Amadlelo Agri agribusiness firm
Amadlelo Agri is an agribusiness firm whose stated vision is 'to contribute to transformation by creating profitable, sustainable, black empowered agribusiness’. On their website Amadlelo Agri’s mission statement is as follows:
“Contribute to the transformation of agribusiness in South Africa through the training and mentoring of black farmers by entering into long term partnerships. Transforming latent community assets into profitable business upliftment, poverty relief, job creation and food security. Growing and empowering business through investing and sharing".
Amadlelo Agri was first established in 2004 by 70 commercial dairy farmers88 from the Eastern Cape and KwaZulu-Natal provinces. Amadlelo Agri has since established seven dairy JV farms in the Eastern Cape and KwaZulu-Natal provinces. They are located in Shiloh, Keiskammahoek, Middledrift, Ncora, Fort Hare and Port St Johns89 in the Eastern Cape and Makhoba in KwaZulu-Natal. In addition Amadlelo Agri also has shares in a Macadamia JV in Ncera90 and a Piggery JV in Fort Hare, both located in the Eastern Cape.
Amadlelo Agri’s shareholders include: Vuwa Investments (a black empowerment company) which has a 35% share, Amadlelo Milk Producers Investment Company (owned by 50 white commercial dairy farmers) which has a 49.9% share and the Amadlelo Empowerment Trust
88 At the time of interviews in 2015 and 2016 the shareholders had reduced to 50 commercial farmers.
89 At the time of research Port St Johns was still in the planning phases and Amadlelo Agri was negotiating with the community and government.
90 As discussed in chapter 4 of this PhD I conducted preliminary fieldwork at this JV farm.
(500 workers from the 50 commercial dairy farms) which has a 15.1% share (see the figure below).
Figure 16. Amadlelo Agri Shareholding and Governance Arrangements on JV Farms 91
Amadlelo Agri’s board of directors meets quarterly and is chaired by an individual from Vuwa Investments. Vuwa Investments main role in the organisation is as the ‘empowerment player’
and they don’t play a role beyond the affairs of the Board of Directors. A representative from Amadlelo Milk Producers notes “Vuwa Investments doesn’t really play any role other than their representation on the organisation. They only made one small loan of R1.5 million to Amadlelo Agri in the beginning of the organisation’s formation”.
Both the vice chairperson and chief executive director of Amadlelo Agri are from Amadlelo Milk Producers Investment Company (AMPIC). Then there are an additional five directors, of which one is from Vuwa Investments, one from Amadlelo Empowerment Trust and the remainder from AMPIC (who have the largest share in the company). Amadlelo Empowerment Trust also does not play a role beyond its representation on the board of directors. They were not required to make any investment in the company to receive their 15.1% share, since their share is essentially a BBBEE deal (Broad-Based Black Economic Empowerment). Members of Amadlelo Empowerment Trust are workers on the 50 farms owned by the shareholders of AMPIC.
91Source: Amadlelo Agri: http://amadlelo.co.za/wp-content/uploads/2016/05/Annexure-A.pdf. The figure describes the governance arrangements both of Amadlelo Agri as an agribusiness firm as well as the governance arrangements at their eight JV farms.
A key informant from Amadlelo Agri asserts that no profits are currently distributed to its shareholders because of debt repayments. Management confirmed that R100 million went into building Amadlelo Agri, with an initial investment of only R25 million from the white commercial dairy farmers at AMPIC. Debts are therefore still being paid off to private financial institutions and to national development finance institutions like the Industrial Development Corporation and the National Empowerment Fund, which among other things, went into building the ‘equity JV farms’ in Middledrift and Fort Hare.
Besides the chief executive director of Amadlelo Agri and two other white commercial dairy farmers from AMPIC, that seem to play an active role in aspects of the organisation, the rest of AMPIC’s 47 shareholders do not play a major role. A key informant explains:
“The short answer of what is the role of the fifty white farmers in Amadlelo Agri is- there is none! The other twenty farmers, from the original seventy, dropped out. I’m not sure why, but I think this empowerment thing is not for everyone. The remaining shareholders don’t really do much in the organization except for a few like (Mr B92) and Mr V. Mr V has mentored the farm manager at Middledrift and our production manager. Mr B is involved in identifying scholars for the Fort Hare training programme. The other farmers may assist in sourcing cows for the projects if need be, but they don’t have a big role besides that “.
Amadlelo Agri is largely driven by the chief executive director, who is a member of AMPIC.
He is responsible for liaising with government, maintaining relationships with the community structures, handling monthly farm trust meetings and training sessions for farm managers, and liaising with Amadlelo Agri’s shareholders and other partner organisations. During the fieldwork, I noted that he was constantly driving between the various JV farms to communicate with the community structures, resolve conflicts and attend to issues pertaining to the management and productivity of the farms. In many senses the organisation is very personality driven, and the name of the chief executive director is synonymous with Amadlelo Agri as a firm. This is a limitation to the sustainability of the model and has been noted by the chief executive director. To address this, he had identified the production manager, who was being trained to succeed him in the future.
Government is essential to the JV deals in terms of sanctioning and funding them, especially those on communally owned land. However, apart from initial negotiations in setting up the JV schemes and providing funding for the fixed assets, government plays a very minor role in these JV farms93. The financial management of the farms is the responsibility of the farm trusts and government does not sit on these structures. Government also does not actively monitor the
92 I have replaced names with pseudonyms
93 A manager at Amadlelo Agri notes “We take DRDLR on a helicopter trip around to all the farms once a year and ask for a Christmas list...
We show them what the issues are and how they can resolve it. But we never really get what we ask for. Today someone from DRDLR’s M&E office came around to Middledrift asking how the three million had been spent on the project. This is the three million that never arrived and disappeared somewhere... “ This statement indicates the very limited role that DRDLR plays in monitoring and overseeing the JVs. The poor functioning of the M&E branch of DRDLR is something that has been noted in previous research (see Impact Economix, 2013).
performance of these JV schemes, apart perhaps from yearly visits and habitual meetings that are held with the chief executive director of AMPIC.
Joint governance structures: Seven Stars Trust and Shiloh Dairies Trust
Both the Seven Stars Trust and the Shiloh Dairies Trust have a board of trustees, which is governed by representatives from Amadlelo Agri (through Keiskammahoek and Shiloh Livestock (Pty94)) and the community cooperatives (Mayime and Seven Stars cooperatives).
The representatives on the board of trustees are responsible for the financial management of the farms and for reporting back to the members of their relevant organisations. They meet once a month. The farm managers will usually be called into these meetings to give a brief report of the status of production on the farm. The trusts also have quarterly meetings with the cooperative committees to discuss the financial outlook of the farm.
The members of the board of trustees receive a ‘sitting allowance’ of R300 per person, for attending monthly meetings. The chairperson doesn’t receive a sitting allowance but rather receives a monthly allowance. The chairpersons at both Shiloh and Keiskammahoek are women from the respective community cooperatives. The former receives R3000 per month and the latter R5000 because “she works every day because they are chasing the issue of title deeds at Keiskammahoek”, according to a key informant at Amadlelo Agri. The chairperson of Shiloh Dairies Trust explains how she understands the role of the trust:
“These members of the dairy trust are making money for Shiloh, they deal with wages and salaries for the business. When we finish doing our operational costs then there is money that is left over, we call it a profit, and this is where we share between Amadlelo and Mayime. In this marriage the sharing of profits is 50/50.”
From the list I received of members of the Seven Stars Trust, there are two representatives from Amadlelo Agri and seven members from Seven Stars Cooperative95. There is meant to be a representative from every primary cooperative represented on the Trust. However, at the time of research there was no representative from Unit 4 and two representatives from Unit 1 (although one had recently passed on). Three landowners serve on both the Board of the Seven Stars Trust and the Committee of the Seven Stars Cooperative (as additional members); this includes the Chairperson of the Trust. These three members all appeared to be in positions of notable power among the other landowners and also in positions of relatively higher income and asset ownership. Key informant interviews revealed that there are certain tensions among the Seven Stars Cooperative members, which are also linked to historical relations that precede the JV farms establishment, as discussed in Chapter 5. However, a member of the trust from Amadlelo Agri, noted that “these issues do not spill out onto the farm”, in the same way as they do in Shiloh.
94 Amadlelo Agri owns 100% of these entities unlike at their other JV farms where they share the equity with other partner firms.
95 Although one member had recently passed away and has not been replaced, his widow notes: “I am just a farmer not a member of the committee. My husband was on the trust committee, but I didn't take his place when he passed. I didn't want to take his place because I am too old now to manage it.”
Some key informants mentioned that the working relationship between the landowners and Amadlelo Agri on the trust was difficult at the start, but that overtime it has improved. For example, a respondent from a dividend receiving household in Keiskammahoek notes:
“During the first time we didn't understand each other, the company and the farmers, but now that we know each other, things are going smoothly. Here we are few people so it's easier and we know each other since 1984”.
One farm manager at Keiskammahoek similarly noted that:
“When I arrived they said the farmers were interfering … most of the guys wanted to sell their farms, but now they changed their mind because they see things are getting better… After they started getting their dividends they were so happy!”
The factor of larger dividends at Keiskammahoek, as compared to Shiloh, is an important factor to take into account. It is not only the different history of intragroup conflict and the character of class dynamics at Shiloh which is creating more conflict there, it is also the simple fact of discontent around the small benefits derived from the JV farm that provokes these tensions. It is possible that the perceived environment of contentment among the beneficiaries, as well as in the governance structures in Keiskammahoek, is significantly influenced by the larger dividends.
I was unable to receive lists of members for either the trust or Mayime Cooperative committee from Shiloh. However, key informant interviews confirmed that the trust committee is composed of twelve members, six from Amadlelo Agri 96 and six from the Mayime Cooperative. Three of the Mayime Cooperative members serve on Mayime Cooperative's committee as well as Shiloh Dairies Trust's board of trustees. Thus these members wield considerable power and influence in the community structures. This is particularly the case with regards to the chairperson of the Shiloh Dairies Trust. Several key informant interviews and participant observation97 revealed that the chairperson of the Shiloh Dairies Trust has a very autocratic leadership style, which has contributed to the pervasive environment of fear and conflict among the customary landowners at Shiloh. Many have stopped attending meetings due to what was described as ‘fear’, or just an acknowledgement that it was ‘pointless’ to participate, as their concerns ‘wouldn’t be heard’.
A key informant from Amadlelo Agri also described the chairperson as ‘very self serving’. She was reported to have pressured the farm into employing her family members. It was eventually agreed that one of her sons would be employed at Keiskammahoek, to avoid uproar from the wider community about unfair patronage. The Shiloh Dairies Trust appears to struggle to operate exclusively according to unbiased business practices, and feels compelled at times to give into demands by its members for preferential treatment. Amadlelo Agri also notes “An
96 However, allegedly, generally only one member attends meetings, due to the transport costs involved.
97 Including observing a meeting of the Trust and a Mayime cooperative meeting.
issue at Shiloh is the level of business understanding and education which is very low”. This also feeds into the way that the community representatives conduct the affairs of the cooperative and engage with the trust. Amadlelo Agri did not mention the same challenge of working with Keiskammahoek’s beneficiaries.
At the time of research one of the community representatives had been dismissed from the Shiloh Dairies Trust. The chairperson of the Shiloh Dairies Trust notes:
“We were 6 before on our side but (he) was dishonest, he couldn’t attend the meetings regularly and he was taking confidential things out into the villages before we reported it at the cooperative meetings. He formed an opposition party that is now fighting us”.
A representative from Amadlelo Agri noted about the dismissal:
“At Shiloh when we employed a member of the board of trustees it was fine in the beginning and then it caused an issue. He was a supervisor on the food plots side, supervising the irrigation. But he had all sorts of demands above his productive ability.
In the end he got fired from the board of trustees”.
It is clear that the governance challenges at Shiloh are linked to numerous, complex and overlapping factors. The power dynamics within the landowning group clearly spill over into the functioning of the trust. This is complicated by the autocratic leadership style of the chairperson, who also plays a prominent role on the Mayime Cooperative. However, even if she were to be replaced, as many key informants demanded, the decades old tensions among the landowning group would likely surface in other ways, and in new power struggles. The small dividends that are distributed to beneficiaries at Shiloh clearly aggravate these tensions.
Democratic reform of the governance structures and financial management of the Mayime Cooperative would likely ameliorate some of the tensions. However, these types of reforms wouldn’t resolve the wider contradiction that the JV model poses to the reproduction of poorer households.
Financial arrangements at Keiskammahoek and Shiloh
The farm operating trusts are the key entities that control the finances of the JV farms. The figure below maps out the financial flows at the Seven Stars Trust Farm in Keiskammahoek. It illustrates that at Keiskammahoek R66 million98 of government funding alone has gone into establishing the fixed assets on the farm, which are owned by the Seven Stars Cooperative.
Amadlelo Agri has also contributed an estimated R20 million in movable assets, which remain the property of the agribusiness firm. The trust pays a nominal fee of R2 per hectare per month to the Amahlati Municipality for the 145 hectares that it rents.
98 Whytske Chamerlain (2015) and key informants reported that R66 million of government funding was invested into the Seven Stars Dairy JV Farm. They provide a breakdown of government funding as follows: an initial grant from the provincial Department of Agriculture of R17 million was used to rebuild the irrigation infrastructure on 150ha of land and to construct a milking parlour on the central unit which is leased from the municipality. The National Department of Rural Development and Land Reform granted Seven Stars Trust R35 million in 2012 under the ReCap programme. In 2013 a second tranche of R14 million was awarded.
In principle 50% of the profits (after deduction of a 10% management fee) should be paid from the Seven Stars Trust to the Seven Stars Cooperative. This ‘secondary’ cooperative should then pay the six ‘primary’ cooperatives the dividends (minus operating costs and investments), which should in turn pay the affiliated households. However, this has not been happening due to governance issues within the Seven Stars Cooperative and the primary cooperatives. At the time of research (2015/16), as an interim measure, the trust was paying the individual landowners their dividends directly. A key informant from Amadlelo Agri notes:
“We are bypassing the Seven Stars Cooperative and paying the beneficiaries directly … The secondary cooperative didn’t have their ducks in a row and the primary cooperatives underneath it also don’t work. There is no capacity within these structures to run themselves. The Seven Stars Cooperative doesn’t even have a managing director
… cooperatives are formed because government gives money to them but they are not functioning properly.”
Figure 17. Keiskammahoek Seven Stars Trust: Financial Arrangements 99
99 Based on Whytske Chamerlain (2015) with own edits from fieldwork insights
At Shiloh around R30 million100 of government funding alone has gone into establishing the fixed assets on the farm, excluding Amadlelo’s investments in movable assets of around R11 million. Unlike at Keiskammahoek where the farm trust pays the beneficiaries their dividends, at Shiloh Mayime Cooperative is responsible for the dividend payments to the 395 households.
This was an area of contention mentioned by some of households, who asserted that they would prefer that the Shiloh Dairies Trust distribute the dividends. Mayime Cooperative has not agreed to a financial audit and its committee is accused of misappropriating funds (by a so-called ‘opposition group’ that has formed among the customary landowners). A respondent from a JV Dividend receiving household notes:
“We want things to be transparent, we want to know how much they make and how much is paid to workers and how much is left.”
Figure 18. Shiloh Dairies Trust: Financial Arrangements
Government has claimed that Amadlelo Agri’s sharemilking model exploits the community because of the relatively higher value of the land and other fixed assets that the community brings to the farming business, as opposed to the value of the cows, other movable assets and management skills that Amadlelo Agri brings. Several key respondents, from among the landowning households at both case study sites, also emphasised that the 10% management fee and 50% of remaining profits deriving to Amadlelo was ‘not fair’. They argued that the community beneficiaries should receive a larger share. Amadlelo Agri, however, maintains that the costs involved in managing the complex dynamics involved in a communal farming operation, the (biosecurity) risk to their cows and the costs of replacing movable assets, means
100 Government funding was in the form of a ReCap grant, according to key informants. I could not obtain accurate information regarding
100 Government funding was in the form of a ReCap grant, according to key informants. I could not obtain accurate information regarding