A transformative and replicable broad-based initiative within the agricultural sector has recently come on-stream via the conclusion of a transaction between citrus and grape farmer, Schoonbee Landgoed, and pioneering black-owned company, Thebe Investment Corporation. 

Known as Project CHANGE, this initiative can potentially provide an innovative, long-term model for partnerships between established white commercial farmers and black institutional investors, while empowering local communities and supporting new entrant (including smallholder) farmers in achieving financial viability.

A profit-for-purpose agricultural model

Project CHANGE is an initiative focused on the commercial production, packaging, marketing and sales of table grapes and citrus. Grounded in the spirit and principles of the National Development Plan, the goal is to become a market-leading, black-owned ‘profit-for-purpose’ farming initiative that is able to service local and international markets with premium products. At the same time it strives to empower the communities involved in the project through job creation and will provide education, training, and healthcare services.

The project consists of two recently developed farms with existing income contributed by Schoonbee Landgoed. It also includes Thebe Investment Corporation’s equity contribution towards the acquisition of just under 400ha of additional land with recognised water rights for further citrus and grape development. Packhouses will be constructed as well as three primary healthcare and educational facilities for the surrounding communities.

It is anticipated that Project CHANGE will create over 1 200 new jobs with an estimated impact on 8 000 jobs throughout the complete value chain in the country. 

A shared vision

Project CHANGE is the brainchild of Schoonbee Landgoed, an established citrus and grape farming enterprise and exporter situated in Groblersdal’s Loskop Valley in the Limpopo province. The family-run business has been operating in the area for the past 75 years. It has recently embarked on a transformation process moving from a family-based business to a corporate business based on shared principles.  

This notion strongly resonated with Thebe Investment Corporation, which adopts a long-term investment outlook that combines a passion for community enablement without compromising on sound commercial principles. It was through this shared vision that Project CHANGE emerged.

Co-owner Gert Schoonbee says: “Over the last two years we have been working intensively to develop a profit-for-purpose concept with the objective of creating shared value, during which time we consulted with various stakeholders in the surrounding communities. We concluded that we could maximise the social impact in our area by offering our people dignity while addressing three specific social needs. The first is employment for people living in the Loskop Valley and surrounds. Secondly, we want to support worker and wider community health by providing primary healthcare facilities and services. 

“Thirdly, to unlock human capability and break the systemic cycle of poverty, we are providing education and training opportunities to our workers, their children and budding entrepreneurs in the surrounding communities. Essentially, while citrus and grapes may be the core business of Project CHANGE, the core purpose is to affect change in agriculture through empowerment and upliftment.” 

Long-term sustainability for stakeholders

Mokgethi Tshabalala, Thebe Investment Corporation’s general manager for agro-processing, says that addressing the primary healthcare and education needs of the community have been ‘baked’ into the commercial model and will not only depend on the inflow of dividends. This is due to the capital-intensive nature of Project CHANGE. In addition, the size of the 16 000 strong worker base and immediate community would result in a minimal dividend per family.

Both Thebe Investment Corporation and Schoonbee Landgoed realise that this model adopted for Project CHANGE may put pressure on the short-term financial returns of shareholders. However, they believe it ensures long-term sustainability for all stakeholders. The partnership is therefore a deliberate shift away from a singular focus on the wealth of shareholders to the long-term health of the company.

Enabling mainstream market entry

From a business perspective, Project CHANGE will have access to the local and international retail markets that Schoonbee Landgoed currently services. Around 70% of CHANGE’s volumes will be earmarked for export to 60 countries.

Joint management of Project CHANGE will harness Schoonbee Landgoed’s skills, market and cultivar access, packing facilities and partnerships while leveraging Thebe’s track record in investment management and community engagement. A joined transformation plan between Project CHANGE and Schoonbee Landgoed will drive diversity with a specific focus on gender, race and youth.

A partnership for change

Project CHANGE has been made possible through the partnership between Schoonbee Landgoed and Thebe Investment Corporation, as well as debt financing provided by the Land Bank. Says Schoonbee: “In Thebe Investment Corporation we found an institutional investor who shares the ethos of long-term sustainability that overrides the potential influence of and dependence on a single individual. This perfectly mirrors the values of Schoonbee Landgoed.”

Thebe Investment Corporation’s mandate is to align with government’s key priorities in the National Development Plan. This includes, among others, support and development of black-owned farms and smallholder farmers so as to strengthen commercial viability and aggregate them into the mainstream supply chain.  

To achieve this, a primary agricultural conduit is required that not only has access to an existing off-take network of its own, but who can also assist new entrants with the quality and consistency of supply required by the off-takers. Project CHANGE will result in such a conduit.

Tshabalala says that Thebe seeks to be the key partner and enabler in the food sector to develop and expand both the domestic and export markets across the value chain, while developing communities remains part of the bottom line.

“Project CHANGE will provide a powerful working example of this. It will leverage Schoonbee’s and Thebe’s institutional knowledge and decades of farming experience, community empowerment and investment management. We firmly believe that although agriculture is diverse, the principles where successful commercial farmers partner with institutional black investors and share the created value of the enterprise with their workers and communities have great potential for replication.”

Preparations are in progress

Project CHANGE is already up and running. All the citrus orchards have been planted and 68% of the vineyards have been developed. The necessary packhouses will be built by the end of 2020. The first training and primary healthcare centre will be completed by mid-2020.

Investment banking firm Bravura, which specialises in corporate finance and structured solution services, acted as the corporate advisor to Schoonbee Landgoed and CHANGE. Thebe Investment Corporation contributed equity for the establishment of additional citrus and grape developments, and the Land Bank provided senior debt and mezzanine funding to fund the developments. – Press release, Schoonbee Landgoed & Thebe Investment Corporation