The Western Cape High Court liquidation proceedings next week will decide the future of Solms-Delta wine farm – 22 months after the wine farm’s public launch as part of government’s 50:50 farmworkers’ empowerment programme and after more than a decade of transformation talk by owners, University of Cape Town Professor Mark Solms and British businessman philanthropist Richard Astor.
This wasn’t quite the picking imagined at a wine estate just outside picturesque Franschhoek where empowerment and transformation, and being different, are plugged along with the grape.
Solms-Delta wine estate stretches across over 350-year-old farms, including Zandvliet, Lubeck and a small portion of land that once belonged to Lekkerwijn. It has a well-producing vineyard and cellar; wines from the estate have regularly featured in Platter’s wine guide. There is the deli, the restaurant and tasting room – all the usual wine estate trimmings – but there is also a museum on the history of slaves and previous tenants of the farms and a music centre, Music van de Caab. Those are part of the transformation lore that Solms, since his return to South Africa in 2001, cultivated.
Transformation is a topic that has its own section on the Solms-Delta website – alongside liquidation these days.
Despite having pumped more than R65-million into this project in less than two years – depending on accounts, it’s between R74-million and just over R83-million – the Rural Development and Land Reform Department is walking away, as is the National Empowerment Fund (NEF). Neither is opposing the liquidation, Daily Maverick has confirmed. That means workers are on their own to try to stave off liquidation after a year-long business rescue process that seems to have cost just in professional fees what is owed to the wine estate’s trade creditors.
It was a visit to the Dwarsrivier Valley advice office in January 2018 that finally got Solms-Delta employees not only legal representation, but also independent representation in the affairs of the estate through an elected employees’ committee. The workers have decided to oppose liquidation and are looking at a restructuring of the project to obtain the owner’s shares so they hold 95% of shares, and a cash injection to avoid a post-liquidation ground zero.
Glyn Williams of Chennells Albertyn told Daily Maverick there was no need for a zero sum approach – building up the farm from scratch after liquidation would also require money, like a recapitalisation.
There are various discussions, including with the business rescue practitioner, as Solms indicated he and Astor have agreed to give up their shares.
“We have not yet unpacked the conditions he’s (Solms) imposed. And we would like to also discuss this with government,” said Williams. “It’s not necessary to have this Ground Zero approach.”
Meanwhile, Rural Development and the NEF both said they “are talking with workers” – there has been at least one meeting in August without the worker’s lawyer that Daily Maverick knows of – but to finalise a turn-around strategy, post-liquidation.
Acting Rural Development Director-General Rendani Sadiki told Daily Maverick the project as it was now was not viable:
“Let (it) be liquidated. Let’s implement a new strategy that will see the farm make profit.”
A turnaround plan to empower workers is being finalised.
The NEF, in an emailed response, said it supported the liquidation, and “together with government and farmworkers we’re currently exploring alternative business use of the land in order to achieve sustainable commercial activity”.
Unfortunately, business rescue had been unsuccessful as only government was prepared to invest to turn the business around.
“The previous owners at the time were not prepared to invest additional money in the business and it was difficult to secure another strategic equity partner…”
If anything, these liquidation and business rescue proceedings raise serious questions as to how land reform, land restitution, tenure security and worker share equity are conceptualised and executed.
The Wijn de Caab Trust that was meant to represent the workers’ 45% shareholding in this project never actually did, according to court documents and trust deeds. The trust was established in 2006 – its deeds state the objective as “community development for poor and needy persons… and anti-poverty initiatives” – and identifies as the beneficiary community “the socially, economically or politically disadvantaged individuals, farmworkers and inhabitants of the Franschhoek and Dwars River Valleys, Western Cape…”, not the Solms-Delta farmworkers and their families.
Crucially, the affidavit by Jafta Karoles, known as Fanie on the farm where he’s worked for over 15 years and the only worker representative company director, outlines how although the trust did not represent Solms-Delta workers and their dependants it somehow found a central role in the farm’s land ownership and transformation.
Workers were told “when the business was established in 2003, its employees were informed that they owned a one third share in it, which included the farm”, a statement made repeatedly since, according to Karoles’ affidavit. And since the 50:50 policy project, he said, workers “have been informed that they own one half share in the farm and the business. They were led to believe that this shareholding was through the vehicle of the Wijn de Caab Trust”.
Yet that trust had “never owned a share in farmland forming part of this business”, according to Karoles’ affidavit.
This is important – more later.
Of the five founding trustees, only two were workers and although by January 2018 the number of trustees has increased to 10, only three are workers at the wine estate.
Why would this be important? Because the core of the trustees – Solms and Craig MacGillivray, joined a year later in 2007 by Astor – are also among the directors of the central company, Solms-Delta Wine Estate (Pty Ltd), contracted to the government’s 50:50 policy project.
That trustees are also directors is arguably tantamount to transacting with oneself while pretending to be two different entities. And that the same people are in the trust that is actually meant to be for the workers (45%) as well as part of the company (50%), undermines the intention of the equity shareholder structure. (The NEF holds the remaining 5% due to its financial contributions.)
Why no one in either the Rural Development Department or the NEF queried that, or moved to help establish a trust truly representative of the farmworkers, remains unclear. But Solms has dismissed any untowardness regarding the Wijn de Caab Trust, telling Daily Maverick there had been a trust board resolution that workers on the farm would receive medical aid and education support for all dependents.
“We had workers committees… regular meetings and channels of communications.”
What also remains unclear is why government decided on this project in the first place, given it was unambiguous from its own documents, seen by Daily Maverick, that Solms-Delta by late 2015 had been a loss-making business for the past seven years and could be deemed technically insolvent.
This arises in Karoles’ court documents, which outline how Astor had spent an estimated R260-million since joining Solms in the project years ago.
Departmental documents dated October 2015 seen by Daily Maverick clearly state concerns, including that the business “is currently operating at a R30m ‘loss’ per year” and that the “proposed strategic partner (was) technically insolvent”.
Those concerns were also expressed in an (undated) NEF document that also raised “inexplicably high operating expenses”, clearly stating the acquisition of Solms-Delta as it is operating “is not recommended as per the MTTT (ministerial technical task team) held on the 4th February 2016…” which nevertheless made other recommendations, that ultimately clinched the deal. These included, according to documents seen by Daily Maverick, the establishment of a new company dubbed “Newco” for land acquisition sale of business assets of existing Solms-Delta and working capital, totalling R65-million.
Those numbers later changed, by the way. Why isn’t quite clear. But the R40-million for land in documents setting out the 50:50 transactions in 2016 became R18.8-million, and the R13.5-million for the assets rose to R34.7-million in documentation dated a year later in 2017. What remained steady was the R11.5-million interest free working capital loan from the NEF – although one of the contested narratives in this saga is whether, and by how much, government funding increased before the plug was pulled.
One of the issues the parliamentary State Capture inquiry into Eskom has shown is how documents can be tailored to suit certain outcomes. It remains pure speculation at this stage what, if anything, happened in the back rooms, what has been outlined as the additional recommendation, were exactly what unfolded between April 2016 and the public official launch of the Solms-Delta 50:50 project by then rural development minister Gugile Nkwinti in December 2016.
A new company was formed: Solms-Delta Wine Estates (Pty Ltd) was established in June 2016 with its directors including Solms, Astor and Craig MacGillivray, an auditor at one of Cape Town’s top auditing firms, Mazars, who had left to join Solms and Astor in business as CEO. As mentioned before, Karoles is the sole worker representative director in this company.
The previous company, the 2003 Solms-Delta (Pty Ltd), according to Company and Intellectual Property Commission (CIPC) records, continues to be in business with its directors, Solms, Astor and MacGillivray, whose old auditing firm continues to audit all Solms-Delta company and trust books.
The new Solms-Delta Wine Estate (SDWE) became the main contracting company to the 50:50 policy deal with Rural Development, according to court documents and other documents seen by Daily Maverick, including the R11.5-million interest free loan agreement with the NEF. It also incorporate Solms-Wijn de Caab, a company established in 2004 – again, the directors were Solms, Astor and MacGillivray – to run the hospitality section of the estate, from the restaurant, deli, picnic area and museums to the tours.
Understood to have been signed and sealed in August 2016, the official public launch came in December that year on the farm, and by the time the 2017 Budget vote debates in Parliament came around, the then rural development minister could point to political successes.
“The department has initiated a lot of projects to fight poverty, unemployment and inequality, projects such as 50/50 one household, one hectare; one household, two dairy cows…” said Nkwinti in his budget speech in Parliament on 19 May 2017, pointing to, among others, Solms-Delta employee Sussanna Malgas, in the public gallery.
“Seated here amongst the audience are some of South Africa’s 50-50 pioneers in terms of promoting inclusive agricultural development in our country,” said Nkwinti, according to the Hansard transcript.
Ironically, despite the talk of farmworker empowerment, transformation and rural land reform, the one thing the Solms-Delta workers never had in their grasp was the land.
That land has been registered in the name of “National Government of the Republic of South Africa”, according to Deeds Office documents, since July 2016 at a R18.8-million price tag. Government paid this as part of the 50:50 project.
Previously, the land was owned by entities that had Solms and Astor as directors alongside, on occasion, MacGillivray. Solms’s farm is Zandvliet-Delta, whose namesake company is in deregistration, according to CIPC. Astor owns Lubeck-Delta farm. Adjoining is Deltameer farm which was purchased and brought into Solms-Delta estate by Solms and Astor for the workers as part of Solms and Astor’s own transformation commitment.
“I leased Delta to the partnership with government, Richard leased Lubeck to the partnership with government. The workers leased Deltameer to the government. That was the deal we did with government… It relieved us of the huge debt we incurred to acquire the workers’ land,” Solms told Daily Maverick, indicating a R46-million bond costing R5-million a year had been incurred to purchase Deltameer.
“The partnership (with government) was meant to put us on a different footing so we become commercially viable.”
Government had known this was a loss-making business, said Solms: “We are not a lean, mean capitalist machine. We employed a lot of people to train and upskill.”
When asked where the millions of rand of government funding for the Solms-Delta project went to, Solms said:
“Richard (Astor) and I never, never have extracted a cent from this venture or partnership with government… When you say what happened to the money, it went into a loss making (business).”
So what clinched Solms-Delta’s inclusion as one of 13 projects of government’s Strengthening the Relative Rights of People Working the Land, or 50:50, policy?
Solms’s transformation talk perhaps led officials and others to believe there are low hanging fruit. The transformation pitch, which has been part of Solms-Delta for many years, has been so successful that, for example, in August 2015 Stellenbosch Heritage said how “collateral provided by the Astor and Solms families facilitated the purchase of portions of abutting Deltameer by the farmworkers’ Wijn de Caab Trust”.
Throughout the years Solms pushed the transformation and empowerment rhetoric, and accumulated much positive publicity on the back of curiosity piqued by mingling wine making with academia as a UCT neuropsychology professor, who most recently in June 2018 received the R1.5-million research prize, the Harry Oppenheimer Fellowship Award.
In April 2014 Solms delivered an address entitled “Turning psychoanalysis into wine” to UCT alumni in London as part of the university’s 96th anniversary. Four years earlier Solms and Astor, who appears to be more inclined to keep a low profile, received the 2010 Inyathelo community philanthropy award.
Astor said he was “not in a position to comment now” when called last week, adding he could not say when he would be.
It may not be completely surprising that Solms in an email on Friday expressed concern about reputational damage.
“What is going on at the moment is very destructive, against good people who have made monumental efforts at great personal cost to advance the cause of transformation in the wine industry and agricultural sector, and the South African social fabric in general,” he wrote.
“I would like draw to your attention to the fact that the Solms-Delta partnership (in all of its aspects) was the subject of several research reports and academic dissertations over the years, conducted by independent researchers from various institutions (mainly business schools)… and not one of them ever raised any doubts about whether we were doing what we said we were doing. The same applies to many, many journalists, who have visited us over the years.”
Transformation is enmeshed in the Solms-Delta lore, also on its home page.
“Solms-Delta is known as one of the South Africa’s most progressive wine estates for empowering its previously disadvantaged worker and resident communities through facilitating the sharing of land and equity in the business with them, helping them live with purpose and dignity and working towards restoring some of the injustices of the past.”
The NEF also in its project assessment documents, seen by Daily Maverick, describes Solms-Delta as a “model of transformation in the South African wine industry. The farmworkers as well as residents through the Wijn de Caab Trust share equal ownership with the established wine farmers Mark Solms … and Richard Astor. Each shareholder owns 33.3% in a partnership that is 11 years old today…”
That is, of course, not the case, as the trust deeds show, and as has now emerged from the documents filed in the liquidation proceedings.
But it was all done and dusted towards the end of 2016 with regards to the Solms-Delta 50:50 project – as R65-million was disbursed for 50 hectares of farm 1732 (R18.8-million), assets including those that moved with the old Solms-Delta company to the new company (R34.7-million) and the R11.5-million interest-free working capital loan.
By all accounts the money ran out soon afterwards. According to court documents, in a meeting on 26 April 2018 the NEF advised that aside from the land costs (R18.8-million), R34.7-million had gone towards “the asset price”, R11.5-million for working capital, and “a further R9-million in 2017, a further working capital of R7.5-million and a R1.5-million contingency”.
This brings the total government spent to R83.3-million, according to the court papers. The Rural Development DG told Daily Maverick the cost had been R74-million, the original R65-million, plus R9-million.
On 31 May 2018 Rural Development publicly announced it had pulled the plug on any further funds, effectively triggering the liquidation.
Solms has disputed such government funding. The search for “further investment” had started earlier in 2017, he said, leading to a government undertaking to urgently provide an additional R7.5-million to be followed by an equal R7.5-million contribution by himself and Astor after the government payment, but before November 2017.
But the government money did not and that effectively scuppered the project, according to Solms.
To support his argument, government knew of the urgency for further funding.
“Yet the money never came…”, Solms emailed an NEF document showing agreement by the Ministerial Co-ordinating Committee (MCM) on 10 July 2017 to make R9-million available, acknowledging the if the money was not paid by 12 July there could be a loss of R1-million.
The NEF has a different view.
“While we were in the process of disbursing the funds and appointing the business turnaround strategist, the directors by way of a majority vote resolved that the business be sent to business rescue,” the fund said in written comment.
“The R9-million was subsequently used towards business operations and costs over the business rescue period. Had the R9-million contribution not been made over the period business operation would have ceased.”
On 24 July 2017 SDWE agreed on business rescue with consent of three directors. The NEF representative director Nthabiseng Ntsele agreed three days later, although the document is officially date-stamped 25 July 2017 by the CIPC. Karoles told the Western Cape High Court he never got notice of this meeting.
The business rescue practitioner was in place from 25 July 2017. PwC’s Alison Timme may have had a tough time – her plan to appoint temporary consultants permanently was opposed earlier in 2018, and staff have been aggrieved – although she did manage to even make a tiny profit from the hospitality section during the season, according to documents seen by Daily Maverick.
But her business rescue-related closure of bank accounts cost Solms-Delta R1-million from overseas wine sales – the money was returned to the payer by the banking system – and the cost of business rescue by March 2018 amounted to R3.8-million, or just over half the total owned to trade creditors, according to court papers. Indications are the business rescue costs now stand at around R5.5-million. Presumably that’s being paid from the NEF’s R9-million alongside staff salaries, and other costs such as electricity.
Approached for comment, Timme said “I’m not in a position to comment according to (PwC) company policy” and referred request for comment to “someone in the marketing department”, Sanchia Temkin, who did not respond to a series of phone calls, voicemails and an email from Daily Maverick.
Rural Development Deputy Minister Mcebisi Skwatsha, who unlike his recently appointed political boss minister Maite Nkoana-Mashabane was in the portfolio throughout the Solms-Delta saga, was approached for comment. He indicated he was ill and referred queries to the director-general and the minister. The head of ministerial office, Mashile Mokono, referred enquiries to the director-general.
Sadiki told Daily Maverick the Solms-Delta project was “not viable”, given that already government had spent R74-million and R9-million following the initial R65-million.
“Government is regulated by the PFMA (Public Finance Management Act)… Our continuation in Solms-Delta would be viewed as fruitless, wasteful and irregular expenditure.”
Advised not to oppose the liquidation, Sadiki said:
“We don’t see (the plan proposed by the workers’ lawyers) as a viable option” as the department is working on a plan within the 50:50 policy that is ongoing. According to departmental stats given in Nkwinti’s 2017 budget speech, R680-million had been spent for 4,450 beneficiaries.
“We want to empower the previously unempowered and to ensure a sustainable livelihood for them,” said the acting director-general. “When we’ve finalised (the turnaround plan), we will unveil… then you will have the answers.”
And so the livelihood, security of tenure and future of the Solms-Delta employees, from security to the restaurant and hospitality to the cellar, wine sales and vineyard, remains in suspension – even though the workers themselves have a plan to rescue the project. DM
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