Rural Development

On a thriving farm in Southport, KwaZulu-Natal, entrepreneur Mlungisi Canaan Mkhungo maintains 30,000 chickens that produce an average 74,000 eggs a month. Raised on a farm, this former school teacher and principal decided to return to agriculture when he saw an old farm for sale. He formed a 33-member black-owned consortium called Wandering Star with workers from the farm, community embers who sell eggs in the area, and a local food distribution company, and applied for a government grant. The Department of Land Affairs gave them R11 million, while ABSA Bank provided a R3 million loan to purchase the farm and its equipment. But the business could not function without money to cover its daily expenses, and ABSA said it had lent them as much as it could.

Mr. Mkhungo, elected Executive Director of Wandering Star, explained, “You cannot wait for the customer to pay. You must feed the chickens!”

In January, with Shared lnterest’s R975,000 guarantee, ABSA Bank extended an additional R1 ,300,000 line of credit for working capital during Wandering Star’s two-year transition period, stabilizing the operation and providing a platform for growth. At the same time, the guarantee is facilitating the collaborative transfer of ownership of a profitable farm to black hands.

ln South Africa, where President Zuma reported last October that 2.2 million people did not receive adequate nutrition, food is a major issue. Despite the fact that the number of people experiencing hunger has dropped since 2002, nearly 20% of South Africa’s black families and a higher percentage of its children lack sufficient nutrients in their daily diets — stunting youngsters’ growth and making entire families increasingly vulnerable to HIV/AIDS. With inflation and fuel prices rising, it is an escalating challenge for low-income South Africans to feed themselves and sustain their health. The government has declared food security a national priority.

ln KwaZulu-Natal, the epicenter of South Africa’s AIDS epidemic, Wandering Star’s increasing production of a low-cost, high-protein food is important to the local market.

In 2010, the farm’s original owner, Rob Foggan, an established white farmer, had decided to retire and sell his nine-hectare farm. Mr. Foggan committed to remain as a mentor for two years, as he teaches the new entrepreneurs how to operate the farm, and connects them to his extensive client base. During the transition period, his son is serving as the general manager, and training those who will succeed him. The ESS consulting company will provide employee training and assist with financial management.

Mr. Mkhungo described the relationship with the farmer as “fantastic,” elaborating, “He wrote letters to all the customers and introduced me, saying they had to support me. He is helping me to market the eggs. He’s an expert. He knows what it is to start from scratch.”

Wandering Star is the private joint venture of the Sihlekasodwa Workers’ Team (a cooperative that owns 40%) and Lakhanya Community Services (a private company that owns 60%). Sihlekasodwa is comprised of 16 worker-owners and 17 community egg vendors. In addition to their share of the future profits, the workers receive salaries, while the distributors earn commissions on the Wandering Star eggs they sell.

Lakhanya is a private company that previously sold perishable produce to rural schools, but decided to discontinue the arrangement because of cash flow constraints resulting from delays in government payments. Over the life of the Ioan, Wandering Star plans to increase its employees to 45, 10 of whom will be women.

The business projecting a return on assets of between 16 and 18 percent every year over the next three years.

"We are dealing with AIDS here," explained MC. He is helping to organize a residence for people with AIDS who cannot be cared for at home and selling eggs on their behalf to help cover the costs of the project.