Its potency lies in the fact that it is the oldest family business in South Africa.
Family businesses are seen widely as unsuitable vehicles for ownership-based black economic empowerment (BEE) deals. Yet the 10th and 11th generation of Van der Merwes from the Bronaar farm — about 200km from Cape Town — have agreed to share the ownership of their 2 400ha farm with their 150 workers.
A year into the deal, there are signs that the owners and workers are the stronger for it.
Bronaar, about 50km from the fruit-growing centre of Ceres in a region known as the Koue Bokkeveld, shares the distinction of being the oldest farm owned by the same family in South Africa along with the neighbouring, Boplaas. It is also famous in Afrikaans circles for having produced the poet Boerneef.
In 1743 Dutch settler Isak Wilhelmus van der Merwe staked out Boplaas using the method of the day — the distance a horse can travel in one day.
“He used a fast horse,” says Hauptfleisch van der Merwe, who started farming Bronaar separately when it split from Boplaas in 1965. His older brother, Carel, continued farming on Boplaas.
Van der Merwe (64) oversaw a gradual expansion through acquisition of neighbouring land and farmed until two years ago, when he handed over to his son, Fanie, the managing director, and daughter Hendrien, the financial director.
Today the farm has 220ha under apple and pear orchards and 120ha of vegetable fields. By exporting about half of its produce, it has a turnover of about R50-million a year.
The idea of a BEE deal emanated from Van der Merwe, who devised it as both the culmination of his career as a progressive farmer and as a way to secure and “sort out” the Van der Merwe ownership of the farm.
Two years ago Bronaar’s workers applied to the Department of Agriculture and Land Affairs for a grant of R7,5-million through its Temba trust. They secured a further bank loan of R7-million from Nedbank, which they used to buy a third of the business “at a 10% discount”, says Van der Merwe. This puts the value of the farm at the time of the deal at close to R50-million.
Although the resulting structure of the business involves five legal entities, Van der Merwe says it is the most straightforward shared-ownership deal possible for a business of its size and nature. The deal is not limited to a certain section of the farm or an adjacent piece of land as are so many agricultural BEE projects.
“Our integrity had to be above all suspicion. The deal had to be inside our core business. It revolves around this family business and there must be no strings attached,” he says.
The Van der Merwes are the beneficiaries of the Bronaar trust and the 150 workers’ interests are housed in the Temba trust.
The trusts own 66,6% and 33,3% respectively of a holding company called the Bronaar Group, which fully owns the property in a company called Tierberg properties and the operations in a company called Bronaar farms.
Van der Merwe aimed to solve a problem common to many family businesses: as the number of family members increases through successive generations, so do the number of passive owners, dependants and hangers-on, leading to clashes and decision-making problems.
To counter this, most of the money raised by the BEE deal was used to set up a separate trust for Van der Merwe’s three non-farming children and their families, thus splitting their interests from those of the Van der Merwes active on the farm.
The overall result is a farm owned only by the people who work on it and by all of them, while it still remains in the original family.
Could the Bronaar BEE deal serve as a model for all South African white-owned farms?
It certainly is an example, but all the parties — including Jaffie Galant, senior farm manager and chairperson of the workers’ Temba trust — emphasise that it is a long-term, difficult process. All the elements may not be present on all farms to make it work.
First, says Van der Merwe, the farmer’s “intent must be pure”. If the reason for doing the deal has to do with greed, making a quick buck, setting up a front or milking the system, it will fail.
“Hopefully we’ve done it for the right reasons. We know of empowerment deals that were done for the wrong reasons, because their cash flow was under pressure. For us it was part of modernisation. You can try to shield what you have, but in doing so you can lose everything. Rather share, get co-shareholders and through that preserve what you have and improve.”
The Van der Merwes had to sit through a few “extremely difficult years” before even thinking of concluding the deal.
The lean years started in 1997 when Bronaar was first hit by the liberalisation of the agricultural trade boards, which had previously shielded export farmers from global market forces.
They also bought an adjacent farm just before the interest rates rocketed to 25% and three years of successive drought forced them to remove their marginal orchards. Van der Merwe describes this process as emotionally harrowing.
But by 2001 the pressure started lifting and by 2004 the farm was financially strong enough for the family to start the first serious discussions with the workers, who received the first suggestions with mixed feelings, says Galant. Historical suspicions had to be assuaged and expectations managed.
The Department of Agriculture and Land Affairs was brought in to inform and facilitate the discussion.
“There were guys who weren’t interested [in the deal] at all, while others were keen,” says Galant. “The first thing people want to know is when they are going to get the money.”
The fact that the Temba trust will be paying off the R7-million bank loan with the profits of the farm for the next 15 years still has to be explained carefully and the new owners educated about their business.
The education of and communication with the workers will not end after the deal, says Galant. “We address issues and questions through our meetings [of the trust] and get experts from outside to explain issues if necessary.”
Van der Merwe says: “It is an art to turn a worker into a shareholder. I’m not saying we’ve managed it yet, we still have to work at it a lot.”
Galant says it will take a while for the full productivity benefits of the shared ownership to flow through, but “there is already a change of attitude among the people. They are already coming with suggestions for improving work efficiency.”
But at Bronaar there seems to be a core trust between workers and management that might well be a crucial success factor that is not present on all farms. For example, when the workers’ trustees had to choose someone to mentor them, they asked Hauptfleisch.
“The idea was that they choose an outsider,” he says.
Although he doesn’t say so, much of the trust built up at Bronaar probably has to do with years of progressive farming.
Van der Merwe discontinued the dop system in 1970, long before South African farmers acknowledged the utter devastation caused by the practice of paying farm workers in liquor.
Single-sex accommodation for the farm’s seasonal migrant labour was turned into family units and fitted with hot water and electricity by 1980. About 75 of the farm’s permanent staff members started off as migrant labourers.
Van der Merwe decided to house his workers on the farm itself, “where they could be nurtured and protected”, instead of in nearby townships, as was increasingly the trend.
Bronaar has a crèche for the farm’s 30 children and a full-time social worker whose services are shared with two other farms. Van der Merwe was instrumental in setting up a training centre for farm workers and by 1990 half of the farm’s management was black.
The Van der Merwes gave R2-million of the money earned through the BEE deal to set up a community development foundation for the wider community outside the farm. The foundation funds the education of six students who would otherwise not have been able to afford tertiary education.
Education and training form the underpinning of the farm’s management approach and also the basis of the BEE deal. “Empowerment really happens only through the transfer of knowledge and skills,” says Van der Merwe.
Another aspect of the deal that needs to evolve is a mechanism through which farm workers and beneficiaries of the Temba trust will one day be able to trade their ownership of the farm inside the trust without losing out if they resign or are dismissed, says Hendrien.
Although Bronaar offers no quick fix, it points to an approach through which white farming families can maintain and even strengthen their land ownership, while empowering their workers at the same time.
“There are businesses that are lions — they kill everything around them — and then there are other businesses, because of their inherent strength, that are actually elephants. They allow others to thrive as well. And they’re calm and relaxed,” says Van der Merwe.
Perhaps Bronaar illustrates this key to transformation — that the strength of a white farmer’s link to his land, perceived for so long as the cause of fearful and aggressive conservatism, actually can free him to share and empower.