This is the second article on this important community project. As TWKM’s Director of Corporate Services says in the Prospectus, the benefits for local small farmers and the workers should be considered together. If such a project is shown to be successful, other similar ventures could be considered throughout the TWKM area.
STRUCTURE OF THE VENTURE
There are a number of concerns in respect of the business structure proposed:
- Security of the 850 worker shares. Will the shares be preferential with a fixed interest rate, or Ordinary shares that are often only partially repaid in the event of sale or liquidation of the business?
- What value will the shares have in the event of voluntary termination of contract, dismissal or retrenchment of the worker, prior to the first dividend being paid?
- How will the shares be valued, will their value accrue annually, are they transferable?
- What is the relationship between Two-a-Day (Pty) Ltd and the preferred BBBEE investor?
- Who will be the de facto legal owner of this specific business?
- What security of tenure applies to the 150 or so workers who will live on the farm, particularly during the first 10 years of employment?
- What is the meaning of the statement reported by Greyton Council that about 50% of the Trust workers will come from outside Ward 2?
- Details of the Trust scheme are requested;
- Transfer value of beneficiary rights from the trust to employees is said to depend on whether they are ‘good’ or ‘bad’ leavers – how are these criteria defined, and what is the difference in transfer value?
- What is the anticipated dividend value?
- Is Two-a-Day (Pty) prepared to consider any variation to the current venture structure?
Answers to some of the question above will determine the importance of the shares, for example as security for a bank loan, and the risks of non-payment of the dividend.
According to TWKM, the successful tenderer must submit a detailed business plan. Will this include cash flows? How will this business plan be assessed and by whom?
Broad-based Black Economic Empowerment
Statements in the Prospectus that the investment company, with a 1/3 share of the venture, should be 75% BBBEE owned and that the target for 2019 for the venture is 19% BBEEE ownership are of little use in understanding the BBBEE status of the business from the layman’s point of view. The relevant legislation is Act 46 of 2013 and Notice 1019 of 11 October 2013.
A generic score card measures the total contribution that a business makes to BBBEE in terms of ownership, day-to-day and strategic management and control, representation at each management level, skills development, preferential employment, enterprise development and socio-economic development. The points scored rate the business’s status against targets. The most important element is ownership, which includes voting rights, economic interest (e.g. dividends) and actual value of ownership. The agricultural sector scorecard rates ownership and skills development as the priority elements.
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Ward 2 Forum Team
Hi. Many thanks for flagging a number of business plan orientated questions, and current business structure proposal questions. These will be easier to further solidify once any business plan is made available – assuming that it can be?
The ownership, transfer or sale question seems to be outstanding at this point. My limited grasp of the current position is that the land was migrated to the control of TWK via a change in legal structure, and if so, this of course needs to be stress tested. For two salient points, clarity on the right to sell also provides clarity on the security of ownership. For all parties involved this must be rock solid as a constitutional challenge may ensue. The second part of this relates to the historical allocation of the land, its defined use and associated attachment to the bequests described in the last will and testament of Herbert Vigne. This is more than a nostalgic nod to the founder of the community, it in effect determines intent, and likely describes a trail of ownership that needs careful legal appraisal. I look forward to reading about such discovery and process in due course. The overall intent to increase agricultural viability, and with it local employment certainly has merits, but more than one proposal (land use plan), even if by the same primary financing cooperative may be required to ensure all parties and the environment achieve the most equitable and beneficial long term outcome.