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Published:  23 July, 2008

By Jack Hibberd

South African wine producer KWV completed the biggest-ever black empowerment deal in South African agriculture's history last week, with the sale of just over a quarter of its shares to Phetogo, a black empowerment consortium. According to Dr Willem Barnard, chief executive of KWV, the deal represents the benchmark for the rest of the South African agricultural sector. We set ourselves three objectives in the process, all of which have been met. Firstly, we wanted it to be a commercial transaction in the best interests of all of our shareholders; secondly, we wanted it to be a broadly based transaction that avoids the criticism, levelled at similar deals in other South African industries, that all empowerment deals do is to make a few rich blacks richer; thirdly, we did not want the deal to be just a flash in the pan, and so our partners commit for at least 10 years, which we think will be the amount of time it will take for the capital debt to be redeemed from the dividend flow.' Phetogo will also gain two seats on the board, one of which will be for the consortium's head, Victor Christian, the first black chartered accountant in South Africa. Christian heads a consortium consisting of the KWV Employee Empowerment Trust, the Black Association for the Wine and Spirit Industry, EPA Development Group, the National African Farmers Union and two associations that represent black on- and off-trade retailers. Phetogo is now the largest single shareholder in KWV. Dr Barnard explained that his major worry was that the deal would be used as a Trojan Horse for a hostile takeover, with the empowerment group immediately selling out to other groups for a small premium on the purchase price - as has happened in other industries following empowerment deals. He said that the way the deal has been structured should avoid this. Christian said that empowerment deals are not an exact science', and that full details of how the members of the consortium would benefit have not been decided, but that as well as direct financial gain, educational projects, regeneration and other social projects will play a role. Dr Barnard added: The financial sector has welcomed the deal and recognised the benefits this gives to KWV. We are the first of the major companies to go through this process and have a two- or three-year head start on the rest of the sector. Now we can look forward.'