More than a decade after Simpiwe Somdyala swapped the public sector for private enterprise, the highly-regarded corporate executive has made a comeback to the public sector.

He was recently unveiled as new CEO of the loss-making Eastern Cape Rural Development Agency (ECRDA), where he has been tasked with turning around the agency’s fortunes and help it deliver on its mandate of stimulating commercial farming and agro-processing in South Africa’s poorest province.

Somdyala replaced previous CEO Simon Qobo, who was fired last year by ECRDA’s board after the state-owned agency was slapped with a disclaimer by the Auditor-General for submitting incomplete financial statements.

But Somdyala will have his work cut out. He has to salvage the agency from further slipping into a deep financial abyss and clampdown on breakdown in corporate governance, something his predecessor failed to address.

Somdyala has been given a mandate to stabilise and repurpose ECRDA to be an apex entity that drives commercialisation of agriculture in the Eastern Cape. Executing this mandate also means addressing the problems that plunged the agency into unqualified audits.

He is the first to admit that the task in front of him is daunting and that its successful execution will depend on the province resolving a nexus of complex bottlenecks that hold back its agricultural potential. These bottlenecks range from poor infrastructure, weak security of land tenure, inadequate investment funding, and shortage of skills.

“I strongly believe that political leadership and support will be key in turning around the ECRDA. This will require stability because we do not have time at our disposal given the challenges we face,” Somdyala said.

Under Somdyala’s leadership, the ECRDA is expected to spearhead efforts to boost production of grain, fodder, food crops, beef, dairy, poultry to sheep, goats, and fisheries. Production of timber, horticulture, deciduous fruits, citrus, and nuts will also be prioritised.

Somdyala brings with him wealth of experience in development finance and commercial farming, having spent the last decade occupying senior leadership roles at Old Mutual’s Masisizane Fund and dairy farm group Amadlelo Agri.

He was CEO of Asgisa-EC from 2008 to 2012, which was subsequently merged with three other rural development agencies, Eastern Cape Rural Finance Corporation (ECRFC), Uvimba, and Agrarian Research & Development Agency (ARDA) to form what is today ECRDA. However, since its establishment, the ECRDA has been plagued by leadership instability. The agency has had about 10 CEOs or acting CEOs in the last 12 years.

Asgisa-EC was the crown jewel of the four merged entities. It started operating in 2008 with an ambitious goal of developing commercial farming and agro-processing in the eastern part of Eastern Cape (previously Transkei homeland).

The province’s eastern half, separated by the Kei River from the western half, is mostly poor, rural and least developed compared with the western half, where the bulk of the Eastern Cape’s wealth is concentrated. Once you cross the Kei River westward, you immediately notice how more urbanised and industrialised the western part is. This part of the province is home to two large metropolitan cities (East London and Gqeberha), two harbours, two busy airports, and a 100-year old motor manufacturing industry.

Before it was consolidated into ECRDA, Asgisa-EC planned to manage 1 million livestock units, place 40,000ha under irrigated cultivation and 500 000 ha under dry-land cultivation. Crops such as maize, soya beans, canola, sunflowers, sugar cane, flowers, sugar beet were identified as the mainstay for the province’s agricultural sector, so was production of fruit, dairy, meat, and leather.

ECRDA’s turnaround plans

The ECRDA’s 12-year track record has been nothing short of underwhelming, if not shambolic. The institution has been plagued by financial mismanagement and legal disputes. The ECRDA’s last published annual report covering the financial year ended 31 March 2024 shows that the agency is highly dependent on government funding to remain afloat and be able to pay salaries and suppliers.

It’s revenue for the year was R197,8m, but the primary source of this income was R156,8m government bailout. There is very little income generated by its business activities such as financial services and property rentals. Total expenses for the year were R212m, with salaries costing the agency R118,4m -- an amount representing over 55% of total expenses.

ECRDA board member, Gcinumzi Qotywa, who took over as acting CEO following the dismissal of Qobo, tried his best to trim the agency’s after-tax losses to R17,2m from R134m the previous year. Although Qotywa has done a commendable job, he has handed over to Somdyala an institution that is running at a loss.

This means that Somdyala’s future endeavours must focus on containing costs while increasing revenue from ECRDA’s business sources. But this will require a complete overhaul of the agency’s strategy.

The agency only owns one business subsidiary, a 100% shareholding in Magwa Tea Enterprise. In the latest annual report, it disclosed that it lost control of the Kangela Citrus Farm after it was interdicted by the Grahamstown High Court in 2018.

The interdict stems from a fallout between the agency and Kangela Empowerment Trust, which acquired a 49% stake in the Addo-based farm from the late citrus farmer Norman Benjamin in the early 2000s.

The empowerment trust, representing Kangela’s workers, approached the court to stop the ECRDA from interfering with the operations of the farm after it butted heads with the agency over operational matters. It emerged in court papers that 51% of Kangela’s shares that used to be held by ECRDA were transferred into the trust in 2009, resulting in the agency losing ownership of its shares.

Private sector involvement essential

The biggest hurdle that Somdyala will likely grapple with is raising funds to finance his turnaround plans. Budget cuts and under-funding have been a long-standing challenge for the province ever since the dissolution in the 1990s of Tracor and Ulimocor, the apartheid-era rural development agencies that were managed by the former homelands of Transkei and Ciskei. These agencies were taken over by the Eastern Cape government after South Africa transitioned from apartheid to democracy in 1994.

“Since the dissolution of Tracor and Ulimocor, there has been a significant gap in funding commercial agriculture in the region. This vacuum has directly impacted the productivity of irrigation schemes and exacerbated the province's food security challenges,” explains Somdyala.

He has witnessed first-hand how difficult it is to raise capital for Eastern Cape’s agricultural projects when he led Amadlelo Agri and Masisizane Fund.

“During my tenure in those entities, I witnessed promising projects consistently fail or remain underfunded due to several critical challenges related land tenure risks, deteriorating infrastructure, misaligned funding structures, and scarcity of skills,” explains Somdyala.

The failure to resolve these challenges often results in over-reliance on government funding, when what is really needed is a blend of public and private sector involvement to grow agriculture and its value chain.

“The private sector has demonstrated willingness to invest and partner with government. The challenge lies in creating an enabling environment that addresses investment obstacles,” concludes Somdyala.

Related Tags