By Alex Hitzemann
Currently, South Africa’s racially selective Black Economic Empowerment (BEE) policy utilizes a points system to award economic advantages to businesses with a significant percentage of black ownership and/or management. The policy has gone through several major revisions and has been a flash-point for debate in South African political theater. Black Economic Empowerment (BEE) projects in the South African agricultural sector have an alarmingly high failure rate.
However, a BEE citrus project in the Upper Olifants River Valley near Citrusdal in the Western Cape has proved to be an exception. Cedar Citrus started in 1999 due to unique co-operation between 32 of ALG Estate’s farm laborers, where every individual received his own share of Citrus land. ALG Estates is a family operation of 6 farms producing some 18,000 tons of citrus a year mostly for the export market.
In the first year more than 24,000 trees were planted by Cedar Citrus and a further 12,000 where planted in 2002. Cedar Citrus started making a profit in 2010. In 2012 it paid off its startup loan to the Industrial Development Council and is now expanding its operations with the purchase of additional farm land.
During 2015, the company exported 1,500 tons of citrus from their production unit of 36 hectares realizing a total turnover of R12 million for the year.
In their next move towards more financial independence the workers jointly decided to plough back their profits and extended their operations by purchasing additional farmland to plant more citrus for the export market. 92 hectares of additional farmland has therefore been purchased on which new citrus orchards will be established.
This of course was only made possible being part of a bigger organization such as ALG Estates. Their employer is an established citrus exporter. “Constant mentorship combined with in-house training and being part of an established value-adding export chain are the necessary ingredients for success in an operation such as this,” says Gerrit van der Merwe, CEO of ALG Estates.
“Cedar Citrus is managed as one of our production units that receives continual expert external advise from professional entomologists and horticulturalists that specialize in citrus management. This is essential for pest and disease control as well as general orchard health. We also handle all their admin such as HR, financial administration and record keeping. External chartered accountants audit the company annually.
“All 32 shareholders are furthermore employed in our various operations such as production, processing, packaging, marketing and general administration. Three of the shareholders occupy middle management positions while two are directors with executive powers. This ensures that they grow with our own operation and establish their own independence.
“Over the last few years the Cedar Citrus patch of 36 hectares coincidentally turned out to be the most lucrative of all the production units on our six farms. They produce mostly popular soft citrus varieties such as Morr and Orr as well as navels, which are exported to North America, Europe and sold locally to the Woolworths supermarket chain. We are especially pleased that the 32 shareholders of Cedar Citrus jointly decided to waive their profit payouts from the company and rather re-invest it in the expansion of their own operation,” says Van der Merwe.
The first phase of the company’s extension on the newly acquired land will be to plant 20 hectares of new popular varieties for the export market. This necessitates infrastructure such as a farm shed, farm manager housing on site, electricity, drainage, water supply and a pump house to irrigate the new orchards. It takes five years for a newly established citrus orchard to get into full production and ten years to make a profit on the initial capital outlay. The Western Cape government awarded Cedar Citrus’ good performance over the years various rewards such as 4 crate wagons, a trailer, and recently a brand new John Deer tractor.
“Cedar Citrus is one of the best performing projects of its kind in South Africa and the envy of many farmers country-wide. Not only is the project a financial success, richly compensating the beneficiaries, but a very good example of how BEE schemes should be implemented and managed in South Africa. Congratulations to Gerrit and his team at ALG Estates on this beautiful project,” says Charl Senekal, the country’s largest private sugar producer and chairman of Pro-Agri Forum the exclusive club of former South African winners of the Farmer of the Year Award.
Anthony Penderis on behalf of ALG Estates produced this report. Some portions were edited for publication in Africa Agribusiness Magazine by Alex Hitzemann
Gerrit van der Merwe: 082 569 8787; firstname.lastname@example.org
Anthony Penderis: 084 306 0331; email@example.com