OMLW112 – Transformation – what is happening on the ground
04 January 2016
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This is Old Mutual Live, time to chat some more wine. I’m Brad Brown by the way. Thank you so much for joining us today and returning onto the podcast. We spoke a short while ago. A little bit about some of the things that are happening within the industry from a transformation and development perspective. He joins us once again, the transformation development manager at VinPro, Phillip Bowes. Welcome onto Old Mutual Live. Thanks for taking the time to chat to us. Welcome back.
Phil Bowes: Thank you, Brad.
BB: Phil the last time we spoke, we spoke a little bit about what’s going on within the industry from a sort of development and transformation perspective and we touched on job creation, ethical trade, and social investment training as well.
I wanted to chat a little bit about enterprise development because that is pretty important when it comes to matters of transformation within the wine industry. This is something that VinPro’s really passionate and something that you’re really passionate about as well.
PB: Ja, absolutely. It’s really important for us and for our sustainability and those of the new entrants coming into the business.
Wine enterprise development in South Africa
BB: Let’s look at the way things stand right now from an enterprise development perspective in South Africa, how are we faring?
PB: Well, the wine industry, many would argue are a little behind in terms of the definition of co-ownership or ownership of land or businesses within the industry. But nonetheless one cannot take anything away from the roughly 60 black-owned production units which is in the region of 2 500 hectares at an average market value of R 200 000 per hectare.
But in some instances, that value is far more than R 200 000 depending on what region somebody is farming in.
It’s quite difficult to accurately express the black ownership as a percentage since some vineyards are owned by companies. Then they’re shareholding in some fairly complicated shareholding structures. But in our best estimates we reckon about 2.5 % of the area under vineyards are owned by black producers.
Furthermore, you’ve got about 30 black-owned brands. In other words, intermediaries who don’t necessarily have land but who own a brand in the market. You’ve seen many of them on the shelves sold locally and many of them are sold overseas as well.
These are producers who will market a line of products under their own brand, under shared supply agreements and then they will conduct their business like that. Support from industry to these businesses includes advice in all manner of technical areas and then enterprise and business management as well.
BB: Okay so as it stands right now that’s what’s happening. What’s the wine industry striving towards with regards to transformation and land reform, Phil?
What are the transformation goals?
PB: Well, you know like I said, it’s very important to us so we look at fast tracking transformation initiatives in partnership with government. This the key priority in the SA wine and brandy industries. The wine industry has embarked on an interesting journey to craft a new cohesive industry strategy called the WISE strategy.
That stands for the Wine Industry Strategic Exercise and it’s resulted in ten new projects with various class orders which include; a land reform and transformation plan, a wine tourism baseline study and strategy development and a number of things, technology transfer and innovation strategy in the wine industry value chain and wine social contact agreement.
Now that’s a long mouthful but I think what’s important about the wine social contact agreement is. We’re looking for a contract where labour industry and government co-sign on the designation of responsibilities and mandates. We hope to get there through what we call the wine industry value chain round table.
We think about new countries. In other words, black entrants are coming into our industry. It’s also good to explore new avenues of marketing the product. China, Africa, and America are important to us and under the WISE initiative there are several. There’s a bit of research going on in each of those countries, very, very big investments, a lot of coordination and different parties for the same focus. Now the WISE strategy will be finalised which means there’ll be interesting results disseminated from that process towards the end of this year. So in 2016 we should see some of that implemented.
Some further developments from WISE are at the appointment of a lobbyist or a stakeholder manager in Pretoria as well as a wine industry value chain round table like I’ve just mentioned. The round table has no head and has no tail so labour industry and government all sit with people standing around the round table determining how to transform the industry into the future.
BB: Ja, I think it’s an important point that you make there that everyone needs to buy into this. It’s not a prescriptive thing. It’s something that everyone has a vested interest in and that’s exactly what VinPro does. Tell me a little bit about your role in promoting transformation through the services and the VinPro foundation as sort of in the industry as a whole, Phil.
The role of VinPro in the industry
PB: VinPro has a number of different delivery mechanisms and I don’t want to confuse anybody in terms of the detail of delivery mechanisms. But yes, there’s a VinPro foundation and then there’s a BEE desk which I manage with a small staff. Really competent people but the BEE desk for example, develops and implements a suite of consulting and training services. With a view to reducing the risks posed by economic transformation in the industry.
So transformation is good and necessary but there are risks to parties involved in it. We try to mitigate those risks so the process entails closed cooperation with government as you say. Then the important functionaries of government who might carry extra technical support or who carry funding. An example of an area where we work really closely with government is in the comprehensive agricultural support programme. Where VinPro gets involved in helping to adjudicate over applications for ground funding under the Dora legislation.
Now that’s a whole lot of jargon but in short it’s helping emerging farmers in our industry to access some cheap money in order to get their businesses going. We find that really, really important support and we’re thankful to the Department of Agriculture in the Western Cape in particular for that.
Furthermore, VinPro has with black labour and producers and government partners established the transformation committee. Now one has to, with these programmes be really transparent about how you disseminate funding, how you adjudicate over applications needs to be really clear. The role of this committee, which is a multi-stakeholder committee, as I quickly described is to make sure that those levy funding spends that I discussed shortly in the previous podcast, are spent responsibly and in line with what one would call transformation and not something else.
VinPro Capital is a newly established funding mechanism where we’re looking to partner with commercial banks or other institutions where we can have a shared responsibility in lending to enterprises seeking to look at developing their black components. So the foundation itself, the VinPro Foundation, as I said just now, I don’t want to confuse anybody with the delivery mechanisms. But we sync with the foundation to look at social work support.
The flagship for all the social web support programme is for example, the ARA Western Cape Department of Agriculture and VinPro triad if you want to call it that. Where the softer needs and the really important social needs on farms are taken care of in a collaborative effort. Under the foundation we fund bursaries and training also.
BB: All right so some great things happening within the industry. Phil, I think that’s amazing. If people want to find out more about VinPro and what you guys do, where can they find out more?
PB: Well, they can email me at mailto:email@example.com.
BB: It’s as simple as that. We’ll pop those details in the show notes of this episode of Old Mutual Live. Phil, thank you so much for your time. Much appreciated and ja thank you for that insight. It’s always fascinating to see what’s going on behind the scenes. So often people just think oh, it’s a bottle of wine on the shelf but there’s lots of different factors in play and lots of different things that go into producing that bottle of wine.
PB: Indeed Brad and thank you for the opportunity. I guess we’re scratching the surface but we’re certainly committed to this and I think everybody involved in the wine industry is working to make it work.
BB: Fantastic, Phil. Thank you so much. Have yourself a great festive season and I hope 2016 is your best one yet.
PB: Same to you and thank you to Old Mutual Live as well for this opportunity.