As far as Tongaat Hulett CEO Peter Staude is concerned, SA needs to pay serious attention to its agricultural sector. The slow pace of land reform and the utter failure of the transformation process to create a successful class of black commercial farmers must be addressed. "We feel a sense of urgency around this issue. It is imperative that SA develops meaningful numbers of black commercial farmers."
Tongaat Hulett is no stranger to broad-based black economic empowerment (BBBEE). Last year it was fourth on the FM's list of most empowered companies. It was one of just four listed companies to achieve level 3 certification.
It has slipped a little this year.
That's because in this year's BEE scoring process Tongaat earns a hefty seven points less on its ownership ranking. The points come off the all-important area of equity ownership.
The group's BEE deal was concluded in 2007 with anchor broad-based BEE partners Ayavuna Women's Investments and Sangena Investments. At the time Tongaat was awarded 20 points out of 20 by the National Empowerment Rating Agency. Bonus points were added for new entrants and women participation, making it one of the highest scored BEE deals in the country at the time.
Yet this year the deal will score 19,5 points. "Tongaat's falling share price affects the value placed on our BEE deal, and this affects the scoring," Staude says.
The bottom line is that the debt secured to acquire the equity interest exceeds the current value of the equity, as share prices on the JSE have fallen. "The deal is structured over seven years and we have factored in a variable share price. What is important is that the current change in value does not affect our BBBEE partners' 25% of the vote. The value of the deal may change during the term of the deal, but voting rights remain the same."
As it drops from a level 3 company to a level 4, Tongaat's customers will be able to recognise 100% and not 120% of procurement spend with it. Staude is circumspect about this. "These are factors outside our control. Transformation is about more than a scorecard. It is important to understand what the issues are and where one can make meaningful contributions."
Thus though the company is already earning nearly full points for enterprise development and full points for socioeconomic development, these are areas where it has continued to invest energy and capital. "To us the issue of land and its successful transformation is a problematic area, so we are doing a lot of work on agrarian reform."
The company is involved in a variety of community land claims, totalling 22 000 ha. In particular there are two phases during the land reform process where Tongaat believes it has value to add. "There is a transitional period between the settlement of the land claim and the payout. Sugar cane is a seven-year crop, thus it is important to maintain continuity in the farming process."
The other phase is postsettlement. "Communities often need help with business management and farming practices."
Staude recognises that the company's help is not always welcomed. "Our ultimate goal is to create successful farmers, but to do that requires trust and that is not always there to start with."
As a primary buyer of cane, however, Tongaat can identify the gaps and opportunities that need to be filled. "We have drawn up business support models, we make working capital available and we employ extension officers who work with the farmers to help resolve problems."
Tongaat is also SA's second-biggest buyer of maize, buying nearly 10% of the maize crop annually. As in the sugar industry the company has prioritised the training of black maize farmers.
Last year it launched the Ithuba Farming Project, in partnership with the Buhle Farmers Academy. "We have leased a 1 500 ha farm which our students are now farming. Last year they were managing 130 ha, so this is a big jump."
Staude recognises that the company has little influence over the land reform process itself. "We can't speed it up, but we can lobby for change."
One of the highlights of 2008 was seeing the SA Sugar Association appoint its first black chairman, who happens to be the MD of Tongaat's SA business, Martin Mohale.
"We use these bodies to amplify the urgency we feel around land reform. Rural transformation is not rocket science. It's about education and the right kind of support. One can't assume a community is familiar with the intricacies of soil sampling, soil preparation, fertiliser calibration, weed control, mechanical operations and record keeping."
Though 2008 was about enhancing and fine-tuning its transformation strategy, the company did take a meaningful step forward. It altered the composition of its board, significantly. The opportunity arose because board members Elizabeth Bradley and Cedric Savage retire this year. Thus Tongaat appointed three new independent nonexecutive directors last October: Fatima Jakoet, Vincent Maphai and Nonhlanhla Mjoli-Mncube. Today Tongaat Hulett is one of the JSE's few listed companies with a black majority on the board.
This, says Staude, has already had a positive influence on the board. "We now have a different balance of paradigms and perceptions. When we make strategic decisions I feel we are better tuned in to all the parts and dynamics of SA."
So what else is a priority regarding transformation? "One area that stands out is getting African women more represented in our firm. There is a lot of thought going into ways to get women into our system, and into jobs that are more technical. "We have some interesting role models on the farming front, now we want engineers and scientists - women who can make breakthroughs in research."
