Solms-Delta and government in historic deal

One of the more remarkable moments thus far in the extremely sluggish transformation (in racial terms) of the Cape wine industry has just taken place. There’s been a groundbreaking agreement between the Solms-Delta estate in Franschhoek and the national government: the farm’s workers now take 45% of the business (including brand and land), funded by the government’s National Empowerment Fund, with the NEF itself taking 5%. This entitles the NEF a place on the Board, along with two representatives of the workers, plus Mark Solms and Richard Astor (the two original owners who long ago essentially handed over a third of the business to the farmworkers), and the farm manager.

Delta-Langbroeke

Music: The Delta Langbroeke

For many years now, Solms-Delta has represented by far the most radical gesture towards transformation in an industry which has changed little in structure since the coming of formal democracy to the country in 1994. We have seen not only the establishment of a worker’s trust owning a third of the business in the new regime at the estate, but, just as important, the building of a culture of human dignity through the recognition and celebration of Cape culture, through museums, festivals and historical research. Specifically, the place in Cape winemaking history of the slaves and workers whose vital contributions have been largely ignored by the industry, have been foregrounded.

The vexed question of land-ownership has always, though, been recognised as a central one – and it is this aspect which has been so little addressed in most “empowerment” gestures in a sadly complacent wine industry.

SD-Slave-Wall

History: The slave wall in the museum on Solms-Delta

Giving up of a third of their property was a radical gesture by Mark Solms and the British philanthropist Richard Astor – I suspect it hasn’t made them popular with some of the landowning class in the Western Cape; there’s no question that a few representatives of entrenched have been looking forward to the failure of this experiment in social justice.

Now, with the involvement of the state, there’s a far more solid basis for building on the experiment. Negotiations between Solms-Delta and the Department of Rural Development and Land Reform had been continuing for a long time before the final recent agreement. The transaction makes the business, according to an official statement, “a prototype of the department’s ‘50/50’ programme (‘Strengthening the Relative Rights of Workers’ programme)”.  It involved a R65m transaction.

I confess that, as always when it comes to large sums of money, my head has spun trying to understand the details – I did come out of the spin, however, with a clear understanding that the money underwrites the workers’ ownership, clears the estate’s debts and establishes a firm financial basis for its development through recapitalisation. (In fact, Mark Solms says, the business is already “within a hair’s breadth of profitability, with local sales and exports going well”.) Solms and Astor themselves have further reduced their ownership of land and equity, and not benefited financially from the deal.

Mark Solms – apart from being relieved that the negotiations, which had used up so much of the time and energy that is in short supply for a man with an international career (or careers) as neuroscientist, academic and psychoanalist, are finally over – is very satisfied. “We never set out to be a model”, he told me the other night from a waiting room at OR Tambo Airport (he was on his way to London), “but this is an endorsement by the government of what we’ve done”. He hopes that perhaps Solms-Delta, especially through its new relationship with the state, has pioneered something that might work on a much larger scale.

The statement by the new Board says, in measured tones, in this regard: “This transaction spearheads the DRDLR’s commitment to partnerships between farmers and workers, a concept first proposed by Minister Nkwinti in April 2014. Solms-Delta is the first in a large number of similar transactions.”

solms-markMark Solms knows, however, that transformation within the wine industry “is a huge problem and I don’t believe we’ve cracked it.”

He’s characteritically full of energy and hope, notwithstanding, and spoke of a major new project between Solms-Delta and the Department that he thinks is looking likely. As I understand it, the project involves the building of an African Vintners Alliance, with a large production facility to be established on the Franschhoek estate. The aim of the Alliance would be to facilitate the building of a genuinely significant black-owned component of the Cape wine industry, beyond mere brand-ownership.

The industry, and the world perhaps, will observe with (let’s hope) interest.

6 thoughts on “Solms-Delta and government in historic deal

  1. With people like this, South Africa is getting more interesting. A motive to visit and invest in this wonderful corner of Africa. This is a man of integrity. It is an inevitable process if the country is to progress humanly. I would like to see more comments here.

  2. Perhaps I should have said “directly benefited”, Chris – that might have been closer to accurate. As I understand it, Solms and Astor would have been entitled to pocket X millions from the government’s purchase, but instead ploughed it all back into the estate (in which, of course, they jointly have a 50% interest). But I don’t understand this sort of complex financial stuff, and haven’t really tried to in this case.

  3. I have always been very impressed with the way Solms-Delta market their wines. They use the indigenous history more than any other property and in a very genuine way. But I would be very hesitant to use this as an example of the way for transformation. The Department and Land and rural affairs is spending a lot of money (note: not a loan) to write off debt in a business that is not profitable (according to the owner). Being debt free will help the cash flow though). The current owners (Solms and Aster) walk away with nothing, but also no liabilities.

    DLRA has put made it quite clear that they want to purchase half the farms, but the money paid does not go to the owner. It goes to the community. So imagine a case where you have a debt free farm. This is your only asset. You stand to lose half your wealth. This does not create a conducive environment for confidence in the industry and investment.

    Transformation is sorely needed but this is a cock-eyed model. Far better would be share options in the business that can be paid off in dividends. Unfortunately the wine business is generally not the best return on investment!

  4. Useful comment, Peter. Just two brief responses from me. 1. It does seem that the estate (which had some rather troubled years) is increasingly close to profitability. 2. The problem with share options, I’d suggest (for the government & a tiny proportion of the powerful figures in the wine industry) is that this doesn’t adequately begin to address land ownership. It’s rare, unfortunately, that the ANC shows much interest in black empowerment that reaches down to ordinary workers like this effort does, especially with regard to a stake in the land. A stake whose importance I’m sure you yourself can recognise; it’s not all about money, is it? I suspect that some of the hostility that the whole ambitious Solms Delta project attracts from a section of the industry establishment is precisely because it goes deeper.

    • But share options is ownership.

      I do agree that we need land ownership for non-white people, just not how the Department is proposing. The NDP is a very workable plan as there is a huge amount of land that comes onto the market annually (avg of 5% per year). The problem is that the various departments try to implement their own ideas which are completely against the plans set out in the NDP.

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