Farmers in bid to block R2.5bn Afgri sale

The 30‚000-strong African Farmers Association of SA (Afasa) is going to the Competition Commission to oppose the purchase of 100% of Afgri by AgriGroupe‚ a consortium consisting mainly of North American investors but including a local black economic empowerment (BEE) group.

Afasa claims it has government backing for its move‚ which will raise questions about South Africa's ambiguous attitude towards foreign investment‚ especially given the Public Investment Corporation's (PIC's) largely unexplained opposition to the proposed R12bn cash and shares takeover of local pharmaceutical group Adcock Ingram by Chile's CFR.

On Tuesday‚ reports quoting unnamed sources close to the PIC said the PIC's move was about retaining local control of a strategic pharamaceutical resource.

Afasa economic adviser Andrew Makenete said on Tuesday that the gist of its argument to the commission would be that the sale would further isolate blacks from the food value chain and would therefore be anticompetitive.

Afgri shareholders will be asked to approve the deal at a meeting on Tuesday.

Afasa has steadfastly opposed the sale since news broke of the R2.5bn offer from AgriGroupe.

At a media briefing on Tuesday Afasa reiterated its opposition on the grounds of Afgri's history as a former co-operative - Oos Transvaal Ko-operasie - which was thus built with South African taxpayers' money.

It also said the R2.5bn price offered‚ which is based on Afgri's issued shares‚ represents just a fraction of what the company's assets are worth and what SA might have to pay to replace it.

Mr Makenete calculated‚ for example‚ that it costs on average R6‚000 to build one tonne of grain storage capacity.

Afgri has 4-million tonnes of storage capacity in its silos‚ which would equate to a replacement cost of about R24bn.

"Afgri is also the fourth-largest poultry producer in South Africa. That poultry business alone would be worth at least R1bn‚" he said.

Afasa has proposed that the government use its agencies such as the Industrial Development Corporation‚ the PIC and the land Bank to collectively buy Afgri and hold it on behalf of the state.

"The company should be held until such time that a transparent and well-structured transfer of the asset can be made to African farmers and their small-farmer cooperatives‚ women and youth groups‚ African agribusiness groups and persons and to the workers of Afgri‚" Afasa said.

Afasa president Mike Mlengana said there was a great deal of sympathy for its argument within the government‚ though he declined to name supporters.

"It will ultimately be a political decision. Government will have to direct its agencies to make an offer for Afgri."

Mr Makenete said that although the "legitimacy" of the proposed sale was not in question‚ Afgri "behaves like a co-operative" when it suits the company.

He said it borrows money from the Land Bank and distributes loans to farmers on behalf of the bank. As the biggest supplier of John Deere tractors in Africa‚ it enjoyed the benefits of the state's tractor support programme.