As the government’s broad-based strategy outlines — black economic empowerment (BEE) is about encouraging black businesses and business people. So BEE deals need not be ”broad-based” in the sense of involving every African National Congress member and his uncle.
Redistribution is left to the area of service delivery, funded through the mechanism of progressive taxes.
Hence BEE and redistribution of assets are not the same. Confusion about the aims of BEE has led to constant demands for equity transfer in companies, rather than the redistribution of opportunities to black entrepreneurs.
By the same token, agricultural land ownership reform should be seen as part of BEE, and not just changing racial ownership patterns.
A straight redistribution of assets on the Zimbabwean model of land reform would beggar the country and return many people who are now part of the cash economy to subsistence farming — until more powerful people started to accumulate those assets to concentrate power once again.
Land ownership will always be a ”site of struggle”, and one cannot ignore land hunger. But farming is a business, and BEE aims to bring black people into the mainstream of the economy. Pure redistribution would leave them in the poorer and excluded ”second economy”.
At the launch of the Human Sciences Research Council’s State of the Nation book, I was asked if I was not downplaying the land question. My answer was that the question itself was political: land is only important if you consider it important. Evidence of this was that the Pan Africanist Congress, until the Zimbabwe land grabs, seemed to have forgotten all about this historical cornerstone of the movement.
Seemingly acknowledging it had put too much emphasis on giving people small plots to farm, the Department of Agriculture has moved its focus to enabling the purchase of bigger farms for the middle class.
I note these developments because I see signs of movement on BEE in agribusiness. Listed agricultural group Afgri Limited’s two recent deals are not the only ones, but the market and the mainstream media appear to find farming as unsexy as Paris Hilton and her buddy found doing chores in Middle America.
The deal whereby egg distributor Eggbert Eggs sold a 74% stake in its Boksburg plant to BEE group Maye Serobe recently caught my eye. Maye Serobe reportedly comprises a staff trust (49%) and plant manager Petrus Fanqa (25%). This is a mix of broad-based and narrow-based empowerment, since the manager is getting a hefty chunk of the company.
Food processing group Afgri approved the R16-million loan for the BEE grouping. Eggbert, which wants to focus on distribution rather than the messy and time-consuming business of getting the hens to lay, raised R6-million to retain 26% of the plant. So it still has a reasonably large commitment to its former egg production division and will want to source its eggs from the plant.
It’s the kind of deal that gives one a warm feeling, but I hope it works. The worst thing about staff ownership is that if companies fail, workers lose their investment and their livelihoods, a double blow.
Afgri has been involved in a bigger deal, in which an empowerment consortium Agri Sizwe Trust will buy 26,77% of Afgri Operations for R502-million. The deal is financed by the Land Bank, but Afgri will guarantee the long-term loan by ceding to the Land Bank R100-million as refundable collateral. So the shares have not been discounted, but use of the R100-million for a guarantee is surely a form of vendor-finance.
Altogether, R367-million of the money raised by Agri Sizwe will be distributed to shareholders. In other BEE deals, they have had to see their shares diluted by the issuing of new shares, or have been asked to sell some of them at a discount to make shares available to the BEE partner.
The trust will pay back the loan through the 26,77% of Afgri’s net income it receives. Afgri reckons the trust should be able to pay off the Land Bank loan within eight years, at which time Afgri will convert the shareholding in Afgri Holdings into a 25,1% share in the holding company, Afgri Limited.
Afgri processes rather than grows food, but it is part of an agricultural industry, including fruit growers, that is worth billions in export earnings to South Africa. Black people need to be drawn into this industry, as well as into other industries, especially as agriculture in South Africa is associated with some ugly acts.
There’s still land restitution and tenure reform to deal with — but that is a separate issue.
Reg Rumney is director of the BusinessMap Foundation