The affordable education loan option
Cape Town - An award-winning, government-backed agricultural project for disadvantaged Beaufort West locals showed great promise in helping to reduce unemployment and poverty in the economically depressed Karoo town.
But after a promising start and despite millions of rand seeding funding, from both provincial and national government, the project - a hi-tech hydroponics scheme producing top quality herbs and vegetables for the high-end consumer market - went belly-up.
For more than three years the municipal-owned project site in the industrial area on the southern boundary of the town has lain derelict, with its infrastructure crumbling.
But the situation should improve soon: the municipality expects to issue a tender call for the site within the next few months, although bidders will not be restricted to projects that involve hydroponics cultivation.
It is widely acknowledged that Beaufort West is severely challenged economically and has a chronic unemployment problem, although figures differ. One source from 2005 put the unemployment rate at 50 percent, and said almost 45 percent of residents received some form of government grant and another 43 percent earned less than R1 000 a month.
According to the 2008/9 Beaufort West Municipal Integrated Development Plan Review, the population of the town in 2007 was 37 598 and the unemployment rate was 35 percent. The majority of households (65.8 percent) had an annual income of between R4 801 and R38 400, while 7.1 percent of households had no income, and 6.2 percent earned between nothing and R400 a month.
As an initiative to provide employment and promote skills - specifically for single heads of households - the municipality launched a pilot hydroponics scheme with research assistance from the CSIR just after the turn of the millennium.
Initially, 14 people were employed, one of whom was then 41-year-old Dina Rose, a single mother of three who had been unemployed for years and who scraped by on government social grants.
“I was very lucky (to be selected) because I am the only breadwinner in the family. I have my children and my sister’s children to take care of,” she said at the time. “But I can see the project is growing, and I know that it will enable me to bring my dreams into being some day.”
Despite scepticism in some quarters, the 18-month pilot project proved successful and did indeed grow, to the extent that the municipality decided to create the section 21 (not for gain) Beaufort West Hydroponics Company in 2002.
Major start-up funding was provided by the then provincial Department of Economic Development and Social Services, which put in R1 million in the financial year 2003/4 to help start the project and further funding of R2.25m in 2004/5. The national Department of Science and Technology put in a total of R1.88m, also over those two financial years.
The project was formally launched in June 2003 with a cost estimate of R5m, and was greatly expanded to include five greenhouses covering an area of about 8 500m2.
It focused on herbs - mostly basil, coriander, rocket and mint - and a small range of vegetables. The project staff ranged between 50 and 60 people, trained at Stellenbosch University, making the project one of the biggest single employers in the region.
It produced such high-quality products that Woolworths - acknowledged for its exacting standards - came in as the major buyer, also providing some financial support.
Annual sales increased from R24 000 in 2003 to R600 000 in 2007.
The project was deemed so successful that in 2005 it won a gold award as the best project in the Western Cape from the Impumelelo Innovations Award Trust, one of the country’s major awards programmes, sponsored by the Open Society Foundation.
Impumelelo reported at the time of the award that “the project (has) increased in size and production, and although it is still government-funded, it will soon be self-sufficient…”
Impumelelo’s optimism was misplaced - the project was unable to sustain itself.
After four years, the project had cost R6.8m, and in 2007/8 the provincial government had to provide rescue funding of R1m to save the 24 jobs that remained. The company went into negative cash flow and was in severe difficulties by the end of 2008. Beaufort West municipal manager Jafta Booysen says the project closed about three-and-a-half years ago - early 2010.
One of the major problems was the unsustainable transport costs involved in taking most of the produce to the major buyer in Cape Town, Booysen explains.
While it was state funded, the project managers never calculated their overhead costs properly, so the cost of transporting the products just over 500km to the market far exceeded the income they generated.
The municipality initially subsidised the project through the provision of services such as making the land available and providing water and insurance.
“That’s how we supported the project, and they were never in a position to pay for those services that were close to R600 000 (a year),” he said.
Another problem was the maintenance costs of the “quite sophisticated” infrastructure that is valued at close to R6 million
Part of the lengthy delay in trying to resurrect the project and/or have the land properly utilised had been caused by problems with the liquidation process of the section 21 company, Booysen said.
But at its July meeting, the council resolved to put the property out to tender, and Booysen said he hoped this would happen in the next two to three months.
“Council resolved to advertise it for business proposals, and whoever gets it - whether it’s for (hydroponics) or something else - is going to happen soon.”
How it works:
Hydroponics involves producing plants in an artificial environment without the use of soil - nutrients are provided through water - and by manipulating growing conditions to maximise production.
Hydroponically cultivated plants typically have a growth rate that is 30 percent to 50 percent faster than that of plants grown in soil. Because they are cultivated in contained areas, it is usually easier to control pests and diseases.
Finding sustainable financial solutions:
Alan Winde, MEC for finance, economic development and tourism, says the DA-led provincial administration believes the role of the government is to create an environment that enables the private sector, operating within an open market, to create growth and jobs.
“That is why, since coming to government in 2009, we have redirected funding away from small-scale interventions such as the Beaufort West Hydroponics Farm, which was a direct intervention and which sought to create a false economy in the region,” said Winde, pictured.
“Instead, we have channelled funding toward initiatives which create a more conducive climate for investment… These initiatives have a far higher impact on stimulating economic growth and more significant and sustainable benefits in terms of creating jobs.”
Winde pointed out that foreign direct investment (FDI) had resulted in the creation of 6 900 jobs in the Western Cape since 2009, and last year FDI projects worth R4 billion landed in the province.