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South Africa’s KWV sold in major black empowerment deal

In the biggest black empowerment deal to date, South Africa’s second-largest producer KWV is to sell 25% of its shares at a discounted price to an investment company.

The transaction is worth some R200m (€25.4m). The business will be run by Pethogo Investments as a trust alongside ‘empowerment groupings’ such as women’s groups and disabled groups.

The government-approved South African Wine Industry Trust (SAWIT) is committed to increasing black ownership in the Cape by 25% by 2010.

Currently less than 1% of South African wineries are under black ownership – far less than other South African industries such as tourism, mining or banking. The KWV deal precedes an official black empowerment charter for the wine industry to be unveiled next month.

SAWIT has facilitated a number of Black Economic Empowerment deals over the last few years. Farms have been either sold outright – as with Mont Rochelle in Franschoek (to a Rwandan businessman) or ownership has been transferred to the workers via loans and grants.

Properties transferred so far include Bouwland Winery, Fair Valley, New Beginnings, Freedom Road and Thandi. Last year’s handover of Boschendal, one of the oldest vineyards in the country, for R323m (€41m), was seen as a benchmark in black empowerment.

The schemes, and SAWIT’s involvement in the deals, have not been without controversy. Prominent commentators – including President Thabo Mbeki’s brother, and non-governmental organisations like Christian Aid – have criticised them as enriching a black elite and leaving the workers no better off.

SAWIT chairman Gavin Pieterse said earlier this year, ‘Productivity is a consequence of ownership. This is the way to bring blacks into the mainstream of the economy.’

KWV’s chief executive Willem Barnard said the firm was offering the shares to Pethogo – a black-led investment group – at a discounted price because it was ‘in the interests of the company.’

Pethogo chief Victor Christian said they were ‘taking the lead in an industry sector which has yet to create an empowerment charter.’

Written by Lalage Snow

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