SA’s largest poultry producer Astral Foods has won a court order over a lack of service delivery in the Lekwa local municipality in Standerton, which will force the national government and the Treasury to prepare a financial recovery plan for the municipality.
The owner of consumer brands Goldi, County Fair and Festive, which has a quarter of the the country’s poultry market excluding chicken imports, said it obtained the order in the Pretoria High Court on Monday, in a matter in which the company challenged the non-delivery of basic services in the municipality. The company owns a poultry processing plant in Standerton.
“The impasse with the municipality with regards to water and electricity supply has had a major disruptive impact on Astral’s operations within Standerton. Unfortunately, the goings on have also negatively impacted on people living in the town and surrounding areas,” said the company.
Astral reported in November in its financial results for the year to end-September 2020 that deteriorating infrastructure and the municipality’s inability to provide water had cost the company millions. Load-shedding and water shortages cost it about R62m, but this was an improvement on the previous year’s R126m. Astral said poor service delivery from the municipality is untenable.
The situation dates back to early 2018 when disintegrating infrastructure in the Lekwa municipality led to severe basic supply interruptions to Astral’s operations. At the time, Astral took legal action against the municipality and a court order was secured.
The municipality was obliged to submit a longer-term plan indicating how and when it intended repairing and improving the municipal utility supply infrastructure — but this plan did not materialise, according to Astral.
In terms of the new, agreed order issued on Monday, the national government will now intervene in Lekwa municipality and, together with the Treasury, will prepare a financial recovery plan as contemplated in the Municipal Finance Management Act.
The order also provides for Astral to approach the court again for further relief if it is of the view that the financial recovery plan is not being implemented.
“We confirm our full support to the national government and the Treasury and look forward to co-operating further in the interests of resolving the very serious issues faced by the Lekwa municipality, and the impact they have on our operations, and the community living and working in the area,” Astral’s CEO Chris Schutte said.
In November, Astral said it had had court battles with Eskom, which cut electricity supply to the defaulting Rand West City local municipality, affecting Astral’s Meadow Feeds operations and other businesses in the area.
Small Talk Daily analyst Anthony Clark said Schutte said some months ago that he would sue the government directly and it is pleasing that the company had now done so and won its case.
“It sets a precedent in this country where municipalities are duty-bound to supply services to their ratepayers and tax holders. If they do not deliver on services they will be found to be delinquent and central government should take over.”
He said other corporates might take the government to court over its inability to deliver basic services in other areas of the country.
Astral’s share price fell 0.22% to R153.38 on Tuesday.
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