ALGEMEEN | GENERAL
1994
1990
2002
1999
1996
2001
Conversion from an agricultural
co-operative to a public company
A NEW BALL GAME
During the late 1990’s and following the new political dispensation, almost all the agricul-
tural co-operatives established under the then prevailing Co-operatives Act, resolved to
convert to public companies.
By Elmarie Joynt
Senwes Group Company Secretary
S
ubsequently, with the 1994
changes in the political envi-
ronment, the then Minister
of Agriculture, Mr Hanekom,
dissolved all the marketing boards and
schemes, effective as from 1 May 1997.
This entailed that producers of grain com-
modities were literally migrated from a con-
trolled grain commodity marketing situation
to a totally free market environment over-
night. Deregulation meant that the prices
of grain commodities were determined by
import and export parity, national demand
and supply, stock levels and the exchange
rate. Price stability was replaced with sub-
stantial market volatility.
With the deregulation, the Agricultural
Market Division (hereinafter referred to as
“AMD”), as a separate division of Safex,
was established as Safex functioned in
financial markets since the eighties. Safex
therefore also became the trading platform
for commodities such as maize, wheat
and sunflower and later soybeans. Price
formulation for grains was done on Safex.
In 2001 Safex formally became part of the
18
JSE and is still known as AMD.
The above gave rise to fears of expro-
priation of the reserves of co-operatives
comprising of general reserves as well as
members' funds. In order to allay the fears
and in an attempt to align corporate struc-
tures with the new free market, co-opera-
tives proposed schemes of arrangement
and with the approval of their members,
elected to convert to public companies.
The conversion meant that the reserves
and members' funds were paid out to
members in the form of equity.
For specifically Senwes, the change in
structure also motivated the governance
body of the time to embark on a growth
and expansion strategy. Senwes’ vision
was to become a “world class” organi-
sation (annual report 1998, page 6). The
diversification strategy to mitigate the
exposure to the traditional business in
terms of seasonality, led to unprecedented
investment in different industries and geo-
graphic markets.
Senwes bought Vaalharts Co-operative
in December 1996, invested in Heinz
Frozen Foods (later McCain’s Frozen
Foods), Senwesko Feeds, Continental Oil
Mills, Country Bird (abattoirs), Profert (fer-
tiliser), Epol and Kolosus (feedlots, leather
SENWES SCENARIO | SOMER • SUMMER 2019
& hides). With the Vaalharts acquisition,
the company also became involved with
the Hartswater Wine Cellar and a citrus
packaging plant. The company also pur-
sued external investment in Mozambique
and established Sabawes with local entre-
preneurs. By the end of April 1999, nearly
R500 million was invested in these agri-in-
dustries, while the core business such as
grain storage and handling, contributed
less than 10% of the company’s turnover.
By 1991, R730 million was invested in the
agri-industries and made up 49% of turn-
over. By then the group’s net profit before
tax decreased to R12,2 million. By 2001
the financial results were far from satisfac-
tory, reflecting a loss of R468 million. This
included provisions for bad debt and write-
offs of the investments of R400 million.
This approach created a new animal,
which had to play a game in an unprotec
ted, unsubsidised free market environment,
with additional volatility in terms of grain
price formation on Safex. Competitors such
as the commercial banks and traders also
accessed the market with different and
attractive value propositions.
The expansion strategy, inter alia,
destroyed immense value for the share-
holders and by 2001 the shares of Senwes