Turning farm workers into shareholders.
Let’s face it – the winelands don’t exactly have a glowing reputation for engaging in Broad Based Black Economic Empowerment (BBBEE). All too often, young BBBEE wine companies are left to sink or swim and as a result can quickly become isolated, with little capital or experience.
Despite the view (however incorrect it is) that nothing is being done or achieved, an increasing number of wine farms are in fact engaging in transformation – and some very successfully so! The models vary according to the degree of ambition involved and the circumstances of each farm. There are many ’empowerment’ projects being launched or being planned in the SA Wine Industry at present, and we are hoping that this project, based at Diemersfontein Wine and Country Estate in Wellington, will make its contribution to the great need in our country for successful models of participation and development of people who generally have not had access to quality education, training, experience, networks and capital.
Thokozani means “a celebration” and it is in this spirit that our project was launched – with its central and crucial focus on training and development as an absolute necessity to the achievement of sustainable economic empowerment.
At Diemersfontein Wine and Country Estate outside Wellington, BBBEE has flowed naturally from owner David Sonnenberg’s wish to make a sustainable community contribution. As a third generation owner with a background in clinical and industrial psychology, Sonnenberg’s return to SA from the UK in 2000 saw him take on the challenge of building Diemersfontein as a business and a community. “The two go in parallel because you can’t build a business without building the team,” he says. The first vineyards were planted by David’s father in the 1970s and in 2000, David built his own cellar and started producing award-winning estate wines of which Diemersfontein’s trademark, the Original coffee and chocolate Pinotage has become one of SA’s most popular.
In 2007, Diemersfontein launched its empowerment company, Thokozani, with 35 staff shareholders, including its white managers so as not to artificially split the workforce. Each worker, with at least one year’s service and a willingness to participate, was given R10 000 to R20 000 worth of shares in Thokozani depending on their seniority. It is conditional on them staying and working on the farm for five years. In addition, they have to devote 2% of their salary each month to buying more shares in Thokozani. The 2% monthly contribution, Denise (Director Business Development Thokozani) explains, is so that the workers recognize their side of the investment which is to make a contribution according to their means.
“We’re hoping that if people put their own money in they’ll learn to be more careful with the assets of the business and feel an obligation towards it,” says Mr. Sonnenberg, “It comes with strings attached because the whole transformation exercise is about instilling mutual obligation and commitment.” “I don’t believe in grand gestures – in saying: “Here, have this farm you guys” – and I haven’t been in a position to buy farms. We have to work with a model we can afford.”
Thokozani is made up of two business entities: Thokozani Winelands Investments (a new wine brand, an art gallery and Diemersfontein’s existing conference business) and Thokozani Properties (plots and cottages to serve as conference accommodation). Interestingly, Thokozani’s biggest capital asset is property and not wine. Because of the subdivisions allowed on the estate, it being partially residential much like a golf estate, David was able to isolate a piece of land worth about R6m, which included six plots and an existing cottage. This was sold to Thokozani (at 20% less than market prices) and financed out of own resources, bank loans, staff contributions and with help of very supportive external investors. Two new cottages worth about R3m have been built to enable greater conference and guesthouse business. There is also potential to build another four cottages, giving Thokozani room for even further growth, and hopefully assisted with additional external investment.
Thokozani wines are made by the Diemersfontein team which reduces overheads and risk for the empowerment company. The latter does most of the marketing and the wines are doing well internationally, especially in Holland. The plan is to grow output to about 10 000 cases a year across the three Thokozani wines, from 6000 cases presently, which would take Thokozani wines to about 10% of Diemersfontein’s annual production. The Thokozani Wine is doing well and represented in the US, Holland, Germany, Switzerland, Sweden, Denmark, Czech Republic , South Africa and Botswana. But why create a new brand from scratch? Why not let workers share in Diemersfontein’s existing success? “It about separating ownership of a brand,” explains David. “If people feel that they have a major proportion of a small brand it has more meaning than having a smaller part of someone else’s brand.” Thokozani is owned by two groups of investors: the staff (which own 80%), and Diemersfontein Investments represented on the board by David (20%).
David defends his 20% slice, saying he needed to tie himself to the commercial success or failure of the fledgling enterprise, at least in the development phase. Over time it may become more autonomous. “I did it because I saw BBBEE companies often become quite isolated,” he says. “The whole purpose is to create a mentorship, not just hive off a bit of your farm. It should also be in my commercial interests that Thokozani thrives, hence my retaining a healthy chunk of it.”
David and Denise have tried to address the problem with capacity building and life skills training but have no illusions – it takes time to turn farm workers into shareholders. “Attitudes don’t change because you wave a magic wand,” he says, “We have a long history of mistrust in this country.”
So are farm workers making any money out of it? Not yet, but the business is showing a small profit already and declared its first dividend in December 2009. David also emphasizes that unlike most BBBEE deals that are profit-share schemes, most of Thokozani’s assets are linked to real estate and therefore, no matter how the wine or conference business performs, the workers have shares in a valuable, long-term appreciating asset. (The land values have doubled since Diemersfontein started selling its first residential erven in 2003/04.) “Part of the challenge is helping workers to think long-term which is a shift for the less sophisticated parts of the workforce because it runs counter to this whole historical mindset of being a people who can’t accumulate wealth and live life only for the day,” says David.
Thokozani Business Development Director Denise Stubbs says that the creation of Thokozani has changed attitudes on the farm. The number of staff shareholders has grown to 85 out of around 115 employees and a new cohort will soon qualify. Workers are more willing to buy shares than at first and some even want to contribute more than 2% of their salaries each month, she says.
Sonnenberg feels that workers have taken great pride in the estate and are thinking more critically about its development.
On one level, he anticipates a time when South Africans will be working together without race self-consciousness. On the other hand, he believes that not only is there is great sense in a system that seeks to correct past imbalances but that one has an obligation (not just a legal, but more a moral one) “to take this ambiguous concept of BBBEE and to do something that has integrity and some developmental truth”. “Therefore,” he says, “we must do it well.”