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South Africa: Parmalat premium for BEE dairy farmers

07 March 2007,

Parmalat South Africa will pay an incentive premium to milk producers who meet specific empowerment targets as a means of encouraging farmers to actively participate in the transformation of the dairy sector. Producers will receive a premium of 1c per litre for BEE scores of 35% or more, and an additional 1c per litre premium for a score of more than 40%.

Parmalat CEO Theo Hendrickse says this incentive plan is a further move by the group to support milk producers in introducing black economic empowerment (BEE).

Last year Parmalat introduced an industry-first R6 million development fund. In conjunction with the Southern Africa Milk Co-operative (Samilco), Parmalat invited milk producers to participate in this fund with the development of BEE strategies for their farms and also provided free advice on compliance with Good Agricultural Practice (GAP). Samilco represents dairy farmers supplying more than 90% of the annual milk requirement of Parmalat which adds up to more than 400 million litres.

Individual business strategies

PricewaterhouseCoopers (PwC) was appointed by Parmalat and Samilco to provide professional services for the measurement of BEE compliance and designing individual business strategies for farmers.

Frans van Wyk, director, private company services, PwC Cape Town office, says the survey is invaluable as it allows participants to choose which elements of BEE they will implement in the future and what effect this has on their scorecard.

The incentive premium payable for milk in 2007 will be based on scores determined by PwC on a generic scorecard - or on the official agricultural sector scorecard when this becomes available - or by any other accredited organisation.

Annual empowerment audit

Milk producers will be required to undergo an annual empowerment audit to determine the incentive premium. From 2008, the premium will be 2c per litre for a BEE score of 40% or more and no premium will be paid for scores below this level.

Parmalat aims to purchase 50% of its 2008 planned milk intake of 500 million llitres from producers who achieve a BEE score of more than 40% by the end of that year. In real terms it means that up to R5 million can be paid as a premium to milk producers who comply.

Hendrickse says Parmalat believes that transformation is a social and economic imperative and is critical for the sustainability of the dairy industry and the broader agricultural sector.

Wait and see

“A survey conducted by PwC on BEE in the milk industry showed nearly two thirds of respondents were adopting a ‘wait and see’ attitude before making definite commitments. A large proportion of the respondents were reluctant to transfer ownership to new and incoming partners. While we recognise the barriers to BEE implementation, it is clear that the pace of transformation needs to be accelerated.

“Parmalat has now also introduced two new skills development programmes in agriculture for previously disadvantaged learners,” he says.

The accelerated farm supervisor/manager scheme will see 10 - 15 farm workers participate in a one-year programme to develop technical dairy and management skills. An accelerated dairy advisor development programme is aimed at equipping two graduates or diplomats with practical dairy industry qualifications and skills to become professional dairy advisors.

The external training for these courses will be provided by the Cape Institute of Agricultural Training at Elsenburg. The two programmes are jointly sponsored by Parmalat and Samilco at a cost of over R700 000 a year.

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