AFASA'S REACTION TO MEDIA REPORTS ABOUT AFGRI'S TRANSACTION
14 Oct 2013
For Immediate Release
AFASA'S REACTION TO MEDIA REPORTS ABOUT AFGRI'S TRANSACTION
There unfortunately seems to be some confusion with regards the position of the AFASA consortium with regards to the AFGRI transaction and the opposition of AFASA to the current deal as reported in various news reports.
The AFASA consortium representing firstly the 12,000 emerging black small holder and commercial farmers who constitute AFASA also included business people with very strong links and vast expertise in the agricultural sector, financial services and business in general. A key consortium member was to be broad based Women's Agricultural Groupings and staff and workers of Afgri currently represented in a Trust owning shares in Afgri Operations but now to be represented directly in the holding company. AFASA itself over and above representing farmer member's also has a chamber that deals with agribusinesses. The groupings expertise in agriculture and the agricultural value chain particularly of blacks involved directly in the sector is unmatched hence the rationale for acquiring AFGRI and using it at a base for further direct black participation across the entire agricultural value chain in South African and beyond South Africa's borders. However, the AFASA consortium has from the onset made it very clear that it sees South Africa as home and that the needs of South Africa and the food security imperatives here must come first including ensuring that vehicles like Afgri become transformative agents in what continues to be a very closed sector to blacks.
It therefore seems very strange and in fact contradictory to learn that the as yet to be named BEE groupings seeking a 35% share in Afgri can in any way consider themselves to be more transformative that the AFASA consortium which sought control and much higher ownership of AFGRI at an effective 60%. AFASA talked to the need for AFGRI to be a landmark transaction in South Africa - which is hard to image the 35% stake being able to do the same. A 60% direct stake represents a level of ownership and control that dictates the direction and future of a company much more directly than 35%, which implies a "come along" rather that a new "black industrialist" path and "active" rather than "passive". Whilst, it is certainly not the aim of AFASA to cast aspersions on other BEE groupings (noting that we cannot benefit at all from antagonism against one another) - one must wonder how a grouping as yet to be confirmed could possibly aspire to influence the major "foreign investors" with investment mandates that more often than not are very specific and have little to do with transformation initiatives and in dealing with the historic legacies of South Africa. AgriGroupe who not only announced the transaction pre-determined the structure and nature of the deal including the very high price on offer for the shares. A 49% premium is not a normal offer for a company that has under-performed the market for such a longtime, and really only reflects the fact that at $240,0m Afgri is very cheap to foreign parties with deep pockets. It was in this pre-determination of the structure, role to be played by various parties going forward and nature of the deal that led to a fall out between AgriGroupe with the AFASA consortium.
AgriGroupe total resistance to active participation by members of the AFASA consortium going forward was a major point of contention. With that in mind one can only imagine how the new BEE grouping's can hope to fare better going forward with less say and influence at 35%? Yes, the inclusion of a 35% BEE element is imminently better than the current shareholding and participation structure. However, to try to argue and present the case that this is a better transaction for SA Inc, when the AFASA attempt at control and active participation with a reconstituted management represented so much more is fooling nobody. Again, it is obvious that existing management has formed a bulwark against true transformation and chosen the soft option of foreign shareholders over the more important goal of economic transformation and liberation of blacks in the South African economy. The current share price is a reflection of the performance of management over time - though not necessarily in the short term hence the need for a revamp.
The very nice statements made by AgriGroupe are in essence no different from those often heard from investors who have come and pillaged the hard worked for (cheap) assets in South Africa. There is no talk off planned new investment but of support to the "commitments made to food security in South Africa" and Africa and to "support governments goals and policies around local small holder farmers". If the current initiatives by Afgri in this direction and anything to go by black small holder farmers in for a very long and painful wait. The 35% talked about in effect represent 15% by one of SA's largest institutional investor (no guessing who since they must be committed to this kind of investment) and an effective 20% by the new BEE shareholders. At an effective 20% the new BEE investors are not even entitled to board seats or veto rights which kick at 25 +1% unless at the behest and mercy of the majority AgriGroupe shareholders. This can only be very dis-empowering to the newly empowered, who having to go with the AgriGroupe deal must pay or raise the money at the R7 going price.
AFASA wishes to put in or record that as the legitimate black farmers and farmer groups' representative in South Africa it certainly supports new investments in infrastructure, capacity building and new technology and the like. The current deal - does not offer any of this to South Africa and the unsuspecting public rather is secures strategic assets to entities with little to no allegiance to SA Inc. The AgriGroupe shareholders are investors who are at arm's length away looking for "cheap and available assets" that can offer a quick return which is very reasonable and to be expected. However, these are not the type of investor's South African agriculture or the government is looking for. AFASA again calls on government to intervene in whatever manner possible to prevent this injustice from happening in the name of investment and BEE. SA Inc simply has too much to lose on this kind of transaction and we shall all live to regret the decision to forego these assets built on the sweat and toil of commercial farmers and the SA tax payer. To expect that SA Inc will one day be able to replace the over R10, 0bn worth of strategic assets bought for a measly R2, 4 bn is hard to imagine. Global precedence exists where governments step in to protect critical and strategic assets even in such free and democratic countries including the USA, Canada and Norway. Hence, there is both precedence and strong rational for some intervention.
The Presidency has announced that the launch of the Fetsa Tlala initiative under the Integrated Food Security and Nutrition Initiative (IFSNI) will take place in the coming weeks with massive state support to black farmers and rural dwellers. This initiative is strongly and enthusiastically supported by AFASA which is a proponent of making our communities more self sufficient and in control of their own destinies. Grain SA and others also support this initiative which should see more land under cultivation and more agricultural production from black farmers. What could be more telling and important in the minds of black farmers and agribusinesses but to be buying, selling, marketing and trading from a company they collectively own a share in? What could this transaction achieve in the psyche and emotions of South Africa Inc particularly in the very strained agricultural arena? This dream is being quashed by "greedy self serving" investors and their compliant partners. We propose that the BEE partners join hands with AFASA in pursuing the dream of real empowerment and not settle so easily for the 35%. There is room and space to truly be a change agent in partnership with the AFASA consortium and its partners. Government must assist the AFASA consortium and likeminded groupings to ensure that these jewels of South Africa remain in local hand. AFASA is stead-fast in pursuit of its goals of true transformation in the agriculture sector. Our future must be in our hands and control especially where our food security and national interests are concerned.