Tractor manufacturer mulls relocation after promised support fails to materialise

29th October 2004 By: Martin Zhuwakinyu - Creamer Media Senior Deputy Editor

At a time when South Africa needs to create and maintain jobs, a local manufacturer of the world’s biggest and most powerful tractor could relocate to Australia, after failing to secure government support to relaunch an updated version of the tractor. The firm says it had been promised State assistance.

The tractor was developed over 11 years by a farmer based in Hoopstad, in the Free State. About 450 tractors were made by the farmer’s company, ACO Tractor Equipment, before its development and manufacturing rights were sold to entrepreneur Basil Botha.

After extensive research and development and field tests, conducted in conjunction with Barloworld – the supplier of the tractor’s Caterpillar engine – a new technically-advanced model called ACO 2000 was developed and approved for relaunch.

However, the company requires a partner or partners to cofinance the relaunch.

Botha says it was confirmed during the field tests that the ACO 2000 tractor is about 25% more cost-effective than competing products and produces a massive 410 kW at only 1 800 r/min.

Botha, the chairperson and MD of the renamed company, ACO Tractor Manufacturing, says that international interest in the ACO 2000 tractor has been shown by potential investors from as far afield as Canada and Australia. In fact, one of the companies has offered to invest a substantial sum in ACO Tractor Manufacturing in return for equity participation. This offer came with a condition that the factory relocate to Australia.

Botha then approached Advocate Felix Malunga, head of the Companies and Intellectual Property Registration Office at the Department of Trade and Industry, for guidance on company registration in foreign countries.

Botha says Malunga persuaded him to reconsider his decision to move a “Proudly South African-developed product to a foreign country”. To demonstrate his faith in the ACO 2000 tractor, Malunga agreed to join the ACO Tractor Manufacturing board as an advisory director, without any financial reward.

Early in December last year, Malunga accompanied Botha to Bloemfontein, where a presentation on the potential economic impact of the ACO tractor project was made to ST Belot, the Free State’s formed MEC for tourism and environmental and economic affairs, and his chief director of economic affairs, Thembeka Mhlekwa. “The meeting was positive, and we were informed that grant funding would be given to us to cement our position as a Free State operation,” Botha tells Engineering News. Confirming this commitment, Mhlekwa wrote to Botha on March 11: “I wish to inform you that the MEC, ST Belot, informed me this morning that the Free State Development Fund has a new budget, and he has requested that I submit your application for their consideration. “Finally, I would like to reaffirm our commitment to this project; we believe in it and will finance it, but . . . a number of processes need to be followed.” On the strength of this assurance and the inclusion of ACO Tractor Manufacturing in a Free State govern-ment publication in which the company is mentioned as being among those involved in tractor manufacture and assembly the provincial government was willing to support with funds, Botha and his colleagues went on to put down a deposit of R1,85-million on a new factory in Bloemfontein.

“This deposit has now been subjected to a default claim by the sellers, as we were unable to come up with the balance of the purchase price, which was linked to the grant that was promised us by the Free State government,” he says. He subsequently wrote several letters to Belot’s successor, Dr B Malakone, and had a meeting with Free State Premier Beatrice Marshoff, but the promised funds have not been made available and no indication has been given as to when they will be released.

The promised Free State government grant is only a fraction of the potential Australian investment of $10-million, but Botha says he assented to Malunga’s suggestion not to relocate the factory, as this option would allow the company’s shareholders not to give up a portion of their equity stakes.

“Given the fact that we are not getting any com-munication from the Free State provincial government, it has become increasingly difficult for our group to remain confident that they can perform at all, and we must now seriously and responsibly consider our options of relocating to Australia,” says Botha.

He says that ACO had assured the Free State gov- ernment that, if it secured the funds it required, the company would accept an application by an empowerment group to acquire 26% of the total shareholding. “At the request of Malakone, we also undertook, in writing, to set up a skills-development centre at our factory in Bloemfontein to develop the skills of people running small- and medium-sized businesses and the youth of our country,” says Botha.

Commenting on Botha’s claims, Nobie Ngombane, head of the policy unit in the Premier’s office, says: “The Free State provincial government has noted with concern the allegations by Botha against the Premier and members of the executive council.

“We wish to reject any idea that he was promised funding without following procedures adopted by the board of the Free State Development Corporation.

“The provincial government wishes to reiterate its commitment to small- and medium-sized enterprise development and economic growth for the development of the economy of the province.”