A sense of nurture
The spectacular growth enjoyed by Ububele Holdings is based on a selected process of vertical integration of its agri business and scientifically-based beneficiation of fruit and vegetables in its food processing division, as Ruari McCallion learned from Theo Kleinhans.
In just six years, the turnover of Ububele Holdings Ltd has rocketed from R2.7 million to R400 million. Even in a period of economic downturn, Ububele and its businesses continue to grow. How has it achieved such remarkable success?
ÔÇ£Our business is in food; and people need to eat,ÔÇØ states Theo Kleinhans, co-founder and CEO. Ububele is focused on two core areas of business: firstly, the manufacture and formulation of chemicals for agriculture, particularly pesticides and ingredients for animal feed. Secondly, it buys produce from its customers, for the creation of added-value fruit and vegetable products, such as concentrate, which is both sold on the local market and exported. It could be seen as a ÔÇÿclosed loopÔÇÖ operation but Kleinhans is immediately at pains to emphasise that Ububele operates in a completely different wayÔÇöthat its relationship with its customer-suppliers is very much a beneficial one.
ÔÇ£We supply our customers, which includes emerging farmers, with much of what they need to kick-start their primary agri activities,ÔÇØ he explains. ÔÇ£They grow maize, raise animals, and so on; we acquire produce from them. Our business model places the farmer at the centre of our efforts.ÔÇØ Building South AfricaÔÇÖs indigenous food supply is very much part of the issue of food security, so helping existing and new emerging farmers to make the most of their resources is in the interests of Ububele, the farmers and the country.
ÔÇ£World Bank research has projected population growth of around 60 per cent over the next 50 years, with demand for food rising 108 per centÔÇöand demand for protein is projected to grow even faster,ÔÇØ Kleinhans continues. ÔÇ£We see emerging farmers playing an increasing role in South AfricaÔÇÖs food security.ÔÇØ
Ububele is engaged in skills transfer and training of people who may be running farms for the first time; it sees a role and responsibility in ensuring the sustainability of the emerging farms. It is that total relationship that inspired the choice of the companyÔÇÖs name, which was actually suggested by an employee who overheard the founders discussing their business model and what to call the company. Ububele is a Xhosa word, which means ÔÇÿnurturingÔÇÖ.
The company is headquartered in Cape Town and has operations throughout South Africa, with a weighting towards the agricultural areas in the north-west and north. RT Chemicals, the subsidiary that manufactures chemicals, is located in Kwa-Zulu Natal.
ÔÇ£We have around 100 chemical registrations at the moment and a further 52 in the process of being registered, so weÔÇÖre looking at about 150 products that are our own intellectual property [IP],ÔÇØ says Kleinhans. ÔÇ£ThatÔÇÖs where the margins areÔÇötheyÔÇÖre bigger for our own IP than for licensing or distribution deals.ÔÇØ While RT ChemicalsÔÇÖ research has largely been successful in rolling out a succession of products for commercial application, it doesnÔÇÖt always please the green movement.
ÔÇ£We are investigating the feasibility of doing registration work on our first biological insecticide,ÔÇØ Kleinhans says. ÔÇ£But unfortunately, after the insect has died, fluffs of fungal spores are visible which spread and affect other insects. Because it is non-specific, further research is required.ÔÇØ So back to the drawing board (or test tube) for that one, then. Fortunately, most of the ideas work out much better, and are helping to grow a uniquely South African business.
ÔÇ£We are seeking to evolve the Ububele brand so that whatever we sell to the farmers, whether itÔÇÖs feed, compounds or anything else, is immediately regarded as high quality,ÔÇØ says Kleinhans. It always takes a while to gain the trust of oneÔÇÖs customersÔÇöwhich is the case the world over, in farmingÔÇöbut once that trust is earned, it stays. As the company grows, it will spread its operations more broadlyÔÇöbut not so broadly as it has been. When Ububele was looking for external funding to back its growth in 2007 for the first time, it was advised to make itself more attractive to investors by making the business easier to understandÔÇöin short, to focus on core activities. It sold off non-core businesses, which helped to raise cash, then moved to the market again. It is due to list on the secondary (AltX) market on the Johannesburg Stock Exchange in November, by means of a reverse takeover of MilkworxÔÇöin doing so, it has acquired a company that can immediately add value to Ububele.
ÔÇ£One of MilkworxÔÇÖs main customers is McDonaldÔÇÖs, who gave it two awards for outstanding supplier performance,ÔÇØ Kleinhans explains. ÔÇ£We supply McDonaldÔÇÖs in South Africa with (among other products), McShakes and McSundaes, and they recognised us as one of their top suppliers in the world for these two products.ÔÇØ
UbubeleÔÇÖs future will be based on research, innovation and IP, as well as working to help its customers, and growth will predominantly be in South Africa, with licensing of its IP worldwide as another source of income. In Africa, it has a presence in Namibia and Mozambique; in 2008 around 10 per cent of sales were in African countries. It has also embarked on a coalition with Syngenta and Omnia, to give assistance to emerging farmers.
An important outflow of the companyÔÇÖs business model is helping emerging farmers to learn and grow, an aspect which has attracted interest from government institutions. A new executive director has been appointed to the company who will, among other things, act as a liaison between Ububele and the Government.
Ububele also extends its learning agenda to its own staff of around 374. Field sales advisors are not simply given a territory and told to get on with it; they spend three years after graduation in a training programme, learning about the business. ÔÇ£In the first year, they study four types of crop; in the second, two. Then they specialise in one, before being sent into the field,ÔÇØ explains Kleinhans. ÔÇ£Because the farmers know we do this, they know they can trust our people.ÔÇØ
