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Summary Report: Annual AgriBEE Showcasing Event Ingwenyama Lodge, Mpumalanga Province,

12 – 13 March 2009

Prepared By

Directorate Business and Entrepreneurial Development

BEE Policy Unit

March 2009

Fourth Annual AgriBEE Showcasing and Networking Event Ingwenyama Lodge, Mpumalanga Province – 12 to 13 March 2009

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TABLE OF CONTENTS

1. INTRODUCTION DAY ONE: 2. SUMMARY OF PRESENTATIONS DURING THE WORKSHOP 2.1. WORKSHOP: FIRST SESSION

2.1.1. Welcome: Mr. J. Velelo

2.1.2. Opening Address: Ms. N Nduli, Director General, DoA.

2.1.3. BEE Mindset-Shift: Mr. W. Janisch, Empowerment Services

2.1.4. BBBEE Implementation framework, verification and AgriBEE: Mr.

T. Masombuka, Department of Trade and Industry.

2.1.5. Questions and Answers

2.2. WORKSHOP: SECOND SESSION Panel Discussion: Funding support for empowerment. Panelists: Mr.

Coetzee - IDC; Mr. S. Nadoo – Khula; Ms. S. Mzamo – Land Bank.

2.2.1. Presentation: The Industrial Development Corporation

2.2.2. Presentation: The Land Bank

2.2.3. Presentation: Khula Enterprise

3. SUMMARY OF BREAKAWAY SESSIONS: THIRD SESSION 3.1. Commission 1: Enterprise Development Support – Mr. W. Janisch

3.2. Commission 2: BEE Scorecard, Role of verification agencies – Mr. J

Maphutha, the Dti.

3.3. Commission 3: Access to market opportunities: AgriBEE Integrated

Funding Business Case – Mr. M. Fick, IMPEC Ostrich.

3.4. Commission 4: Stakeholder Partnership Models: Prof. B. Wessels –

UFS/ASGISA; Dr. J. Purchase – ABC.


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DAY TWO

4. PLENARY REPORT BACK: FOURTH SESSION. 4.1. Commission 1 4.2. Commission 1 4.3. Commission 1 4.4. Commission 1 5. PROVINCIAL EMPOWERMENT EFFORTS IN THE SUGER INDUSTRY (Mr. V. Khoza, TSB) 6. AgriBEE Showcasing and Summation: Provincial AgriBEE Project

Profiles – Mr. R. Abercrombie. 6.1. Background Information

6.2. Analysis of provincial profiles submitted

6.3. Conclusion

6.4. Lessons Learned

7. BLACK ECONOMIC EMPOWERMENT: LESSONS FROM OTHER SECTOR CHARTERS’ IMPLEMENTATION. 7.1. BEE History in the country

7.2. General trends from other sectors – seven elements

8. SUMMARY EXHIBITION REPORT


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1. INTRODUCTION

This year’s showcasing event marks the Fourth Annual AgriBEE Showcasing and

Networking Event and as for this year it was hosted under the theme, “True

Change Comes from Within” (from Sector Charter to Sector Code) as pioneered

by the host province – Mpumalanga Province. As per the AgriBEE reference

document the AgriBEE Showcasing Event is an event held every year in the

agricultural sector for the purpose of leveraging investment and confidence

toward economic transformation in the agricultural sector.

This event also serves as a platform for all stakeholders to visibly showcase their

experiences, empowerment models, successes, failures and challenges with

regard to transformation to assist in policymaking decisions. This in the end

promotes the agricultural sector as business opportunity.

The event was held in Mpumalanga Province on the 12th and 13th of March 2009

and for the first time in four years the event was a two day (1½ days) event. The

event was marked by a workshop and exhibition running parallel and the Gala

dinner was held on the 12th March 2009 wherein the key note address was made

highlighting transformation milestones achieved so far in the sector and amongst

those is the institutionalization of the AgriBEE Charter Council on the 05th of

December 2008.

This year’s event was honoured by high profile major stakeholders in the sector

such as Mr. W. Janish from Empowerment services, Mr. V. Jack from

EmpowerLogic, Dr. J. Purchase from ABC, Prof. B. Wessels from UFS /

ASGISA, Mr. T. Masombuka from the DTI, Mr. S. Naidoo from Khula, Ms. Mzamo

from the Land Bank, amongst others.


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DAY ONE:

2. SUMMARY OF PRESENTATIONS DURING THE WORKSHOP 2.1. WORKSHOP: FIRST SESSION

2.1.1. Welcome: Mr. J. Velelo Mr. Velelo welcomed everybody who attended the event highlighting the transformation backlogs facing the Agricultural sector, namely; Land reform amongst others. In conclusion he said, “It is in forums like this one were confusions on matters of transformation in the sector can be cleared”.

2.1.2. Opening Address: Ms. N Nduli, Director General, DoA. The event was officially opened by the Director General (DG) of the National Department of Agriculture, Ms N. Nduli, outlining the background and the purpose of the showcasing event and she said,

“Ladies and gentlemen it was during the development process of the AgriBEE Charter that sector stakeholders made reference to the organizing of an annual event to showcase experiences on empowerment efforts in the agricultural sector. This undertaking by stakeholders is contained in the AgriBEE Reference Document, which accompanied the AgriBEE Framework that was launched in July 2004 with sector stakeholders by the Minister for Agriculture and Land Affairs”.

“The annual showcasing event provides an opportunity for sector stakeholders to share experiences and lessons relating to their empowerment efforts. An exhibition and workshop are run parallel to each other during the event. Updates on the BEE landscape are provided by the Department of Trade and Industry. Various speakers who are leading commentators on BEE in our country participate in the workshop program. Over the years, the AgriBEE Showcasing has provided a platform for increased stakeholder interest and participation on issues of AgriBEE and this has contributed to positive consultations during the phase to conclude the AgriBEE Charter”.

It was also made clear that this annual event gives a platform to sector stakeholders and related industry players who are invited to this showcasing event, during which several industry business and partnership models are shared to demonstrate successful implementation of empowerment in agriculture. In stressing the importance of having this landmark annual event, the Director General emphasized that during these annual showcasing events areas of concerns/ gaps affecting empowerment and its progress, are identified and those


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are being addressed through initiatives and interventions developed by all stakeholders within the sector and beyond.

In acknowledging the work programme ahead of the AgriBEE Charter Council which was inaugurated 05 December 2009, the DG said, “Agricultural sector stakeholders, let us take note that this sector has to report, like other economic sectors, for compliance purposes, on its progress with respect to B-BBEE during 2009. Therefore, all our stakeholders are encouraged to “get-ready” and put systems in place that will enable all of us to report on our various empowerment contributions, across the seven elements of AgriBEE. In this regard, the appointed AgriBEE Charter Council will facilitate this process together with the Department of Agriculture”.

In conclusion, the Director General said, “Colleagues, in conclusion it is envisaged that the annual showcasing event, in future, be organized as a competition award, using the BEE scorecard ratings of agricultural businesses as yardstick. Once the Agricultural Sector Code is finalized, a conceptual framework in this regard can be developed”.

2.1.3. BEE Mindset-Shift: Mr. W. Janisch, Empowerment Services Background Information: BEE is one of the most misunderstood and hotly debated issues – and it is usually very poorly communicated. It illicit fears, resentments, misgivings and feelings of inadequacy from all race groups and as a result many see it as a “compliance” issue; some still believe it is only about black ownership; some believe it is only benefiting the selected few; some see it as a threat to their jobs or livelihoods and others think it is too complicated. The title “BEE” means different things to different people and it needs to be re-defined. Traditionally, Capitalist economic systems meant that the more money, land, resources, technology, education etc. which you had; the more money you were likely to be able to make. This has the effect of increasing the gap between rich and poor and of further marginalising the have-nots. Communism, on the other hand, tends to fail as an economic system, because it is often based on the incorrect assumption that all people are equal in terms of capabilities and attitude. What is needed, rather, is what some call “Humanitarian Capitalism” whereby, the more you have, the greater your responsibility to empower the rest of society and to look after the environment. And we need a way to measure this contribution so that everyone does their fair share. This is called Social and Environmental Accounting or Triple-Bottom Line Accounting and it measures the Social and Environmental Bottom Lines – not just the financial one. Most societies end up collapsing because of a failure to address the needs of the poor as is the case with our neighboring country Zimbabwe.


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The Context: Given the above background, BEE derives its strength in the Humanitarian Capitalism and AgriBEE should be better understood as an attempt to define and measure more sustainable business practice using a balanced scorecard. The BBBEE Act 53 of 2003 was thus introduced, in South Africa, in order to address the imbalances made by the past policies and to also assist to narrow the gap between the rich and the poor, for example the laws that were used in disempowering black people of those factors having economic value, such as land, dignity, education, skills, amongst others. It was under the Native Land Act that black people were disempowered of their land and 90% of it given to white and the remaining 10% to black South Africans Conclusion: AgriBEE is there to address the three major challenges facing our economy, namely; 40% unemployment, massive wealth gap between the haves and the non haves, and the legacy of disempowerment. In so doing, the AgriBEE Charter exist to inject economic value to the majority of black South Africans who are not participating in the mainstream economy. This is addressed through the seven empowerment indicators, namely Land and Equity Ownership, Management Control, Employment Equity, Skills Development, Preferential Procurement, Enterprise Development, Poverty Alleviation, rural development and CSI. These seven empowerment indicators are meant to incorporate black disadvantaged South Africans in the mainstream economy by providing meaningful employment (Ownership, Management Control and Employment Equity) and self employment (preferential procurement and Enterprise Development). In conclusion, Mr. W. Janisch made a quote by the former president of South Africa, Nelson Mandela, “Let the mountains raise up the valleys, there is room for us all”.

2.1.4. BBBEE Implementation framework, verification and AgriBEE: Mr. T. Masombuka, Department of Trade and Industry.

Background Information: The purpose of this presentation was to give the background with regard to Black Economic Empowerment in the country with specific reference to the importance of the Codes of good practice and how it relates to AgriBEE; the role of sector charters and also the role and importance of BEE advocacy; alignment of BBBEE with Government Procurement and Legislation and lastly, BEE verification and Accreditation. The Codes of Good Practice was gazetted in February 2007 and fully implemented in 31 August 2008. The period in between was the transition period meant for the development and introduction of institutional mechanisms for BBBEE implementation. The other reason for the transition period was to prepare government and State Departments to align systems and Measures. The Codes


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represents shift from narrow-based BEE to BBBEE. This means that the emphasis is now on Ownership, Management, Employment equity, Skills development, Preferential Procurement, Enterprise Development, Socio economic development. Sector Charters: BBBEE Strategy encouraged the development of Sector Charters as part of Strategy for effective BBBEE implementation. After the Codes were developed it was clear that certain Strategic Sectors necessitated a different approach to BEE and the Agricultural Sector is one of them – AgriBEE and this includes Include Financial Services, Mining & Construction & Transport. In doing so, the sector may not deviate with the following: measurement principles, elements, definitions. The following are the legal requirements attached to those sector charters deviating from the Codes, namely; it must be submitted by a representative body, it has to be a product of consultative processes among the major stakeholders in the Sector, in this case the AgriBEE Sector Charter. It is also important that the sector shows the commercial characteristics. Once gazetted under Section 12: it is just a statement of Intent only and not binding on government departments. In developing the section 9 charters, the legal requirements enable the sector/industry to deviate with the Generic Codes only in targets (achievements), weightings (measurement points) and thresholds (EMEs/QSE/Large Enterprise). If the sector is deviating from the codes of good practice, the sector should motivate for deviations on the following grounds: economic rationale, empirical research and the sector specific peculiarities. BBBEE Advisory Council has been established to advice on BEE Strategy and implementation; review progress in achieving BEE; provide Advice on new programmes, promoting partnerships in implementing BEE, Advise on Sector & enterprise charters and the Council to become footprint for Sector Charter Councils. Verification Agencies: The following are Accredited Verification Agencies as of the 09 February 2009: BEE Matrix, BEE Verification Agency, DRGSiyaya, Emex Trust, Empowerdex, Empowerlogic, Honeycomb, NERA – Gauteng, NERA – KZN and NERA Western Cape. The verification agencies exist to reduce the risk of misstatement to an acceptably low level, arrive at a similar conclusion based on the same set of info, an assurance of the integrity on the information, assess, verify and validate BEE Information for decision making, and to give confidence that information is tested for validity & accuracy.


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2.1.5. Questions and Answers a) How long does it take for a Sector Charter to become a Sector Code?

There is no prescribed period for section 12-9; it depends on

stakeholders, measurement tools, and the sooner is always the better.

2.2. WORKSHOP: SECOND SESSION

Panel Discussion: Funding support for empowerment.

Panelists: Mr. Coetzee - IDC; Mr. S. Nadoo – Khula; Ms. S. Mzamo –

Land Bank.

2.2.1. The Industrial Development Corporation

The IDC was formally engaged in industrial development but as of now is

also engaged in primary agriculture. Much as the Land Bank is cash crops

and livestock AgriBEE initiatives, the IDC is more on fruit Industry

initiatives ranging from startups, extensions and rehabilitation? As part of

the developmental initiative, the IDC also looks at equity deals in primary

agriculture, also engaged in project development; it gives support to

developmental models in working with farmers in the rural areas with

specific reference to skills development. And lastly the IDC also support

the empowerment models as is the case in the Western Cape.

2.2.2. The Land Bank

Land Bank is the fund manager of the AgriBEE Funding Scheme as per

the Memorandum of Understanding and Directorate: Business and

Entrepreneurial Development is the custodian directorate. The main

purpose was to unpack the contents of the developmental strategy in


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assisting development clients. It was also emphasized that the success

could only be possible through the partnerships wherein empowerment

efforts / programmes are leveraged from both sector stakeholders and the

government. These initiatives also work better when they are being

incorporated into the IDP’s of local municipalities much as the Land Bank

has embarked on.

The projects to be considered under this partnership should be

sustainable, showing an element of viability which is a key to ensure that

the funded projects do not fall apart after or before three years of funding

and / or funding. Beyond considering the balance sheet and the projected

cash flows, due diligence is vital in establishing that all the aspects

defining a sustainable business are intact.

The following are the objectives as for the Land Bank with AgriBEE

projects: institutional mechanisms for managing agriculture, farm

partnerships with relevant stakeholders to enhance development in

farming enterprises, assist farmers to access funding, mainstream

development through business enterprising, target groups are

cooperatives. Of note, the long term goal is to unlock potential in the

agricultural sector. The pillars of support are: to mainstream development,

promote export development, and to encourage innovation (agro-

processing).

2.2.3. The Khula Enterprise

Khula Enterprise assists in the form of Land Reform Empowerment fund

targeting the cooperatives across the value chain in the sector. The equity

share loan minimum amount is R600 000.00 and the qualifying criteria: the

applicant project should be a black SA citizen, and have a purchased land

within and of importance is the cooperatives or groups for any sort of

assistance.


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3. SUMMARY OF BREAKAWAY SESSIONS: THIRD SESSION

3.1. Commission 1: Enterprise Development Support – Mr. W. Janisch a) Background Information: In this session the farmers were given a platform to understand the definition of Enterprise Development as is on of the empowerment indicator as per the AgriBEE transformation charter. The session also had ample time in answering questions on how Enterprise Development as an empowerment indicator can be practically implemented. On that note, Enterprise Development was then defined as the establishment, support and integration of black entrepreneurs in the mainstream economy and / or business processes. It was also described as the process of developing businesses, supporting them through access to finance, Infrastructure, Information and Knowledge system. A number of questions were asked after the presentation and a report on that is covered under the plenary report back covered in this report.

3.2. Commission 2: BEE Scorecard, Role of verification agencies – Mr. J Maphutha, the Dti.

The dti is responsible for championing the code of good practice. It must ensure

that there is professional conduct in industry participants and in doing so; the

SANAS is used to accredit the verification agencies wherein the approved

agencies get certificates of approval from dti. As per gazetted verification manual

dated 18 July 2008, standards are set to eliminate the verification agencies which

have different status and as a result the first set of accredited verification

agencies has been released by the DTI.

The implementation of the BEE codes of good practice is implementable only

when there are verification certificates amongst the participant in BEE

transactions and / or deals.


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3.3. Commission 3: Access to market opportunities: AgriBEE Integrated Funding Business Case – Mr. M. Fick, IMPEC Ostrich.

The ostrich business in South Africa has been a “limited entrants only” industry

for more than a century. Small scale emerging farmers in rural South Africa have

never had real ownership nor had opportunity for participation in the whole

industry value chain. Now for the first time in South Africa, an integrated and

holistic business model which is facilitated by Salem Agribusiness mentors has

been adopted to incorporate small scale farmers and existing commercial players

in the ostrich industry in a mutually beneficial Joint Venture.

Existing commercial players in the Ostrich industry have embraced the model

proposed by Salem Agribusiness and a value adding, portion packing ostrich

meat plant in Grahamstown has been completed. This allows the creation of

retail products for sale directly to Supermarkets and end users both locally and

internationally, eliminating middlemen and opportunistic traders.

The structure adopted is one where the small-scale emerging producers are,

by means of an infrastructure grant to the value of R9.3M from the AgriBEE

Fund, equal to 49% of the R19M facilities, they as a Trust have: secured their

position in the industry, guaranteed their own slaughter space and

guaranteed access to lucrative retail markets for meat and leather.

Government Support Funding for Infrastructure requirements for both basic facet farmers and

feedlot construction has already been secured and disbursed under phase 4

and 5. To date, R 4 456 949.35 has been received by the project in Grant

Funding for infra structure from the PDA. The Trust received a further R9.3M

grant from the AgriBEE fund as an investment towards the 49% shareholding

in IMPEC.


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Shareholding: Unlocking the future

Small-scale emerging farmers have secured improved prices for their

produce, and reduced risk of financial failure. Shareholding of this nature has

secured both slaughter space at the abattoir, and market-share in value

added products, enhancing return. A dividend yield can be expected to further

enhance passive income returns annually to farmers from IMPEC.

The Philosophy – the model echoes one important message, that

opportunity is empowerment and no true empowerment can occur unless the

needs of the whole person are addressed – incorporation of emerging

farmers in the whole value chain.

Why the small scale farmer fails to access the export and organized local market? Lack of infrastructure & collateral for production loans, lack of Industry and market information, lack of technical knowledge and experience, high Industry entry costs, inability to supply high volumes demanded by the industry, and inability to comply to quality standards and registration requirements for market access. Access to niche markets

It is essential to have a stake in the further processing of Ostrich products, so as

to give best value and opportunity to producers - especially for emerging

producers.

3.4. Commission 4: Stakeholder Partnership Models: Prof. B. Wessels – UFS/ASGISA; Dr. J. Purchase – ABC.

What can realistically be expected from agricultural businesses regarding Broad

Based Black Economic Empowerment (BBBEE) in South Africa? This was an

opening question to the presentation by Dr. J. Purchase from the Agricultural

Business Chamber.


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ABC Visionary Framework and Strategic Plan

• Core Objective 1: To influence the policy and legislative environment

insofar as it affects agribusiness activities, by way of ongoing and

professional interaction with all relevant government institutions.

• Core Objective 2: To improve the agribusiness environment through liaison

and co-operation with influential groups within the business environment –

locally and internationally.

• Core Objective 3: To support the developing agriculture value chain and

Black Economic Empowerment.

• Core Objective 4: To create unique, relevant and accessible agribusiness

intelligence to support ABC programmes

ABC Contribution Part of Ministerial Committee to develop AgriBEE Charter, Played key role in

drafting team of AgriBEE Charter, Education of businesses and broader sector

on BBBEE Act, AgriBEE Charter and Codes of Good Practice (CoGP), and

launched initial survey on AgriBEE with IDC at end 2007.

ABC/IDC Survey on AgriBEE Survey Objective: The survey was meant to determine the current BBBEE

status of the agribusiness sector and to identify the major BBBEE challenges

faced by agribusinesses in South Africa.

Respondents: 30.9%, members of ABC and clients of IDC; and employ 25 000

workers, serve primary agriculture.


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THE RESULTS OF THE SURVEY Turnover of Respondents - 35% consist of Large Enterprises ≥R2 000 million - 35% consist of Medium Enterprises R35

million - R2 000 million - 30% consist of Small Enterprises ≤R35

million

Strategic Approach to AgriBEE - 8% No BEE strategy in place - 46% constructing a BEE strategy - 46% currently implementing a BEE strategy

Primary BEE Strategy Driver - Board of Directors = 37%

- Member of the Board = 8%

- Exco Member = 34%

- Senior Manager = 13%

- Junior Manager = 5%

- Other = 3%

Current Average Element Scorecard - Ownership = 30% - Management Control = 20% - Employment Equity = 40% - Skills Development = 46% - Preferential Procurement = 40% - Enterprise Development = 34% - Socio-economic Development = 60%

Current priority assigned to different elements (Scale 1 being lowest and 7 highest)

- Ownership = 5.5

- Management Control = 5.3

- Employment Equity = 5.7

- Skills Development = 6.3

- Preferential procurement = 5.4

- Enterprise Development = 5.6

- Socio-Economic Development = 5.9

Ranking of elements according to ease of implementation (Scale 1 being most difficult to

implement and 7 easiest)

- Ownership = 3.6

- Management Control = 2.6

- Employment Equity = 2.6

- Skills Development = 4.2

- Preferential procurement =3.0

- Enterprise Development = 4.0

- Socio-Economic Development = 4.6

Initiatives in Implementing Ownership Element

- External BEE partner = 33%

- Workers trust = 33%

- Community Trust = 19%

- Other = 15%

Sources of funding IRO BEE Ownership Initiatives

- Funded by Company = 30% - Funded by Black Partner = 21% - Development Finance Institutions = 21% - Commercial Banks = 9% - Grants = 6% - Other = 13%


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Initiatives in promoting the Enterprise Development

- Emerging Farmers Development

Projects = 32%

- Joint Ventures with Black Companies =

11%

- Business development with community =

32%

- Joint venture with labour in green fields

projects = 9%

- Management of farms on behalf of black

owners / communities 13%

- Other = 3%

Obstacles to implementation

- Finding and retaining suitably qualified managers

- Finding equity partners who have sufficient funding or can obtain

sufficient funding; and who can add value to the business

- Procurement: verifying the status of suppliers, and finding quality

products/service, that are also competitively priced.

- Guidance from regulatory bodies in terms of BBBEE

- Implementation of broad based schemes, including managing expectations


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DAY TWO

4. PLENARY REPORT BACK: FOURTH SESSION.

4.1. Commission 1: Enterprise Development Support

During this commission a number of questions were put to the floor for clarity

and they are listed below as follows:

• What makes Enterprise Development Support work?

• How can it work for an established business – to move to the next stage

• How can development agencies assist?

• Partners for niche/Specialist help

• Why ED hasn’t worked and what’s going to be different now?

• How will ED impact on the rural areas, youth, women, disabled and PANDA?

• What role can Y/WARD play?

Responses: • Distinction between business and social development: Pty (Ltd), cc, Trust,

sole Proprietary and Cooperatives. History confirms that 91% of new

businesses collapse within the 1st 3 years of operation and amongst the

reasons: Lack of passion and commitment; Lack of info about the product and

the target market and Lack of business management skills.

• What makes ED work?

- Attitude and personal commitment

- DISCIPLINE! DISCIPLINE! DISCIPLNE!

- Readiness

- Stick to your plan

• How to move to the next level?

- Right attitude

- Willingness to learn and to listen Fourth Annual AgriBEE Showcasing and Networking Event

Ingwenyama Lodge, Mpumalanga Province – 12 to 13 March 2009

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- Specialist knowledge and an understanding of the value chain

- Emphasis on mentorship

- Deal with people that have a vested interest in your business

• How can development agencies assist?

- Few programmes

- Communicate them well

- Understanding the value chain and segments thereof

- Need to focus on businesses that are growing

- Complimentary relationships amongst agencies and BDS private

companies

• Why ED hasn’t worked before?

- Numbers vs. quality

- Focus on short-term results

• How will it impact on rural, youth, women, disabled

- Market them

- Insist that companies invest in a rural/women/youth programme and

support

- Find something that will make you stand out.

• Role of WARD

- Lobbying power for a market

- Make a flagship programme, use the lobbying power to attract them

4.2. Commission 2: BEE Scorecard – Role of Verification Agencies

The report back was covering the proceedings of the presentation which was done by Mr. Jacob Maphutha from the Department of Trade and Industry during commission 2. It was reported that the presentation aimed at emphasizing the importance of the scorecard which is the vehicle in measuring and implementing BBBEE in the country. In doing so, the verification manual was unpacked and a number of questions were presented after the presentation.


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Questions: How many accredited verification agencies are there in Gauteng Province and what does it take for one to become an accredited verification agency? In response, Mr. J. Maphutha said, there are nine verification agencies in Gauteng Province and for one to become an accredited verification agency he / she must follow the normal processes for application during the application season to be announced by the Department of Trade and Industry.

4.3. Commission 3: Access To Market Opportunities Introduction The Access to Markets Opportunities commission was structured in a form of a

discussion on a single case study that addressed most of the constraints faced

by the emerging farmers with regards to markets access. The objective of the

AgriBEE showcasing event was to showcase best practices of projects.

Therefore during this commission, a best practice model on creating market

access to small scale farmers was presented to the delegates. The presentation

was based on an Ostrich Production Chain model in the Eastern Cape, which is

being facilitated by the Salem Agribusiness and Khula Sizwe. The case study

was presented by Mr. Martin Fick.

The model The Ostrich Production chain model is one of the best case studies that can be

replicated in any other sub sector to increase ownership and market access of

the small scale producers. The objective of this business model was to facilitate

the rapid successful, holistic development of small scale farmers by integrating

with the existing large scale commercial agriculture enterprises. The business

model tried to address all the constraints faced by the small scale farmers in

accessing the markets.

Before the project was implemented, three fundamentals needed to be assessed

and addressed, which are key to the success of any developmental projects.

These fundamentals are: Markets - must be marked driven; Access to

competitively priced inputs, including finance and training.


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Salient features The project could not have succeeded without the government support.

Therefore the government support in this kind of projects is imperative. The

government injected R9.3 million into this project for the producers to secure

49% shareholding. The shareholding afforded the small scale producers with the

following, secured the farmers position in the industry; guaranteed them a

slaughter space in the abattoir and guaranteed them access to lucrative markets.

The farmers through their membership with Khula Sizwe Small Scale Ostrich

Farmers Participation Incentive Trust that represent their 49% interest receive

more benefits for successful operation of their businesses. They receive the

following services; mentorship, training, finances; and markets. The project has

been running for 6 years and 120 farmers are benefiting from this scheme and

the farmers are represented throughout the value chain, they have stake in

marketing and further processing of their products

For the projects of this nature to be successful, the following is a necessity:

Commitments from the small scale producers, commitments from the commercial

farmers, support from government, and transparency throughout.

In conclusion, this was a good case study, which can be replicated into other sub

sectors with small modifications

4.4. Commission 4: Stakeholder Partnership Models

The presentations on the importance and relevance of partnerships and

models for sustainable BEE in agriculture were made by the following

presenters: ABC – presented the MGK-TEMO model and University Free

State (UFS) – Partnership between the DoA and the UFS for the roll out of

the Excellence Model.

Fourth Annual AgriBEE Showcasing and Networking Event

Ingwenyama Lodge, Mpumalanga Province – 12 to 13 March 2009

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Joint Venture between MGK & Temo farmers Trust

The Objectives of The JV: Mentors and develops emerging farmers to

becoming commercial farmers. Farmers that join the program are part of the

Farmer Share Trust that owns MGK shares

Services: Production loan, crop Insurance, production Inputs, marketing &

Logistics, mentorship.

Partnership between the DoA and the UFS: UFS and DoA have an

agreement in place and Centre of Excellence has been established in UFS;

facilitators and farmers are trained on the Excellence Model and linked to

Small Enterprise Development Agency (SEDA- dti) for addressing gaps.

Challenges: Finding and retaining suitably qualified managers, finding equity

partners who have sufficient funding or can obtain sufficient funding; can add

value to the business; skills transfer in the empowerment deals; procurement:

period of payment taking a long time - verifying the status of suppliers,

finding quality products/service, that are also competitively priced. The other

challenges is shortage of extension officers; farming on communal land –

affects farming from becoming a sustainable business; and although skills

development has been seen as an element that is easier to implement there

is still confusion resulting in fronting.

Way Forward:

Excellence Model – to be rolled out in all provinces.

Impact and lessons leant from UFS need to be replicated in all other

provinces.

Promotion of Agriculture and the benefits thereof should be emphasized in

schools offering agriculture as a subject.

As the theme indicates ‘Change comes from within’ farmers should

become more passionate about farming as a business.

Build on models that are available and keep trying.


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5. PROVINCIAL EMPOWERMENT EFFORTS IN THE SUGER INDUSTRY (Mr. V. Khoza, TSB) Sugar Industry and Employment After having given the sugar Industry landscape in the Mpumalanga Province,

Mr. Khoza reflected on the employment profile which is as follows: In total the

TSB has employed and / or benefiting 97 200 beneficiaries comprising of :

TSB 2 600

Small Scale Farmers 1 300

Commercial 250

Labourers 8 000

Direct employment 12 150

Dependants 85 050

TOTAL 97 200

Tsb BEE Strategy Score card focus and attention to all areas (annual targets)

Ownership-linked to the land claims process completion

(Employees/Growers/Investors)

Management-linked to ownership BEE transaction, but actively recruiting

for senior management (now 2 black GMs)

Employment Equity -currently low but aiming at target 15 score

Skills Development -Mentorship program/bursaries/learnerships

Enterprise Development - Middle scale farms-Siyathuthuka; JVs with

claimants; and Contracts.

Corporate Social Investment Schools program

Scholarships

Soccer sponsorship


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6. AgriBEE Showcasing and Summation: Provincial AgriBEE Project Profiles – Mr. R. Abercrombie.

6.1. Background An empowerment audit commissioned by the DoA during the development of

AgriBEE Framework: an audit of empowerment efforts carried out across the

country and completed 2003/04; specific lessons drawn from one case per

province, focus on the nature of empowerment in province, what are the

critical success factors and challenges; AgriBEE showcasing concept initiated

in 2005: exhibition and workshop event; approach: identify empowerment

projects (by that time the 1st phase of COGP was out – seven elements) per

province to participate in 1st event; the focus then: partnerships between

designated groups and commodity organisations (e.g. citrus, sugar and apple

industries).

During 2007 and 2008 approach the same: difference was introduction of the

“draft” AgriBEE Charter and its elements as endorsed from Indaba. In

requesting profiles, a template: seven elements AgriBEE that was developed

by DoA, was proposed for provinces to select empowerment project profiles.

Response in using the template positive, one e.g. was there a project

scorecard was compiled to showcase application of empowerment.

Specifically in 2008: provinces had to select projects which mostly advance

the objectives of BBBEE. Through analysis it could be determined which of

the submitted profiles were doing the “most” in terms of the seven elements.

Analytical summary was shared with audience of the showcasing and this

type of acknowledgement / recognition of effort as way to encourage

empowerment by all.


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6.2. Analyses – Provincial Profiles Submitted

Requests were made to Provincial Departments of Agriculture to submit 2

empowerment project profiles per province; 10 project profiles received,

others submitted late for analytical purposes; participating projects: exhibition

Stellar group, Fair packers (Pty), Crop production support for crop farmers,

Ramadila Products, Tropical mushrooms, Koukamma fruit packers, Sovereign

Foods, Phahameng LHB farming CC, Tikwe project and Bethlehem Farmers

trust; primary and secondary agricultural sector participation.

According to the profiles submitted it shows that those provincial projects are

falling in different categories, amongst the profiles submitted five projects are

falling under the Qualifying Small Enterprise (QSE), which are defined by the

AgriBEE charter as companies with an annual turnover of between R5 million

and 35 million while three projects are falling under the Exempted Micro

Enterprise (EME’s), which are defined by the AgriBEE charter as companies

with an annual turnover of R5 million or less. Ito AgriBEE at the moment: The

EME’s can also enjoy and be deemed a BEE recognition level 4 contributor

and since three of them are 100% Black owned they can be promoted to level

three contributors and enjoy BEE procurement recognition level of 110% as a

supplier to other entities applying the AgriBEE charter. Remember Gazette

AgriBEE Charter s12: this dispensation is subject to change en-route to

Sector Code. Some project profiles did not indicate turnover levels.

Ownership (equity and agricultural land) – the analysis of the

ownership was done considering the level of participation of the black

people in regard to having entitlement to the voting rights and having

economic interest associated with equity holding. The overview of the

ownership element reveals that there is well participation of black people

in the ownership and the projects are also empowering workers through

formulating the workers trust and there are two projects that had manage

to formulate the workers trust while three projects had formulated farmers


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trust. But there is still a lack of participation of black disable people in the

ownership of the projects.

Management control – address certain key indicators surrounding black

management and control of enterprises. These include: representation of

black people at executive board level and involvement of black people in

daily operations and strategic decision-making at the most senior level.

According to analysis: on average - 10% of the project members are

participating at the executive board level; 40% at the senior top

management; while 50% are participating at the middle management

level.

Employment equity – the purpose of the element is to bring about an

equitable representation of black employees and those employees living

with disabilities in the workplace. According to profiles black employees

are 80% represented in the workplace whilst there is a lack of

representation of employees living with disabilities in the workplace.

Skills development – the element aims to promote the development of

competencies of black employees. The following indicators were

considered when assessing the profiles: the total amount spent on scarce

and critical skills as identified by relevant Seta, offering experiential

training such as internships, in-service training and having mentorship

program that targets black unemployed graduates in all disciplines. Four

projects spent 1,5% on the SD while one project had provided some

scholarships to students for tertiary studies and another one had launched

a program to employ graduates for experiential training. perspective:

government departments are getting 100% for this point allocation: mostly

having these initiatives.

Preferential Procurement – the element promote and encourage

sustainable procurement opportunities for the BEE compliant enterprise, 1

- 7 levels of which one is highest R1.35c for each R1 procurement spent

on level 1 enterprise. This lever is not well-implemented by the projects

huge opportunities to increase the BEE scoring abilities.


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Enterprise development – it refers to the establishment, support and

integration of black entrepreneurs in the mainstream business processes

e.g. support services such as access to finance, infrastructure, information

and knowledge systems. There is one project that is implementing this

element in a way of supplying inputs to primary producers (black farmers)

whilst another has assisted 35 people to establish successful farms

through giving advice and support.

Rural development, poverty alleviation and CSI – all the projects are

contributing in this element through job creation initiatives to the people

who are staying in rural areas, general CSI initiatives such as participating

in community involvement programs and donations. Transport for farm

workers and health care facilities to families.

6.3. Conclusion:

All the empowerment projects are promising, have good performance base in terms of its business growth, financial fundamentals and profit potential.

Lessons from these empowerment projects contribute to a set of benchmarks and good practices for future empowerment initiatives and alerting on critical areas that should be avoided or improved.

Empowerment projects potentially must ensure that the following are present, amongst other:

6.4. Lessons Learned: Mutual trust There should be loyalty, good faith with no hidd0en

agendas in partnership projects and the role players along the value chain.

Debt-equity ratio (cashflow)

The debt-equity ratio should be kept low to ensure sustainability and avoid cash short falls. Skilled work force is necessary for the success of businesses including management capacity.


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Sufficient working capital Post-BEE entry: business must have and maintain its sustainability.

No interruption with the normal production and business operations

BEE deals or take over should not interrupt with the normal operation of the business to enhance what is available. A comprehensive business support is crucial for the success of agricultural projects. The support should include market info, farm management models, products mix, infrastructure etc.

Adequate business support

A comprehensive business support package is crucial for the success of agricultural development through empowerment. The support should include market info, farm management models, products mix, infrastructure etc.

Buy-in from labour force Critical.

Creating enabling structures and partnerships (industry support structures) for transformation

Skilled work force is necessary for the success of businesses including management capacity.

Adequate capacity building and mentorship provision

Adequate capacity building should be provided by both the government and private sector – JVs.

7. BLACK ECONOMIC EMPOWERMENT: LESSONS FROM OTHER SECTOR CHARTERS’ IMPLEMENTATION. By Mr. Vuyo Jack.

7.1. BEE History in the Country.

First Wave of Empowerment

• Activity around 1996 to 1998

• Black companies listings on JSE

• Highly leveraged deals

– Depended on bull markets

• Sell-off of non-core assets by incumbent companies


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• In substance the deals did not confer real risks and rewards to BEE

entrepreneurs

• Sustainability dependent on share price performance

• 1998 stock market crash

Second Wave of Empowerment • Leveraged Buyout of the South African economy

– Buyout of stakes in existing companies

– Relies on the debt funding

– Sensitive to interest rate risk

– More reliance on the underlying cash flows of the business rather

than share price

• Effect of 2nd Wave of BEE

– Shares encumbered to secure the financing of the deal

– Lock-in clauses to guarantee BEE Status

– Most of the value is captured by financiers who are exposed to

most of the risk

Third Wave of Empowerment • Driven by Affirmative Procurement

– Black people start their business from scratch

– Take advantage of procurement opportunities

• These are available in the public and private sector

• Increased market access for black businesses

• Effect of 3rd Wave of BEE

– Requires more working capital to get business going

• Enablers to working capital

– Works with enterprise development element of Broad-

based BEE

• Barriers to working capital

– There is no track record in most cases


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– There are no assets to use as security

– Leads to job creation

– Catalyst for economic growth

– There is a trickle down impact because of affirmative procurement

7.2. General Trends From Other Sectors – Seven Elements Top performing companies in 2008 FM/TEC - 46% of Top 50 performing companies are from the Financial Services

sector

- 18% are from the ICT sector

- 70% of Top 10 BEE performers in the Top 40 Large Caps are from

the Financial Sector – shows impact of FSC and move towards B-

BBEE.

• Greater move from narrow base BEE to Broad-based BEE

• PPPFA causing problems that ultimately undermine the BEE Codes due

to misalignment between the two

• Lack of alignment between specific legislation requiring BEE to the Codes

is problematic for most companies due to differing requirement

o Results in lack of certainty

a) Ownership Trends`

• 67.5% of Top 40 Large Caps have deals where more than 10% of equity

is recognized as black

• Greater utilization of new entrant bonus points

• Move towards ESOPs as BEE Partners

o Risk of sophisticated fronting

o All employees get involved leading to dilution of potential economic

benefits to black beneficiaries

• Over 40% of the Top 200 have broad-based BEE partnerships

• Greater receptivity for general public retail ownership schemes

o Naspers


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o Sasol

o Vodacom

• Use of phantom shares in BEE structures

b) Human Resources Trends

- More black female board appointment but still predominantly in non-

executive positions

- The gender targets of 50% has had visible impact

- Sub-minimum of 40% has affected the Employment Equity scores

negatively

o Only just over 42% of the Top 50 scored no points for Senior

Management,

o 38% of the Top 50 scored no points for Middle Management,

o But only 4% of the Top 50 scored no points for Junior Management.

- Of the Top 40 Large Caps, Employment Equity was the worst performing

element, with an average compliance of 31%.

- The introduction of the Learning Programmes Matrix has allowed more

companies to score under the Learner ship indicator – recognition of work-

based training is crucial.

c) Procurement Trends - Average BEE spend reported by Top 50 is 44% of discretionary

procurement at an average value of R1.83 billion

- Only 9% for small business (QSE & EME)

- 6% for Black-Owned and

- 1% for Black Women Owned

- Shows a bias towards larger business in procurement practices. Also

points to a lack of access to small black business


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d) Enterprise Development & Socio-Economic Development Trends - Enterprise Development

o Average contribution of Top 50 to ED is 10% of NPAT – heavily

influenced by Financial Sector BEE financing targets

Includes amounts for the sector’s own deals

o There are still a lot of companies that are still struggling with this

element

- Socio-economic development o Average S-ED spend reported by Top 50 is 2% - No real decrease

in performance after switching over to S-ED definition from CSI

definition.

o Of the Top 40 Large Caps, S-ED was the best performing element,

with an average compliance of 63%.

8. SUMMARY EXHIBITION REPORT Following the history of the AgriBEE Showcasing Event, the exhibition session was run parallel to the workshop session for the duration of the event. Fifty exhibitors were invited into the event and it was consisting of 25 from the host province and the remaining was expected to be invited from the national Department of Agriculture. This includes, amongst others, the 18 AgriBEE projects which were expected to come from the provincial Departments of Agriculture across the country – two per each province. In the end, thirteen exhibitors showcased during the event and their names are as follows: Onderspoort Biological Products; National Movement of Rural Woman; Betlehem Farmers Trust; Ipokelletse; ABSA Lousveld; Department of Land Affairs; Stellar Winnery / Farming; Mpumalanga Agriskills Development & Training; Centre of Excellency; Winee Industry Development Association; Parishable Products Export Control Board, Department of Agriculture and SAFEC.

“True Change Comes From Within” From Sector Charter to Sector Code


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