Black empowerment in wine (2): Dealing with realities
Gavin Pieterse, chair of SAWIT, speaks to  Ingrid Motteux

Grape’s Widow, in her Sour Grapes column last year reported that Michael Fridjhon was being replaced as chair of SAWIT by ‘someone no-one in the wine industry seems to have heard of’. That someone was you. It seems you stepped in quietly, did some serious sorting-out, and then roared very loudly! How did it feel stepping into what must have been an unfamiliar and extremely hostile environment?

Perhaps the Widow’s hearing isn’t what it should be! As director of Spier Wine Estate and CEO of the Spier Development Trust for a three-year period after Dick Enthoven bought the property I was hardly unfamiliar with the industry. As for any hostility, I would say it was due to SAWIT’s poor record of delivery and directed rather at the position than at myself personally. The attitude of the established industry was more one of dismissal – or a ‘let’s wait and see’ stance at best.

Many consider it miraculous that you managed to get government, the KWV and the newly formed South African Wine and Brandy Company under one roof for the two-day black economic empowerment (BEE) consultative conference, with the aim of drawing up a BEE charter for the wine industry. How do you feel about the road ahead?                  

The road ahead is a little clearer in the sense that there appears to be broad consensus among the relevant stakeholders on what the key growth drivers for the industry are. Assuming quality and price point sensitivity prevail, high quality research, product differentiation based on our rich cultural heritage and responsible usage of natural resources will be key success factors. Clear and dedicated investment in promotions to capture the large emerging local and continental consumer base in line with NEPAD strategy can also contribute. But in the end, I firmly believe that a commitment to knowledge transfer and organisational transformation, and a meaningful shift in the ownership patterns of productive assets are equally essential to the profitability in our South African wine and spirits industry.

SAWIT was established almost four years ago, in February 1999. How is it possible that, with a mandate specifically aimed at the empowering ‘disadvantaged’ farmworker communities, so little was achieved in that time by DEVCO, SAWIT’s development arm?

Considering that the creation of SAWIT was essentially a compromise settlement, and that the joint custodians of the development strategy, KWV and government, were at loggerheads over tax and commercial issues, it was inevitable that the mandates could not be executed. Breaking the suspicion and hostility, and developing a common vision and purpose for both parties was of course my biggest challenge, and I am pleased that these legacy issues between the parties have now been successfully resolved.

Meanwhile, SAWIT has been able to redefine its role and function in line with the realities on the ground and, with the experience gained in effective and timely decision-making, DEVCO has disbursed more aid and support in the last eight months of its existence than in its entire prior history. This trend is continuing and will be bolstered with constant impact assessment.

Could you briefly define the present, restructured SAWIT?

The Trust has been restructured to incorporate measures to streamline and facilitate decision-making, such as a reduced number of Trustees at main trust level and the establishment of a smaller executive committee. Directly affected stakeholders are now represented on the DEVCO and BUSCO (business support) boards.

In line with government’s broad agricultural strategy and the Agri BEE initiatives, the DEVCO mandate has been redefined to include specific BEE objectives alongside traditional poverty alleviation programmes and social, health and economic support programmes.

Development activities will in future take a greater proportion of the funds at our disposal, with particular emphasis on better communication and information sharing, and more speedy and effective application processes. In a similar way, knowledge management and transfer rather than classic research will be favoured, with more focus on local as opposed to export promotion activities.

Finally, a way has been established for SAWIT to attract and manage funding from sources other than KWV.

You have commented previously on the importance of understanding the legacy of disempowerment before tackling empowerment. Please expand on this issue.

The historic ownership patterns and business processes, the legislative and regulatory protection and the abysmal labour relations of the South African wine and spirits industry, have resulted in immense poverty and degradation. This is characterised by low skills and literacy levels, social diseases such as substance abuse and foetal alcohol syndrome, and, most importantly, the concomitant psyche of ingrained inferiority and low self-esteem.

My point is: as we endeavour to transform the ownership, resources and skills patterns in the industry to reflect the demographics of our society (a process known as BEE), we should never neglect the inherent legacies of decades of disempowerment. Equal focus and resources have to be invested in both.

People seem automatically to equate empowerment with land, yet this seems to have been one of the least effective ways of empowering people. What are the key hurdles for overcoming the wine industry’s poor BEE record, and which approaches hold the most promise?

Land ownership, access to capital and limited hard skills on the part of black people and aspiring entrepreneurs remain the most critical hurdles in accessing opportunities in the industry.

Barriers to entry include high cost of productive real estate in established wine producing regions and third party financing. Limited research and information on soils, climatic and other terroir-related conditions in non-established, less expensive regions with viticultural potential is obviously significant. Consequently, a strategy which allows for new entrepreneurs to acquire a label and own the distribution and marketing rights whilst avoiding the pitfalls of huge capital investments, is the way forward. Sourcing grapes from selected producers and outsourcing the production to independent cellars based on well-tested formula for grape varieties which meet market demand on both quality and price can be a part of this.

Affirmative procurement reform in the immense downstream opportunities such as manufacturing corks, bottles, labels and packaging etc will then provide lucrative opportunities for new black and women entrepreneurs.

Furthermore, we also believe that early gains in the area of BEE can be quickly achieved through big ticket equity transactions with some of the larger producers facilitating accelerated skills development.

The chief successes and failures of BEE were debated at the conference. In a nutshell, what are these?

The conference overwhelmingly condemned that model of BEE transaction in which state grant funding buys for a group of farm workers a piece of land on a productive farm, the principal however retaining the production, marketing and distribution rights, and still owning the label. This model essentially creates a non-productive ‘bantustan’ with no positive effect in developing the meaningful skills or upward mobility which might hold the potential for the new farmers to compete effectively with their erstwhile ‘benefactor’.

Thabani wine was one of the few successes identified. Here we have an example of a black entrepreneur who created his own brand on the basis of a deep understanding of the international market, who outsourced the production according to the model outlined above, and kept control his own destiny by owning the marketing and distribution.

Is there some sort of approved model for the small wine-farmers to follow in order to initiate the empowerment of their workers? What sort of initiatives do you hope to see from the various players in the wine industry?

The BEE conference hosted by SAWIT recently tasked SAWIT with developing a BEE charter for the wine industry on the basis of intensive consultation, research and scenario planning. The first draft of that Charter will be released towards June 2004, and I do not wish to be seen to preempt or prescribe any conclusions by giving a detailed answer to that question right now.

Education at all levels must be of huge fundamental importance to the process. What is being done in this regard, and how accessible is funding?

SAWIT has historically placed a huge premium on funding relevant and appropriate education and training and continues to do so. As a result of its efforts, the first crop of black viticulturists, oenologists and cellar masters are emerging. Tertiary education is also being complemented by many other forms of education, ranging from significant investments in basic adult literacy, on-the-job training and formal certification of farm workers and managers, as being delivered by the Vineyard Academy, Elsenburg etc. The application process for funding in whatever form for any historically disadvantaged student is readily accessible.

What is the best part of your job?

I see my responsibilities in SAWIT as part of ‘national service’ duty, and the opportunity to make a contribution and hopefully leave a legacy of transformation is reward enough.

And what is your favourite wine?

I don’t want to appear biased, but that Vergelegen Chardonnay … mmmmmm!

As a schoolboy and undergraduate, Gavin Pieterse felt the force of the apartheid regime in many ways. After being banned from university where he was studying law, he embarked on an early career that included teaching, youth counselling, crisis intervention and photojournalism. He has since become a seasoned practitioner in organisational development and transformation. As well as chairing SAWIT, he is Managing Director of African Renaissance Investment Management, a subsidiary of African Renaissance Holdings Ltd, one of the leading unlisted BEE investment holding companies in South Africa.