'The idea that you are going to change a person’s attitude towards a business by giving them shareholding is wrong'

BUSINESS INTELLECTUAL: I interview Paul Clüver (senior) about nature walks, empowerment, family firms, wine innovation, land redistribution and much more...

This is the fourth interview on Our Long Walk, my blog about the past, present, and future of South Africa. I'll be talking with South African business leaders to gain their perspectives on the lessons from history. Previous interviews were with André de Ruyter, Herman Mashaba, and Jannie Durand. Please consider a paid subscription to access the full interview and all of my twice-weekly content, including columns, guest essays, and summaries of the latest relevant research.

1. The De Rust Estate was handed down through three generations of Clüvers due to an entail, a legal mechanism to keep property within a family lineage. How has this unique history influenced not only the business model but the culture of the business?

The entail allows you to use the property but not to sell or mortgage it, so it becomes what De Soto calls dead capital. It is a restriction which inhibits investment and growth, but it keeps the farm in the family.

The entail ended with the third generation, and this allowed the business to grow. The culture of the enterprise was influenced by my parents, especially my mother who moved from Cape Town to the farm in 1954 in order to run the farm. She brought a culture of caring about people and caring about the environment.

Culture is not created by restrictive regulations; culture is formed by people. Both our top management and our Board consist of more women than men, which I think is unusual for an agricultural enterprise. Three of my daughters are involved in senior executive positions, two of them studied agriculture and I think they were influenced by seeing their grandmother running the farm and their mother running the Dairy.

My mother started a school in 1955 and mobilised surrounding farms to support the school financially. From a humble primary School of 2 classrooms, the school has grown to over 1200 learners, has its own creche and goes to matric.

It also has an agricultural and hospitality focus. My daughter Karin chairs the school trust, following in her grandmother’s footsteps.

2. Farming was not necessarily your first love. You qualified and practiced as a neurosurgeon. There’s growing evidence supporting the therapeutic effects of spending time in nature on mental health and cognitive function. As someone who has spent extensive time in both the operating room and the vineyard, can you reflect on how the natural environment of a vineyard might influence mental well-being and cognitive health?

There is nothing like a long walk in nature in the late afternoon to clear your mind and get rid of stress, I find that this changes my perspective on current problems and leads to innovative solutions.

That’s why philosophers still walk along the ‘Philosophensway’ in Heidelberg, Germany.

3. When you took over De Rust in the mid-eighties/early nineties, South Africa and the world underwent remarkable historical transformations. What convinced you to give up neurosurgery and become a farmer when the risks must have been enormous?

My parents left De Rust, moving to Stellenbosch in 1976 and – still under the entail – I was responsible for overseeing the farming activities from a distance in Cape Town, while management took over the day-to-day responsibilities. But this situation was becoming increasingly difficult, practicing as a neurosurgeon while trying to keep an eye on De Rust. In neurosurgery, one has no control over your time – what has to be done has to be done immediately. You can’t run a side-line such as farming. Otherwise, you end up doing both things poorly.

Initially, the risk was walking away from something in which you had been well-trained and where you felt you were in control. Medicine was a field I was comfortable in, as I had excellent training and could practise at an international level of expertise. To now leave all this for something in which you had no qualification was a huge risk. But what was there to do?

I was not permitted to sell the farm, nor could I let it run itself down. Furthermore, in 1989, when I decided to leave medicine and take over De Rust, there were political risks indicating a possible uncertain future in South Africa. But I saw potential in farming, and realising this, I decided to focus not only on the farm but also on managing all these risks.

Times were definitely uncertain. I remember requesting a meeting in 1991 to see the then minister of forestry, Magnus Malan, about a long-term lease for some workers-housing we had applied for on a portion of Lebanon forestry land. My need was to ascertain what the future situation of this piece of land and its residents would be once a new government was in power. I arrived at his offices in Cape Town and was told to wait. After a while an official came out and said: ‘Mister Clüver, surely you don’t think we can waste the minister’s time speculating about the possibility of a new government coming to power, can we now?’ That’s how uncertain things were back then.

Having come to farm, and now being hands-on, I was actively aware of the political and economic risks. But on the other hand, I felt that a new political dispensation could bring opportunity for both the fruit and wine industries. Before Nelson Mandela was released, South Africa was unable to export its wines, something that changed within months after he was freed.

Under the new dispensation, the gradual deregulation of both the fruit and wine industries held vast opportunities for those willing to recognise them. In wine, the KWV’s stranglehold had allowed grape and wine farmers to survive who should not have been allowed to. In fact, here on De Rust we began planting vineyards in 1987 only after we had managed to secure a KWV quota permitting us to do so. No KWV quota, and you were not allowed to plant wine grapes in a ‘new’ wine region. So, we bought our quota from Rainbow Chicken in Worcester! Imagine how our wine industry would have looked if it still fell under these kinds of regulations.

For the fruit industry, there was a slight wobble after its deregulation, as farmers had to leave the comfort and security of the single-channel marketing system. But I have always been an optimistic person so saw the opportunities innovation and vision this new order could hold for those whose spirits were positive and entrepreneurial.

4. You’ve said before that for any business to have a long-term future, it needs to be part of the community; that the community is an inherent stakeholder. Given how long the Clüver family have been custodians of the De Rust Estate, how has its relationship with the surrounding community evolved over time?

If you look at the current extent of migration taking place – in South Africa and in other countries – then it is very difficult to have a relationship with the broader community.

On the farm, we have a community strengthened by the fact that many of our 120 workers are second and third-generation employees, which adds to a community spirit and strengthens the bond between the Clüver family and our people. The wine side of the business, especially, has created opportunities for upskilling people as wine is a product where value is added to the source fruit, unlike fruit, which is a commodity requiring a limited skill set on the farm.

5. You started a black empowerment farming trust, Lebanon Fruit Farm Trust, in 1996, one of the first farmers to do so. Part of that was also the creation of Thandi Wines, which became the first Fairtrade wine brand in the world. Black empowerment transactions are neither simple nor always successful. Did these attempts at empowerment meet your expectations? What lessons have you learned from this early attempt at black empowerment that might help young farmers today?

Looking back over the 28 years since the Lebanon Fruit Farm Trust began, I can say that the outcome has been successful, but not without many hard knocks taken and lessons learnt. Today the project, Thandi, is a self-sustaining and profitable producer of apples.

Wine was another story.

Initially, the wine under the Thandi brand was made in the Paul Clüver cellar from vineyards on De Rust, with the vision of Thandi planting its own vineyards and having its own cellar and brand home. We did not want Thandi to be seen as Paul Clüver’s second-label, as branding and image are vital to the success of any wine, and if it was going to grab the imagination and succeed, Thandi was going to have to be seen as an independent brand with an own voice, ethos and quality proposition.

To help establish this, Thandi went into partnership with the late Vinfruco, a wine export company based in Stellenbosch, which took a 30% stake in Thandi in exchange for production, marketing and sales responsibilities. Due to various factors, this fell apart, and Thandi wines ceased to exist. It is really difficult to create a profitable wine business, especially in a short time, and especially difficult to create an elite brand.

It is good that Thandi was able to kick start Fairtrade wines in South Africa, which have grown to such an extent that South Africa is now, by far, the biggest producer of Fairtrade wines in the world. However, whilst Fairtrade is a route to market, it also adds costs and does not help to create up-market aspirational brands, which is where you need to be in order to be sustainable   

But what you lose on the swings, you gain on the roundabouts – today, Thandi thrives as an empowerment apple business and made a healthy profit last year.

One of the key challenges of empowerment is managing the expectations of the people involved. And empowerment in agriculture is difficult as profits are far lower than, for example, financial services or IT. Studies in the wine industry have revealed that only 10% of South African wine farms are economically sustainable, so one can only imagine how hard it is to create viable empowerment in this industry if the established side of the sector is struggling.

Another reality is that worldwide, the number of people involved in agriculture is becoming smaller as it is a high-risk, low-return endeavour. Farming units are becoming larger, and the use of technology is increasing. Less hands are required. In this environment, it is extremely hard for empowerment to gain traction. Thus, it is far better for a child of a farm worker to be sent to university to become a lawyer or accountant than it is for him or her to be a shareholder in a BEE project.

The idea that you are going to change a person’s attitude towards and involvement in a business by giving them shareholding is wrong. Most things in life come with responsibility: a dog must be exercised, groomed and go to the vet. A car be serviced. Homeowners must do maintenance and pay rates and taxes. But there is no responsibility towards a share. One buys a share with the hope of making a profit and there is no loyalty towards a shareholding. And in areas such as the agriculture business, loyalty and a long-term view are vital – shareholding gets in the way, mostly by creating unrealistic expectations.