ASTERN Cape-based Sovereign Foods announced today that it has entered into an empowerment transaction with Cultiver Investments, a black economic empowerment (BEE) agricultural company.
Sovereign Foods, South Africa’s third largest producer and distributor of frozen, fresh and value-added poultry products, said the preferential procurement off-take agreement was for day old chicks hatched and reared by Cultiver on its farms in Limpopo.
“To create a far-reaching, multi-dimensional empowerment deal, Sovereign has further incorporated components of management support, farming skills transfer, and credit facilities for Cultiver,” the company said in a statement.
Cultiver, a BEE beneficiary in terms of the Proactive Land Acquisition program, leases breeder and hatchery operations outside Mokopane and a broiler farm outside Polokwane in Limpopo.
Based on future estimations for day old chick to meet demands of its clients, Sovereign said Cultiver could potentially realise a turnover of R659 million over the next 10 years. “This, in turn, will set Cultiver well on a path to become one of South Africa’s largest 100% black-owned poultry hatching and rearing operations in Southern Africa over the next three years.”
Sovereign Foods CEO Chris Coombes said the off-take deal would remove barriers for entry and market risks for the company while “contributing to growth and sustainability of a relatively young start-up, eager to grow and make its mark” and boosting food security.
Cultiver Director Muzi Twala concurred, adding that the company would retain its existing ownership structure and operate independently from Sovereign Foods.
“However, we will remain in very close orbit to Sovereign to access its knowledge, R&D and best practices in relation to day old chick and broiler production. The support base of senior expertise to improve our efficiencies, levels of productivity and our venture’s profitability is also welcoming from our partner,” said Twala.
He also announced that Cultiver had obtained 125 000 breeder birds from Sovereign Foods and said that placement of additional parent stock at its Polokwane farms was well underway.
“This will enable Cultiver to produce approximately 342 000 hatching eggs per week from which 285 000 day old chicks will be hatched per week. This, in turn, will result in an output of 23 000 tons of broiler meat per annum.”
Cultiver has already secured and provided employment for at least 151 individuals and will be able to substantially increase this number.
According to forecasts from the company and in line with its expansion plans, it expects to create more than 700 new direct jobs over the next few years, with a total of a 1 000 (direct and indirect) jobs expected to be created through the value chain as result of the deal with Sovereign.
Coombes said the transaction was a win-win deal for both companies.
“For Cultiver, the deal entails skills transfer, access to finance, and the removal of market risk allowing the senior management team to hone farming and management skills. For us, the long-term off take agreement creates security in relation to our supply chain while locating it within government’s national transformation and empowerment policy frameworks,” Coombes said.
Sovereign Foods Group Executive for Agriculture Ettienne du Preez said: “In order for an empowerment transaction to be successful and sustainable it is critical to support and train management in all aspects of a business which we are looking forward to.”