Like many SA farming districts, Outeniqua near George has seen empowerment projects come and go. Usually launched by politicians making speeches about creating jobs while reversing racially skewed landownership patterns, many are unsustainable and must be shored up for years with government grants until they eventually collapse, leaving a sinkhole in the district.
A prime example is Groothoek farm outside the village of Pacaltsdorp. Seven years ago the 30ha property was producing thousands of tons of vegetables for McCain and several fresh produce markets. Then 50 black would-be farmers were given grants to buy the land and new infrastructure to start an essential oils project for a French perfume company. Few had farming experience, and those who did had no management or financial skills.
They had secured supply contracts, but no mentorship or hands-on training was provided. Infrastructure and equipment weren’t maintained and production schedules weren’t kept. Crops failed, more government grants couldn’t rescue the project, and the farm now lies derelict, the state-funded infrastructure rusting in abandoned fields.
Repeat performance feared about two years ago, when shade netting started going up on Diepekloof farm at nearby Sinkasburg for what was rumoured to be a government-funded BEE project, farmers feared a repeat performance.
The farm was owned by Gauteng engineer Chrisleo Botha, who’d moved to the district with his auditor wife a decade ago. He became the first farmer to grow vegetables under netting, selling them to Pick ’n Pay and Woolworths.This project was far more ambitious. notice posted outside his farm office showed his company, Blue Mountain Berries, had applied to enlarge two farm dams capable of drip irrigating 70ha of blueberries. Word was he’d managed to rustle up tens of millions in grant funding by claiming his project would empower hundreds of black workers.
But many feared the high establishment and production costs of blueberry farming at a time of low producer prices meant the project was doomed, with Botha likely to sell off a business that only looked good on paper to his unsuspecting black partners, pocketing the cash while they went bust.“It’s a scam,” says one farmer who did not want to be named. “This will never work. Seasonal labour will bankrupt him. This will ruin the district.”
Farmers and other residents interviewed raised several objections to the project, ranging from its unsightly appearance that blemished a picturesque coastal landscape framed by the Outeniqua Mountains, to concerns that state-subsidised erosion contours had been ploughed up.But their main gripe centred on labour issues. Once fully operational, the farm would need over 140 full-time staff and over 1 000 workers during peak harvest time in an area where labour and housing are scarce. Botha has no accommodation on his farm.
“I battle to get labour in town. People don’t want to work these days because they get social grants,” says Phillip Terblanche, head of the Outeniqualand Farmers Association, who runs a 280ha dairy and vegetable farm. “Neighbours whose workers were lost to [Botha] but are still living on their farms are furious. That’s what’s getting people upset in this area.”
Many fear that, like Groothoek, the land would eventually be abandoned and could turn into a crime-infested squatter camp peopled by Botha’s unemployed workers.
Misinformed critics
But several community members believe Botha has been treated unfairly.
“It’s a good project and not comparable at all to Groothoek. It’s structured much better and Chrisleo Botha has all the business credentials,” says prominent local vegetable farmer Stephan Gericke, who heads the George Agricultural Association. “Besides, he didn’t get a BEE partner from outside. He got his workers involved and he’s still there. That’s a good thing.”
Gericke concedes the labour and housing issue is his “biggest concern”, but believes it’s unfair to throw stones before the project gets started. “If it goes under it will be because of normal market forces. People who call it a white elephant are ill-informed or jealous.”
Terblanche agrees. “Whether the product will ever make money, I don’t know,” he says. “But [Botha] and his wife are bloody good managers. We were sceptical about his vegetable farm at first, but he did well. So give him a chance.”
Japie Weyers, the NG Kerk dominee whose church lies directly behind the farm, believes much ill feelings towards the project stem from a natural resistance to change in farming circles. “He’s had harsh critics around here but I don’t think people realise what’s going on around them. We need real social upliftment in this area. He’s made a real effort to help uplift people here and I feel very positive about it.”
Will it fly?
Serious concerns remain about the viability of SA’s blueberry industry though. “I normally try to talk people out of planting blueberries,” says Trevor McKenzie, CEO of SA’s largest berry marketing agency, Eurafruit. “I wouldn’t recommend getting into the industry right now.”
Spectacular profits are a strong attraction, but McKenzie warns reports of up to R150/kg for blueberries should be seen in context. “That’s for a specific variety in a specific month,” he says. “The average price is dropping every year. R40/kg is realistic in the long-term. For growers to get over R100/kg is fairytale stuff.”
Start-up costs can be as high as R600 000/ha, although this level of investment translates into higher yields and prices. McKenzie declined to provide any exact figures, but confirmed estimates that Farmer’s Weekly collated from several sources “sound about right”. But he cautioned costs were notoriously difficult to quantify (see box: Viability scenarios).
“You need to sit down and look at all the variables – market, varietals, climate, soil, management, labour and transport – and establish a market before planting your first bush. This industry is driven by markets, not producers.” Eurafruit researches the market potential of different but proven berry varieties, identifies sites where they will perform best and concludes supply contracts with growers, including Blue Mountain Berries. Growers are provided with imported saplings, which they must quarantine for two years to comply with agriculture department regulations, and ongoing technical support.
McKenzie believes Blue Mountain is one of SA’s more sound investments in blueberries, but cautions only time will tell if it pays off. “We’ll see in five or six years.”
Where does the cash come from?
A major concern is that Blue Mountain’s substantial start-up costs are being funded with government grants, which gives the participants little incentive to ensure their business flourishes.Most of it comes from Industrial Development Corporation (IDC) loans. Botha is a former IDC employee, but officials insist the loans don’t represent a conflict of interest. “Any ex-IDC employee can apply for funding, all the normal procedures were followed and it was declared at approvals meetings,” says Rian Coetzee, who heads the IDC’s agriculture division. “Besides, he hadn’t worked at the IDC for 10 years, which can be regarded as an adequate cooling-off period.”
Coetzee says the IDC’s investment model is to exit profitably. The first loan, for R10 million, requires a real return on investment after tax of 10% to 12%, with the IDC holding 33% equity until it’s paid off. The second, also for R10 million, was supplied by the EU-funded Risk Capital Facility, which co-invests with the IDC on projects considered risky. It only requires a 5% to 8% return. Dividends can’t be declared until all loans are repaid.
Land Affairs provided government grants to fund up to 4% of equity for a workers’ trust, a total of R4,2 million, and another R1,6 million from the agriculture department’s Comprehensive Agricultural Support Programme (Casp) to expand the shade netting.
The EU fund has warehoused another 29%, to be ceded to the workers trust as the loan is repaid, with Botha supplying matching funds for a 34% stake in the business.Botha believes hostility to his plans stemmed from the fact that he’s a newcomer in the district with little agricultural experience, and a project of this scale has never been tried here before. “People see me as a novice. It’s true I brought no farming skills, but I brought in outside expertise and made a relative success of my vegetable business. In the 10 or 12 years I produced for Pick ‘n Pay and Woolworths, I only had four or five rejections. It was very profitable.”
Financial management will be a key ingredient at Blue Mountain. “My philosophy is to budget realistically, to keep costs low, and to keep control of assets,” says Botha. “I wouldn’t be doing this if I didn’t think it was feasible.” Expansion to 70ha will be phased in over three to four years, depending on how well the business performs. He expects to break even by 2013.
Botha says he’s sunk every penny he made from his vegetable business into the berry project. “If it goes belly-up I lose everything. That’s enough motivation to make it work.”Labour will be a challenge, but one that can be overcome, he says. “There are 60 000 adults in George, 20% of them unemployed. I will employ 130 to 140 people full-time, and about 1 000 during peak harvests.”
If George can’t supply enough workers, Botha will look at alternative strategies such as putting up workers’ hostels and transporting pickers from Ladysmith or Grabouw. “If you treat people right and pay them well, you will get labour,” he says.
To avoid the rent-a-crowd phenomenon that has caused debilitating conflicts on many land reform farms, membership of the workers trust is capped at 70 and subject to at least one year’s service. Each trust member receives a R60 000 grant. Of this, 60% must be used to buy equity and the remainder put towards buying a plot of land to live on, for those without secure tenure.
A labour consultancy has created a grading and career pathing strategy. Workers undergo regular training and performance appraisals, with bonus points awarded for low absenteeism. Botha expects the best workers to take over at least half the executive management positions in time.
Government confidence
Botha believes his BEE model is more viable than Groothoek’s because he has a vested interest in ensuring its success, and is able to offer hands-on mentoring for free.
The agriculture department is not unduly concerned either. Jerry Aries, who heads the Western Cape farmer support directorate, concedes his office has sunk money into several land reform farms that have gone belly-up, including in this district. “That doesn’t mean we shouldn’t fund any. You can’t ask someone why he’s marrying his wife when people get divorced.”
Aries says comparisons with Groothoek are unfounded. “The berry project is structured like a business, the commercial farmer is a major shareholder, the board of directors is operational, the market is established and there are specialists in every position,” he says. “Compared to some projects I’ve seen, this one is low risk. We’re not worried about it at this stage.”
Time will tell whether Blue Mountain becomes a thriving BEE enterprise or just another failed land reform farm that leaves a trail of destruction in its wake. “I took a chance 10 years ago and it paid off,” says Botha. “Let’s talk again in 10 years.”
Contact Chrisleo Botha on (044) 876 0131. |fw
