factory and commence installations of machineries within two months of handover of the building.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: