AN ANNOUNCEMENT by dairy group Clover yesterday that it was closing South Africa’s biggest cheese production plant in Lichtenburg in North West, because of poor service delivery by the local municipality, has raised the concern of investors.
The group said it had incurred large losses because of long-standing water and electricity disruptions, as well as impassable roads, and would move operations to Queensburgh in Durban, leading to the loss of more than 300 jobs and costs of up to R1.5 billion.
The loss of jobs is a blow. South Africa’s unemployment rate rose to a 13-year high after ticking up slightly to 32.6 percent in the first quarter, from 32.5 percent in the fourth quarter of last year, data from Statistics South Africa this week showed. This was the highest unemployment rate since 2008 during the global financial crisis.
Clover said: “This has negatively impacted production, which requires a continuous process, and it is no longer feasible for the business to operate in Lichtenburg.”
It said despite consultations with the Ditsobola Local Municipality, its production, particularly the treatment and pasteurisation of milk, was continuously affected. “Hopefully, this is not going to be a trend of companies being affected by poor service delivery. It brings to mind a similar problem poultry producer Astral faced in Standerton,” said Steve Meintjes, the head of research at Momentum Securities.
But the General Industrial Workers Union of South Africa (Giwusa), which represents workers at Clover, was aghast at the move and said not only had it not been consulted by the company to engage with the municipality, but it was part of a restructuring process endorsed by the Competition Commission through a ruling made in September 2019.
Giwusa’s national organiser, Charles Phahla, said the union looked forward to engaging with Clover soon on this issue, as well as on other issues.
“Lichtenburg is a small, dismal town. Jobs are desperately needed there,” Phahla said.
He said the union had unsuccessfully challenged the company’s decision to restructure and set up three super structures in Clayville, Gauteng, Port Elizabeth and Bloemfontein, all of which would be heavily automated and therefore reduce the prospects of employment creation.
“We will be consulting with them shortly so that we can try to protect jobs, and at the very least have people transferred to areas where they continue with employment, save for those who cannot relocate and opt for voluntary retrenchment,” Phahla said.
Clover is not the only company whose operations have been disrupted by poor service delivery.
JSE-listed poultry producer Astral in April succeeded in obtaining a high court order against the national government and the National Treasury because of the non-delivery of basic services faced by businesses and the community living within Lekwa or Standerton Municipality.
The impasse with the municipality with regard to the supply of water and electricity has caused major disruptions at Astral’s operations in Standerton, which Astral has repeatedly flagged since 2018.
The government will now intervene in Lekwa Municipality and, together with the Treasury, prepare a financial recovery plan as contemplated in the Municipal Finance Management Act, according to the order.
The order also allows Astral to approach the court again for further relief if it is of the view that the financial recovery plan is not being implemented.