Black empowerment in wine (1): ‘Think out of your boxes, guys!’

John Platter attended the recent conference which examined ways of responding to the racial skew of the South African wine industry. He considers the problems it confronted and some of the possible solutions.

How much more than the predictable avalanche of platitudes did the South African Wine Industry Trust’s Cape Town conference on black economic empowerment (BEE) achieve? And was its proposal – to transfer 30% to 35% of the industry’s assets to black South Africans by 2014 – too ambitious? Even (in an atmosphere muggy with acronyms) using OPM? Other People’s Money?

To an outsider, noting the national black-white population ratio – about 8:1 – an ownership target of little more than a third, after 20 years of democracy, would seem very modest. And the present base, an almost zero black stake in the wine business, illustrates not only the daunting scale of the project but the political untenability of the status quo. Normal market forces and willing-buyer-willing-seller arrangements alone could never manage such a shifting of the tectonic plates. Especially in an industry, despite some golden years (and how far down did the gain-sharing really seep?) which once again may face embarrassing surpluses.

In the past decade, disappointingly, the overall labour scene has worsened. Rationalisation has been painful, its benefits not universally enjoyed. The casualties of casualisation in labour are numerous. A ‘deepening double divide’ has developed, conclude veteran labour academics Joachim Ewert and Andries du Toit in a trenchant September 2003 analysis of the Cape wine economy. Which made the light-hearted banter at the conference – plenty woven into the serious stuff – all the more remarkable, underlining the forbearance of those to whom the legacy of long vassalage is still vivid in the present.

This was an overdue heart-to-heart. For the first time in 350 years, representatives from ‘all walks’ of wine – landowners, workers (bussed in from all over) bankers, academics, unionists, researchers, economists, winemakers and government officials – gathered for a few days and nights under one roof. Historic, even if the many levels of expertise and varying agendas sometimes made for unwieldiness. A tone of realism and compromise was set by Agriculture Minister Thoko Didiza, opening the proceedings with the Wine Trust’s chair, Gavin Pieterse. A visionary dynamo, Pieterse is vice chair of the national commission on empowerment, virtual designer of the new BEE Bill; in him, the wine industry has the services of a seasoned insider on the subject. Government’s sober thinking – in the face of strident criticism of its ‘lethargic approach to agrarian injustice’ – was articulated by Minister Didiza at a private briefing for ministerial appointees to the Wine Trust.

‘Empower the weak without weakening the strong’

If only it were that simple! The conference had no difficulty identifying the central, self-evidently unsustainable problem: a racially skewed industry where 115 000 hectares of national vineyard are owned by 4 500 white farmers, employing a 350 000-strong coloured and black workforce – ten years into the new South Africa! Broadly, three huge ‘deficits’ persist among the ‘disempowered’ or HDIs – historically disadvantaged individuals: skills, funds and land.

*Central to the conference was developing a menu of different empowerment enterprise models that workers, farmers and entrepreneurs could adopt or adapt, thus fast-tracking access to funding from the Wine Trust, Department of Trade and Industry, *IDevelopment Corporation and Land Bank. The Trust already finances business plans for likely schemes, but many have not met the basic criteria for real empowerment and protection for ‘minority’ stakeholders. Working sub-committees made a start on mapping solutions, and the reaction of one Stellenbosch farmer was typical: ‘I’m very motivated by it all’, he said. ‘When I received my invitation, I was actually quite scared. I thought we were about to be dictated to. But as I listened to everyone, including the minister and her officials, I realized they want a friendly, inclusive ... constructive debate.’

The government appears determined to remain largely consultative; we’ll help outline the goals, they’re saying, and provide some legislated incentives (in preferential procurement contracts for empowered enterprises) but you work out the details. However, empowerment must happen. So far, the carrot without the stick. Only the most purblind will fail to see the enormous opportunities contained in official preferred procurement policies; the slow will lose out. If this is interventionist, command economics, so be it. That’s life here, for the moment.

So the wine industry – facilitated by the Wine Trust and in co-operation with the SA Wine and Brandy Company and its Wine Industry Plan – will now follow mining and financial services in developing its own empowerment charter over the next six months: that was agreed by acclamation at the conference. The mantra is ‘broad-based empowerment’. All stakeholders are aware that ‘fat-cat deals’ primarily enriching the politically well-connected, or window-dressing re-arrangements designed to preserve imbalances, will subvert the process.

Empowerment-worthiness is now itself a specialist subject in the due-diligence processes. Any form of paternalistic ‘soup kitchen’ scheme is a non-starter. Some, incredibly, though probably well-meaningly, still believe these might pass muster as real gain-sharing. They live on a planet that believes the velvet Mandela transition came without a price, that the new South Africa is a divine right.

The Wine Trust subscribes to the need for a ‘broad band’ of vigorous but disciplined (and commercially viable, no-free-rides) assisted empowerment projects – accompanied by constant evaluation and technical support. These will include the bigger deals, where even if the ‘black equity’ is held by relatively few individuals, they can – with more than 25% of the stake – help determine training, human resource development, skills transfer and procurement policies that advance empowerment and broaden its base ‘from within and the top’.

Of course, what sometimes begins as an avowedly ‘subversive’ project can soften into Uncle Tom co-option – and failure. Empowerment shells already litter the scrap heaps of the business landscape. But they won’t – except among incorrigible cynics ready to give up at the first hurdle – detract from the general idea.

Also high on the Wine Trust agenda will be support for the smaller, down-on-the-farm, ‘seed-potato’ projects, with mentorship – no longer a patronizing concept – the basis of ‘empowering partnerships’ that should sprout more. Several models for these exist and can be improved. Nine of the longest established have been closely analysed by Mike Lyne of the University of KwaZulu/Natal. His conclusions: about a third are winners, a third so-so, and the rest ‘dismal’. Problems include ‘institutional vacuums’ following launch; ‘free riders’ and ‘blatant opportunism’.

Education and training, the most potent but slowest empowerment tools, will remain a priority of the Trust’s Wine Education Fund. About a score of black graduate winemakers – the stars of wine – will soon not only adorn the scene, but, much more importantly, become an unremarkable commonplace. Land transfers are the most expensive form of empowerment. The prohibitive cost of land creates some obvious imperatives: forcing acquisitions into outlying, cheaper, less prestigious (though often viticulturally excellent) areas, leaving black representation in sexy, high-visibility areas to the Tokyo Sexwales, or PVAs (presently very advantaged); and focusing attention on downstream enterprises where BEE initiatives might kick in more easily – marketing, distribution, retailing – and, most prestigiously, winemaking. An aggressive onslaught on this value-chain could make an immediate impact.

But the crucial, emotive issue of land remains. And here, government, province and local municipalities – the biggest landowners – could (should) come to the party, making available significant areas, affordably. Meantime, whether on BEE or exports or expanding local markets, the way forward was via a united, imaginative Team South Africa approach, said the charismatic DG of Agriculture, Bongiwe Njobe. (She was in charge of winemaking – from pawpaws – at an ANC camp in Tanzania while in exile!)

‘Start thinking out of your boxes, guys!” she exhorted. “Claim the African market. Take on China. Grow the industry!’ That would build the high road to black empowerment.

*John Platter is a government-appointed representative on SAWIT.