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EMPOWERMENT: Oceana's Empowerment Problems


Recent Western Cape Business News

FISHING giant Oceana last month launched the ‘second wave’ of its empowerment scheme – an event that would not normally elicit much interest were it not for some hectic transformation issues tangling lines in the local waters.

The ‘second wave’ of BEE involves the Khula Trust Share Scheme – the company’s black employee share trust - offering employees at Lamberts Bay Foods participatory rights to shares in Oceana. Lamberts Bay Foods has got squid all to do with fishing these days – housing a french fries (chips, if you will) facility where there was once a thriving fishing business.

To date the Khula scheme has produced tangible rewards to BEE participants. Oceana reports that since its inception, the Khula Trust has paid out around R76 million in the form of dividends – which, by way of illustration, is more than half the current market value for Sekunjalo Investments, the empowerment company that owns Premier Fishing.

Oceana’s second phase will allocate participatory rights to 7.9 million shares to existing Khula Trust beneficiaries, as well as new employees who joined Oceana in the period since January 2007 until 1 May 2010. The accrued capital value of the Khula shares to be allocated is currently more than R100 million (based on Oceana’s current share price on the JSE).

Oceana CEO Francois Kuttel says Oceana is committed to transformation and was BEE-compliant before legislation required it when in 1994 the company embarked on a process to transform the ownership of the group (in a transaction involving Don Ncube’s Real Africa Holdings).

When Real Africa Holdings (now a casino holding company) lost its BEE status Oceana’s ‘follow-up’ BEE transaction in 2006 saw the sale of 22.4% of the shares in Oceana to a BEE consortium - which included Brimstone Investment Company and the Khula Trust.

Kuttel says the Khula Trust reflects Oceana’s continued commitment to broad-based BEE and its adherence to the requirements of the BEE Act and the Codes of Good Practice.

That’s all good and well – but transformation is a thorny issue for Oceana. In the background, Oceana is locked in a potentially ugly court battle over a frustrating situation around the transferring of fishing rights between companies.

Oceana – like most of the bigger fishing companies – is looking to extend its influence via the acquisition of long-term fishing rights.

But there’s a hitch. The Marine Coastal Management regulations stipulate that such transfers may not compromise BEE in any way. In other words a 100% black owned company cannot sell its fishing rights to a company that only has a BEE ownership of 34.9%.

Financial Mail recently reported that Oceana and its subsidiary, Blue Continent Products, were taking government to court - reportedly frustrated that its five applications to acquire fishing rights from other parties in the last two years were declined or ignored by MCM.

According to the Financial Mail, the rules for the transfer of rights stress black ownership and management rather than the broad-based socio-economic impact of BEE initiatives.

This is problematic for Oceana. The company may be a pioneer in empowerment (not only in its sector but in all corporate SA) but the fact is that Oceana – controlled by food giant Tiger Brands – is unlikely to be black controlled or black managed in the foreseeable future.

Oceana is also by far the biggest fishing player and dominates key sectors of the industry. With so many small fishermen and fishing entities clamouring (and apparently bending President Jacob Zuma’s ear recently) for more than just a subsistence existence, being the biggest player in the sector is not an enviable position. This is especially true if things turn increasingly political (remembering the ANC has lost its grip in the Western Cape).

But Oceana may be justified at being miffed at the MCM’s approach to the transferring of fishing rights. Not only does the group empower its staff, but it also pulls it’s weight in community development.

Kuttel says that within the local Cederberg economy, Lamberts Bay Foods’ estimated contribution to GDP is approximately 10%.

It is trite that the presence of a big corporation in the area shelters the labour force from market and seasonal employment fluctuations.”

He discloses that annually the wage bill of the Lamberts Bay operation is almost R20 million, which impacts directly on the broader regional economy.

Kuttel stresses that Oceana remains committed to ensuring the sustainability of the French Fries operation at Lamberts Bay. “We look forward to partnering with government in future projects that will benefit the local community.”

One also has to put Oceana’s efforts at Lamberts Bay Foods into historical perspective.

Kuttel says that in the nineties a combination of factors impacted on Oceana’s fishing operations in Lamberts Bay – most notably the migration of the fish resource southwards, government’s policy of re-distributing fishing rights and declining quota allocations.

This forced the company to consider closing the fishmeal plant – naturally a difficult decision in a community almost totally dependent on fishing.

Kuttel says that following discussions with the community and employees an agreement was reached that Oceana would investigate alternative job creation possibilities.

While today the french fries operation continues to provide an economic anchor in Lamberts Bay, it was not smooth sailing.

The french fries operation is not ideally located from a geographical point of view as the Sandveld potatoes are not optimally fit for purpose. Lambert’s Bay is also a good distance away from key markets in fast food and restaurants –with some markets being as far as 1 400km away.

But by sour-cing potatoes locally, Kuttel says the Lamberts Bay operation supports between 800 and 900 equivalent agricultural jobs nationally.

He reckons a further 440 indirect jobs are supported in the surrounding Cederberg region.

Currently, in the area north of St Helena Bay, Lamberts Bay Foods is the largest single employer in any coastal town in South Africa, employing 240 employees. In total, more than 2 200 employment opportunities are supported nationally through the operation.”

Kuttel points out that the potato products plant now employs substantially more people than the fish meal plant ever did.

Many seasonal fishing jobs were replaced with permanent jobs in the French fry facility which assists significantly in maintaining livelihoods throughout the year, rather than only during the fishing seasons.”

Whether the MCM will give due consideration to these tangible empowerment efforts – and look past formulaic BEE percentages – remains to be seen.

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