The embattled South African Wine Industry Trust (Sawit) ended months of speculation by announcing the refinancing of its loan to Phetogo Investments, KWV’s black empowerment partner. This could see funds flowing again early next year to a range of Sawit’s beneficiaries, who have been left high and dry since August. A t a meeting in Stellenbosch on 28 November, Sawit’s trustees unanimously accepted a refinancing offer from to buy the Phetogo loan for R100 million.
This is R25 million less than its estimated value, according to a source close to the negotiations, but substantially more than R65 million apparently offered by Tri-Linear, previously the preferred bidder. The trust has been trying to secure an attractive refinancing deal for its Phetogo loan book since it ran into financial difficulties 18 months ago. The refinancing team included Sawit CEO Charles Erasmus and financial adviser Sakkie van der Vyver. It was headed by prominent ANC MP Kader Asmal, a Sawit trustee and chairperson of the industry’s official decision-making body, the SA Wine Council. Sawit was set up to advance black empowerment, vine research and export promotion in the wine industry with a R369 million settlement from KWV as a condition for converting to a private company.
It controversially loaned Phetogo R135 million in 2004 to part-finance a 25,1% stake worth R207 million. The deal was criticised for not being broad-based enough, KWV was accused of funding the acquisition of its own shares, and Sawit came under fire for blowing a third of its potential reserves to finance black diamonds with few links to the industry. The trust eventually gained ministerial approval when a workers’ trust stake funded by a soft loan from KWV was increased to 27%. B ut by August 2007 Sawit had run out of money and began freezing funding to all beneficiaries. Although fraud or financial mismanagement was never proved, a wide range of industry players interviewed believe Sawit squandered resources by funding members’ lavish lifestyles, paying excessive fees to consultants, and making questionable loans and grants to beneficiaries such as the Black Association of the Wine and Spirits Industry. Sawit and CebiCapital will use the proceeds of the refinancing deal to form a new investment entity early next year, after the completion of a legal and financial due diligence, says Asmal.
This will enable Sawit to meet its social and economic objectives, including funding land reform, agriBEE and social upliftment projects in the winelands. “All trustees have welcomed the proposal of CebiCapital with great relief and excitement,” says He expects other strategic partners to be invited to participate in the investment entity. I n the interim, Sawit will release funding incrementally for its projects with the most urgent financial needs, while future financing will be done by the new investment vehicle. – Stephan Hofstätter