Land reform's poster child goes sour as debts mount
A flagship land-reform wine farm has flopped less than a year after it was touted as the future of winelands transformation.
Solms Delta, an owner-worker partnership in the Franschhoek valley founded by neuroscientist Mark Solms, has gone into business rescue after being unable to pay its debts.
Solms and his philanthropist neighbour Richard Astor made headlines several years ago when they mortgaged their farms to buy a third property for their workers. However, the pair appear to have miscalculated the cost of running a successful wine-farming operation.There was more fanfare last year when the National Empowerment Fund increased the workers' share of the farms' combined landholding to 50% in a R65-million deal that helped offset some of the mortgage debt.
Land Reform Minister Gugile Nkwinti visited in December and commended Solms and Astor for setting a land-reform benchmark. He said the deal mirrored his department's 50/50 Strengthening the Relative Rights of Workers programme. The NEF also acquired a 5% equity stake in the business.
Too many overheads
In terms of the deal, the government agreed to fund a business turnaround strategy aimed at making the farm profitable. But funding delays prompted a cash-flow crisis.
In an affidavit deposed last month, Solms-Delta chief executive Craig MacGillivray said the company had "originally placed too much emphasis on its social responsibilities to the detriment of profitability and as a result was overly staffed, top heavy and carried too many overheads".
He said the turnaround strategy was based on funding flowing from shareholders, "but for a number of unforeseen circumstances the funding has been delayed".
Solms said he was still determined to make the business succeed."I wouldn't have put in as much money if I didn't believe it could work in the long term," he said.
"Richard and I have invested not only financially but emotionally as well. I came back to South Africa [he left in 1988 for several years] to set this up; it is very much a part of everything that I am about."
Solms said efforts to uplift the personal circumstances of beneficiaries placed a strain on resources.
"Solms Delta took the view long ago that workers needed to see benefits of ownership from the outset.
"In view of our country's history, they cannot be expected to trust that their efforts today will benefit their grandchildren tomorrow," he said.
"For this reason, we introduced educational, healthcare and recreational programmes before the company reached profitability. Obviously we need to remain profitable for our approach to be sustainable. Hence the need for a turnaround strategy."
In a joint statement, the NEF and the Department of Land Reform and Rural Development insisted Solms Delta was still on track. Ensuring a sustainable business was the reason the government had invested, it said.
"The business was experiencing challenges and a commercial bank was threatening to liquidate the business. The government investment assisted with settling the debt with the commercial bank, and as part of the acquisition the government negotiated for the workers to acquire shares.