How BEE made this stone fruit producer

Motivation is at an all-time high and theft and absenteeism have evaporated among farmworkers two years after this farm was converted into a massive BEE enterprise. In an area not suited to stone fruit production, Bambanani has doubled production and secured long-term benefits for workers. Sharon Götte reports.
Issue date : 20 June 2008

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Bambanani Fruits BEE (Pty) Ltd, 60km west of Johannesburg, is one of the most sophisticated stone fruit farms in SA. I n 1992, when mining house JCI established the farm, then called Tavlands, they spared no expense establishing state-of-the-art production, fertigation and packing facilities for 68ha of fruit trees.

While Gauteng isn’t traditionally stone fruit territory, the Richardson Chill Units ensured the area was suitable for fruit production, and the farm was close to the markets and the airport. n 2004, JCI sold off their farming assets, and stone fruit production manager Johan Swanepoel, with 20 years stone fruit production experience, and marketing manager Roger Horak bought Tavlands, renaming it Bambanani Fruits.

In 2006, with their turnover increasing at a phenomenal rate, and Johan decided it was time to get involved in BEE. With the help of an LRAD grant and a loan from Standard Bank, Roger and Johan sold 25% of the shares in their company to 55 loyal workers. Respected consultant Cornel Zandberg of Zancor Financial Services was brought in to assist with the complex deal, and a new company was formed called Bambanani Fruits BEE (Pty) Ltd. Shareholding was split 75:25 (see Diagram 1). T he money received for the shareholding was reinvested back into the farm and, with an additional investment from Fruits, paid for a further 30ha of orchards and a new irrigation dam.

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This investment has doubled turnover in the past two years, and another 50ha is planned for the near future. By the end of 2009, the farm will have 150ha of stone fruit and enough water for at least 200ha – most stone fruit farms in the Western Cape cover between 30ha and 50ha.

Why share the prosperity?
Bambanani is a well-established direct supplier to Pick ‘n Pay and Spar, winning Pick ‘n Pay’s Producer of the Year award in 2006. “Our personnel were very proud to receive this award,” recalls Johan. “They worked hard to ensure Pick ‘n Pay received good produce consistently.” Apart from producing their own stone fruit, they also purchase fruit from selected Western Cape farmers to ensure they can fulfil their delivery contracts, and import produce to ensure a constant supply throughout the year. One of Bambanani’s biggest advantages is that their fruit hits the market early in the season, about three weeks before Western Cape produce, receiving high prices on both the local and export markets.

The company directors say the aim of Bambanani Fruits BEE “is to not only strive for profits and dividends, but also to help every shareholder have a better life”. “I think originally many SA farmers thought that by becoming BEE companies, they’d benefit from contracts and higher prices,” says Johan. He adds that while Bambanani has sometimes received preference over other producers, “just as for non-BEE-compliant farmers, good quality is still the overriding factor to secure business and our prices must be competitive.” However, BEE has benefited Bambanani. “As owners, workers take more responsibility for, and pride in, what happens on the farm,” says Johan. Motivation is high and problems such as theft and absenteeism have evaporated.

A long-term plan
The ownership of the workers’ shares has been arranged for long-term wealth creation or pension planning. Great efforts have been taken to ensure workers understand this isn’t a get-rich-quick scheme that will change their lives overnight. The company has only been running in its current capacity for two years, and no dividends have been paid out as there is still debt to be repaid and key investments to be made in the farm. “There’s no money in our pockets yet, but people generally understand the project is long-term and they’ll see the benefits later,” says Screeninger Solomon, one of the trustees of the workers’ trust.

“This is an opportunity for all of us.” Shareholders were chosen based on how long they had been employed on the farm, and can keep their shares if they leave – feeling that an LRAD grant was many workers’ only chance for a better life, the directors decided workers shouldn’t be forced to give up this opportunity. Ideally, shares that become available will be used to bring more workers into the project, rather than increasing the stake of current shareholders.

Due to a moratorium on the sale of shares, all shareholders must keep their shares until 2016. At that point, many of the current shareholders will be close to retirement, and could sell their shares and use the money as a pension. Shareholders have a will and life insurance and if one should pass away, the company will buy the shares and pay out the value to the person nominated in the will. “We decided on this arrangement so that shares won’t fall into the hands of someone who has no involvement in the farm, as this would dilute the incentives that shared ownership creates for the workers,” explains Cornel As with all new endeavours, Johan says that after a few months into the project it was necessary to make some changes to the shareholders’ agreements and the trust documents.

“It’s vital to get the right advice before starting a BEE project. Having a knowledgeable consultant made all the difference,” he affirms. “Expect to engage a consultant for about two years, as it generally takes that long for things to get off the ground.”

The practical side of empowerment
The directors of Bambanani have a capacity-building plan in place. “Workers are identified and trained for specific management posts, such as orchard managers, packhouse managers, supervisors and financial managers,” explains Johan. All workers receive ongoing training to enable them to manage their own finances and improve their understanding of business matters.

Training is provided by two companies, Skills for All and Adult Basic Education Training (Abet). As the BEE consultant, Cornel mentors trustees and helps them understand the business’s financial aspects. “It’s a challenge to explain the more complex financial decisions the company has taken, as they have no financial background, but they’re slowly catching up,” he says. “It’s something you can’t teach in a year or two.”

Providing alternative benefits The directors want each shareholder to be part of the company’s vision but, as Screeninger says, “If you can’t put food on the table, or have a sick child you can’t afford treatment for, how can you dream?” Johan agrees. “We believe it’s essential to address basic poverty needs before we try teach someone how to run a company.” Bambanani’s farmland has been declared unsafe for housing due to instability created by mining, so many workers live in shacks in the rural township of Poortjie. “We strongly believe that once everyone has a proper house, they’ll start to see the material benefits of this project and they too can begin to dream,” affirms Johan.

Company management is negotiating with Poortjie’s council to determine how to achieve this. If the negotiations are unsuccessful, the company plans to start a housing scheme in Poortjie next year. However, says Cornel, shareholders need to see some benefit sooner than in 10 years. The company is also looking for innovative ways to measure, motivate and reward workers on a day-to-day basis, and is considering using scanners to determine packing rates and offer bonuses. Already, a clinic has been established in the packhouse, which is open twice a week during the season, and the farm canteen is being upgraded.

Bambanani owns a bus which transports workers between the farm and Poortjie for a token R2,50 a day. Shareholders and permanent workers may also apply to use the bus for personal matters. The company is fully sponsoring one farmworker’s daughter’s three-year NHC in accountancy at the Vaal Technicon, and hope to sponsor a second and perhaps even a third student. Bambanani is also reaching out to the broader community. “The hawker market is growing in importance and size,” says Johan. “We supply it and finance some hawkers to distribute fruit to others. This also ensures all our fruit is sold.”

Bambanani also donates fruit to preprimary schools in the township and to some old age homes in the area. Looking to the future “This started out as just a farm, and now it’s a really large agricultural business enterprise,” says Johan. “We are literally growing by the day.” He sees himself retiring in 15 years’ time. “This is an opportunity for the workers to eventually own all of the shares in this business, while their skills and knowledge base increase with their ownership percentage.” Johan firmly believes in the role that farmers play in SA and says that, to succeed one should develop opportunities out of perceived threats. With statistics indicating that 50% to 90% of all BEE agricultural initiatives fail, Bambanani shows that with the right approach, it can work. Contact Cornel Zandburg on 082 562 8567 or e-mail [email protected]

Toubleshooting at Bambanani

Johan says that despite Bambanani’s size and success to date, they still face the same problems that other farmers do. “We also have problems with skilled labour as we use seasonal workers in the packhouse, so we seek out opportunities, such as buying in bulk citrus, to make full use of the packhouse throughout the year,” he explains. Bambanani faces the same weather problems as the rest of the stone fruit industry. “We have 60ha of orchards covered with hail nets and the rest will be covered in the next few years,” says Johan. “The benefits clearly outweigh the costs.” He says that the orchards covered with hail nets also have a better colour, earlier harvest date and a higher packout percentage.

As hail nets are constantly in need of repair, Bambanani is always testing new net designs. The most popular nets have elastic cords that stretch open under a heavy weight, allowing the hail to fall in the rows between the trees.

Bambanani has occasional frost problems in the lower-lying areas of the farm, so microclimate loggers are positioned at strategic intervals in all orchards. “These devices let us predict frost a day ahead and take measures to lessen its impact,” says Johan. Weather data from the last 10 years identified areas on the farm with a lower risk of frost for new and planned orchard developments. Suitable areas have also been identified for plums and pome fruit orchards. Along with the rest of Gauteng, Bambanani faces problems with crime. The farm is permanently guarded by a security company and all visitors monitored.