USAID helps Black Farm Business Mushroom in South Africa

Tropical Mushrooms Employees Shareholder Trust

Peter Nyathi symbolizes the new face of South African commercial farming.  He won the African continent’s top award for the best small and medium sized enterprise in agriculture in 2003 from the Center for Investment Analysis.   His small-scale commercial agricultural business, Tropical Mushrooms, supplies delicious white and brown mushrooms for the local market and neighboring African countries (including the islands of Mauritius and Madagascar). 

Demand is high for his fresh organic produce.  In cultivating good quality mushrooms for the local market, Peter provides jobs and leadership for an economically depressed community.  He did not have opportunities in the old South Africa to own land or his own business. 

The articulate visionary earned his agricultural economics degree in Zimbabwe.  The United States Agency for International Development (USAID) had assisted the university’s agricultural department at which Peter earned his academic credentials.  Though he had impressive qualifications and practical experience, Peter struggled for 3½ years to obtain financing for his farming dream in South Africa.  The soft-spoken man persisted and eventually acquired the first black economic empowerment loan from a large South African commercial bank, ABSA (African Bank of South Africa). 

Nyathi bought 19 hectares of land in South Africa’s Magaliesburg region.  He constructed all the buildings and infrastructure necessary to farm on a large commercial scale, commencing production in January 2000 as an independent, privately-owned mushroom producer. 

USAID entered the entrepreneur’s life again, providing technical assistance for the design of Nyathi’s temperature control room.  From a tiny workforce, Tropical Mushrooms now employs nearly 60 workers and produces four to five tons of mushrooms every week with the capacity to expand to 11 tons in 2005.  Peter is able to use his technical expertise in a niche market, proud that “My mushrooms are usually better in the market than anyone else’s”.

Peter views his opportunities and responsibilities with serious dedication, training staff and offering workers the chance to buy shares in his commercial farm.  He says, “This is the first time they have been able to own land as well as gain equity in a profitable business venture.”  USAID assists Nyathi and his workforce through the South African Agricultural Financial Restructuring and Privatization Program (SARPP).  SARPP was designed by USAID and is managed by the Emerging Markets Group (EMG, Ltd.) to technically handle transactions for groups of workers wanting to become shareholders in firms.  A high degree of proficiency is required to maneuver through the related legal systems and paperwork.  

SAARP staff helped establish the Tropical Mushrooms Employees Shareholder Trust for Nyathi’s interested workers.  The staff who are the beneficiaries and new shareholders in the Trust have purchased 29% of the farm’s equity.  Twenty-two of the thirty-seven beneficiaries are women.

USAID’s two year, US$1,634,000 (nearly 10 million Rand) SAARP project, implemented by EMG, helps commercial farm owners enter into “willing seller-willing buyer” transactions with their interested employees.  The process includes obtaining local government grants and private sector loans necessary to purchase equity in the operation as a group.  Enterprises desiring to enter into such transactions with their workers provide detailed financial and management information.  USAID EMG develops a business plan that evaluates the viability and sustainability for all parties to the transaction.

When the criteria is met, as it was in the case of Tropical Mushrooms, USAID’s SARPP team begins work, helping employers and employees with business strategies, shareholder trusts documents necessary to help workers get Land Rights grants and bank loans to purchase shareholdings in the venture.  During 2004, 20 transactions were strongly viable and initiated.  Five transactions were fully completed through which 409 financial agreements allowed employees to access more than 21.2 million Rand (about US$3.5 million)* in financing toward equity ownership of the firms in which they work.

This project strongly supports South Africa’s AgriBEE (Black Economic Empowerment in Agriculture) goals of significantly increasing ownership of agricultural lands and enterprises by historically disadvantaged individuals (defined in South Africa as black, colored (mixed race) and women).

Nyathi had initiated the ownership-sharing approach for Tropical Mushrooms with his staff and said he appreciates USAID’s assistance to bring it to fruition.  The enterprising entrepreneur has further assisted his workforce to learn about HIV/AIDS threats and prevention by organizing educational workshops and materials. 

The award-winning African agriculturalist prefers to think forward and not dwell on past inequities.  His workforce admires and respects him as a community role model.  Nyathi says the prospect of assisting so many employees and their families is daunting, but necessary to redress unemployment, skills shortages and poverty.  

Peter pays diligent attention to his business and carefully analyzes risks and opportunities.  His major hope for the future is one of a personal nature.  Peter would like to be able to take a vacation with his family and indulge the relaxation that his mind and body craves.  Maybe he should head east with his wife and children to the tropical island paradise of Mauritius, though he will still be reminded of his business back home when his favorite meal arrives with Tropical Mushrooms procured from his own commercial farm back in South Africa. 

*exchange rate calculation at 6.0