creating shared value: grootbos private nature...

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Creating Shared Value: Grootbos Private Nature Reserve

A Case Study Research Report

Presented to:

The University of Cape Town

Graduate School of Business

In Partial Fulfilment of the Requirements for the

Masters of Business Administration Degree

By

André Strydom

9 December 2011

Supervisor: Elspeth Donovan

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Acknowledgements

This report is not confidential. It may be used freely by the Graduate School of Business.

I wish to thank Michael Lutzeyer, Owner and General Manager of Grootbos as well as

the management and staff of Grootbos Private Nature reserve and the Grootbos

Foundation for their inspiration and valuable time. Furthermore I would like to thank my

supervisor, Elspeth Donovan for her advice and guidance throughout this research

process. Most importantly, I would like to thank my wife and immediate family for their

support, without this report would not have been possible.

I certify that except as noted above the report is my own work and all references used are

accurately cited throughout the report.

Signed:

André Strydom

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Abstract

South Africa has a long history of inequality resulting in one of the highest Gini co-

efficients in the world. In an attempt to address this and create more equitable economic

development, the South African government has implemented the Broad Based Black

Economic Empowerment scorecard. The BBBEE scorecard aims to encourage South

African companies to actively involve previously disadvantaged individuals within their

core business, by incentivising these companies through preferential procurement and

Enterprise Development (ED). ED is one of the pillars of the BBBEE scorecard and aims

to encourage large companies to provide opportunities for small businesses owned by

previously disadvantaged individuals to become active in the South African economy.

This will happen through funding, ownership, mentoring or procurement by the company.

This concept could also be described as creating shared value.

The case study provides a practical example of how a medium sized South African

company has gone about incorporating the economically inactive into the South African

economy through an inclusive business approach. The case study focuses on the

company as it stands today, the initiatives that have been implemented and the challenges

faced throughout the process. The case study will help students think more carefully

about creating shared value and the different legal structures to accommodate the process.

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Table of Contents

ACKNOWLEDGEMENTS ............................................................................................................................ II

ABSTRACT ............................................................................................................................................... III

ACRONYMS ........................................................................................................................................... VIII

1 INTRODUCTION .............................................................................................................................. 1

1.1 OBJECTIVES .......................................................................................................................................... 1

1.2 STRUCTURE .......................................................................................................................................... 1

1.3 RELEVANCE .......................................................................................................................................... 2

2 RESEARCH METHODOLOGY ............................................................................................................. 3

2.1 LITERATURE REVIEW .............................................................................................................................. 3

2.2 PRIMARY DATA: QUALITATIVE INTERVIEWS ................................................................................................. 3

2.2.1 Semi structured, in depth interviews ...................................................................................... 3

2.3 SECONDARY DATA ................................................................................................................................. 4

2.4 SCOPE AND LIMITATIONS OF THIS STUDY .................................................................................................... 5

3 LITERATURE REVIEW ....................................................................................................................... 6

3.1 SOUTH AFRICAN CONTEXT AND HISTORY ................................................................................................... 6

3.2 ENTREPRENEURSHIP IN SOUTH AFRICA ...................................................................................................... 7

3.3 GRASSROOTS DEVELOPMENT ................................................................................................................... 9

3.4 ENTERPRISE DEVELOPMENT ................................................................................................................... 11

3.5 CREATING SHARED VALUE ..................................................................................................................... 15

3.5.1 Creating a customer ............................................................................................................. 15

3.5.2 Sustainable Local Enterprise Networks ................................................................................. 15

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3.5.3 Inclusive Business .................................................................................................................. 16

3.5.4 Shared value ......................................................................................................................... 17

3.5.5 Developing social capital ...................................................................................................... 19

3.6 CONCLUSION ...................................................................................................................................... 20

3.7 LITERATURE REVIEW BIBLIOGRAPHY ......................................................................................................... 21

CASE STUDY: CREATING SHARED VALUE AT GROOTBOS PRIVATE NATURE RESERVE ............................. 26

INTRODUCTION ............................................................................................................................................ 26

GROOTBOS TODAY ........................................................................................................................................ 28

THE BUSINESS TODAY .................................................................................................................................... 32

SUSTAINABILITY ............................................................................................................................................ 34

SOCIAL SUSTAINABILITY .................................................................................................................................. 40

FUTURE INITIATIVES ....................................................................................................................................... 48

LOOKING TOWARDS THE FUTURE ...................................................................................................................... 51

QUESTIONS FOR DISCUSSION ........................................................................................................................... 52

CASE EXHIBITS ....................................................................................................................................... 53

EXHIBIT 1: AWARDS AND ACCOLADES ............................................................................................................... 53

EXHIBIT 2: OCCUPANCY STATISTICS AT GROOTBOS .............................................................................................. 54

EXHIBIT 3 – GROSS PROFIT FOR 2009 AND 2010 ............................................................................................... 54

EXHIBIT 4: NET PROFIT .................................................................................................................................. 55

EXHIBIT 5: TOP NATIONALITIES VISITING GROOTBOS............................................................................................ 55

EXHIBIT 6: BRIC NATIONALITIES VISITING GROOTBOS .......................................................................................... 56

EXHIBIT 7: TOP TEN VOLUME PRODUCING TOUR OPERATORS ................................................................................ 56

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EXHIBIT 8: OBJECTIVES OF THE FOUNDATION ..................................................................................................... 57

EXHIBIT 9: GREEN FUTURES FOUNDATION GROSS REVENUE ................................................................................. 58

EXHIBIT 10: INCREASE IN DONATIONS AND GRANTS RECEIVED ................................................................................ 58

EXHIBIT 11: NET MARGIN FOR GROOTBOS FOUNDATION ..................................................................................... 59

EXHIBIT 12: OPERATING EXPENSES ................................................................................................................... 59

EXHIBIT 13: OPERATING COST AS A PERCENTAGE OF REVENUE ............................................................................... 60

EXHIBIT 14: BBBEE SCORECARD ..................................................................................................................... 61

EXHIBIT 15: THE GROOTBOS MODEL ................................................................................................................ 63

4 TEACHING NOTES .......................................................................................................................... 64

4.1 CASE SUMMARY ................................................................................................................................. 64

4.1.1 Background ........................................................................................................................... 64

4.1.2 Intentions behind implementation of sustainable ventures ................................................. 64

4.1.3 Implementation of sustainable ventures .............................................................................. 65

4.1.4 Successes and challenges ...................................................................................................... 65

4.2 TEACHING APPROACH .......................................................................................................................... 66

4.2.1 Target Audience .................................................................................................................... 66

4.2.2 Learning objectives of the case ............................................................................................. 66

4.3 ANALYSIS OF THE CASE ......................................................................................................................... 68

4.3.1 Question 1 ............................................................................................................................. 69

4.3.2 Question 2 ............................................................................................................................. 74

4.3.3 Question 3 ............................................................................................................................. 78

4.4 CONCLUSION ...................................................................................................................................... 83

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5 TEACHING NOTES BIBLIOGRAPHY ................................................................................................. 84

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Acronyms

AA Anglo American

AAC Anglo American Chile

AAZ Anglo American Zimele

BEE Black Economic Empowerment

BBBEE Broad Based Black Economic Empowerment

CBE Community Based Enterprises

CSI Corporate Social Investment

CSR Corporate Social Responsibility

DBSA Development Bank of South Africa

DEG German Development Bank

DTI Department of Trade & Industry

GEM Global Entrepreneurship Monitor

IFC International Finance Corporation

IMF International Monetary Fund

MRFC Malawi Rural Finance Corporation

NGO Non-Governmental Organisations

PPP Public Private Partnerships

QSE Qualifying Small Enterprises

SAB South African Breweries

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SANBI South African National Biodiversity Institute

SLEN Sustainable Local Enterprise Networks

SEDA The Small Enterprise Development Agency

SMME’s Small Medium & Micro Enterprises

TEA Total Entrepreneurial Activity

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Case Study Research Report – Creating Shared Value at Grootbos 1

1 Introduction

In today’s global world, it is becoming more and more important to think of sustainability

as a part of a business’s core strategy. Companies are being pressured from governments

and customers alike to become more innovative in how they develop and stimulate socio-

economic development within the environmental constraints of the planet. In order to

stay competitive and to assist with the socio-economic development of the specific

country, companies are starting to integrate sustainability into their core strategy. This

case study research report analyses what companies can do to improve social and

economic development through the concept of shared value and how to put this into

practice.

1.1 Objectives

The objectives of this research are to analyse different ways in which shared value can be

created through Enterprise Development, sustainable local enterprise networks,

developing social capital and inclusive business. Through the development of a case

study for Grootbos, the research highlight that even small and medium sized companies

have the ability to create shared value by following different frameworks. The case also

highlights certain challenges which small and medium companies are faced with in

bringing these initiatives to life.

1.2 Structure

This report begins with a description of the methodology used to generate the required

data for this case study. The methodology section is then followed by an overview of

theory focused on the entrepreneurial landscape, the economic climate of South Africa

and how shared value can improve both. The case study on Grootbos is then presented,

which allows students to put into practice the theory that they have learnt, by analysing a

practical example of creating shared value. The case study is supported by teaching

notes, which summarise the case and provide discussion questions and answers to

facilitate the use of this study.

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1.3 Relevance

South Africa’s economic climate has been severely affected by the 2008 recession. The

South African Government still believes that economic reform will come by promoting

Small, Medium and Micro Enterprises (SMME’s). In order to accomplish this,

companies of all sizes must have the ability to incorporate previously disadvantaged

individuals into their core business strategy and thereby creating shared value for both the

company and the communities in which they operate. Most shared value initiatives come

in the form of Enterprise Development and are generally initiated through large scale

organisations that have sufficient resources to invest in these initiatives. Grootbos

provides an example of a medium sized company that has created economic activity to

develop social capital within the local communities through a number of innovative

shared value initiatives.

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2 Research Methodology

An exploratory case study approach has been chosen and is defined by Robson (2002) as

cited in Lewis, Saunders & Thirnhilll (2003, p 93) as “a strategy for doing research which

involves an empirical investigation of a particular contemporary phenomenon within its

real life context using multiple sources of evidence”. Lewis et al (2002) suggests that

exploratory research is a way to find out exactly what is going on and to gain new

understanding from this.

2.1 Literature Review

A literature review on the South African economic climate, entrepreneurship in South

Africa and different methods of creating shared value has been conducted, using books,

academic journals, newspaper articles, reports and internet websites. The literature

review focuses on providing a theoretical structure within which to conduct the case

study research. The Grootbos case study provides an opportunity to understand the

theory of creating shared value in practice.

2.2 Primary data: Qualitative interviews

Due to the exploratory nature of this research report, qualitative interviews were

conducted with employees of Grootbos and Grootbos Foundation at all levels of the

organisation. In order to avoid forming a biased opinion, it was imperative to interview

as many stakeholders as possible. Some of these interviews were followed up with

further in-depth interviews, telephone discussions and emails to ensure the accuracy of

the information.

2.2.1 Semi structured, in depth interviews

Semi structured, in-depth interviews were conducted with the owner, management and

staff at all levels at Grootbos. Some of these interviewees were directly involved in the

design and implementation of the initiatives at Grootbos, some were not involved at all

and some were beneficiaries of the initiatives. Selection of Grootbos employees followed

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a “purposive sampling” technique that best enabled the gathering of information required

for the case study.

Semi structured, in-depth interviews were conducted with the following people:

Michael Lutzeyer Owner and General Manager

Sean Ingles Deputy General Manager

Lean Terblanche Foundation Project Manager

Sharlene de Villiers Green Futures Manager

Anita Mbalekwa Green Futures Beneficiary

Chumani Nyelesi Guide and previous beneficiary of Green Futures

Lieben Kruger Front of House Manager

Mbuyi Tywenese Waitress at Grootbos

Tulani Bekameva Employee at Growing Futures and previous

beneficiary of Growing the Futures

Zokhanyo Bikani Beneficiary at Growing the Futures

Nosiboniso Bikani Beneficiary at Growing the futures

Liziwe Nocephe Beneficiary at Growing the Futures

Ntombetsha Madubela Beneficiary at Growing the Futures

Ziyanda Metsho Beneficiary at Growing the Futures

Luleka Totose Beneficiary at Growing the Futures

Zoliswa Vuka Beneficiary at Growing the Futures

Nokulenga Gwadiso Beneficiary at Growing the Futures

2.3 Secondary data

Secondary data has been used to deepen the understanding of Grootbos and the various

initiatives. Secondary data included financial data and statistics from the business and

the Grootbos Foundation and guest comment cards. These figures were analysed to assist

in understanding where the business stands at the present moment.

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2.4 Scope and limitations of this study

The scope of this research has been limited to a literature review and the analysis of

creating shared value in a single company, Grootbos. There is a risk that the format of

the interviews could have introduced bias as the researcher may not have maintained

constant focus on the same questions.

Furthermore, not all stakeholders were interviewed during the research. Certain

stakeholders including customers and suppliers of Grootbos were omitted from the

research. There is a risk that not including all stakeholders could allow the researcher to

form a biased view on the study.

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3 Literature Review

3.1 South African Context and History

South Africa’s history is one of controversy. The end of apartheid marked a change in

South Africa which many believed to be the start of economic reform for the country.

However, 17 years later, South Africa is still plagued by social inequalities which arose

during the apartheid era. In the past 17 years, the international world faced a number of

economic challenges. In the early 2000’s the world faced an economic downturn as a

result of the dotcom bubble. This was short lived, however economic theory suggests

that the policy environment during this economic downturn was the stepping stone for the

great recession. According to Murse (2011), in 2007 the world faced the great recession.

This recession severely affected the world, including South Africa. It is however

important to note that developing economies performed much better than the developed

economies with China and India experiencing growth during this period. South Africa,

did not perform as poorly as many of the developed economies, however was still greatly

affected. During this period, South Africa lost nearly a million jobs.

Unemployment has always been a major problem within the South African economy and

the recession exacerbated this. During the past year South Africa had an unemployment

rate of 25.7% for the second quarter of 2011 (Trading economics, 2011). Roos (2011),

confirms this view and states that the latest unemployment figures, makes South Africa

the country with the highest official unemployment statistics out of 61 countries that were

recently surveyed.

One would imagine that due to the low unemployment and amount of jobs lost during the

great recession that South Africa would have a culture of entrepreneurship and that this

culture would be stimulated by government policy. Evidence shows that this is not the

case.

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3.2 Entrepreneurship in South Africa

Fal, Selofo, Williams, Herrington, Goldberg & Klaasen (2008), authors of the

entrepreneurial dialogue report, suggests that countries with the highest levels of

entrepreneurial activity are the most competitive nations. The reason for this is that

SMME’s are the greatest creators of jobs and in emerging economies, the greatest

creators of wealth. In South Africa, the financial and operating environment does not

stimulate entrepreneurship. This is confirmed by Herrington, Kew & Kew (2010),

authors of the GEM report, who suggests that South Africa has a Total Entrepreneurial

Activity (TEA) rate of 8.9% which is below the average of 11.9% for efficiency driven

economies and 15.6% for middle to low income economies. Furthermore the report

states that a country which operates at South Africa’s stage of economic development

should have a TEA rate in excess of 15%. So why does South Africa have a below

average TEA rate? Entrepreneurial attitudes and perceptions are essential if an

entrepreneurial culture is to be created and South Africa has a not progressed in this

regard (Herrington, Kew, & Kew, 2010). This is confirmed by a survey which was

conducted and features in the GEM report. The survey suggests that in South Africa,

77% of people surveyed see entrepreneurship as a good career choice. However, only

17% of people surveyed have any entrepreneurial intentions. This suggests that South

Africa does not have an entrepreneurship culture. So what are the underlying reasons

why we don’t have this culture? Three key factors were identified as being the most

critical. These are education & training, government policies and market openness.

Education and training:

In spite of the fact that South Africa has one of the highest spends per capita on education

in the world, the GEM report suggests that it has one of the lowest primary education

rankings in the world. The GEM report highlights that “a healthy and educated

workforce is vital to a country’s competitiveness and productivity” (Herrington, Kew, &

Kew, 2010 p 32). This is only achieved through a quality education and training system,

one which is evidently lacking in South Africa. This view is confirmed by Worthington-

Smith (2008) who suggests that education and self-confidence is essential to the

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development of entrepreneurship in South Africa. According to Fal et al (2008), both

formal and informal education systems are lacking and not supporting entrepreneurship

in South Africa.

Government Policies:

The main government policies which are cited as areas which constrain entrepreneurship

are tax, inefficient government bureaucracy, red tape associated with starting up and

managing a business and restrictive labour regulations. South Africa is ranked 94th out of

139 countries with regards to the burden of government regulations. Furthermore

regulations for starting a business in South Africa require 6 procedures which take 22

days. This is an improvement from the 9 procedures taking 35 days in 2007, however it

is considered still too high and one of the main factors contributing to the low TEA rate

in South Africa (Herrington, Kew, & Kew, 2010).

Market openness:

According to the GEM report, the banking, retail, steel, energy and telecommunications

industries are characterised by monopolies and lack of competition. The reason for this is

that the size and power of these industries makes it very difficult for start-up companies

to compete unless they are able to supply support services. The larger companies block

competition from entrepreneurs and are reluctant to open their supply chain in order to

purchase from SMME’s. This is where Enterprise Development is required, however the

research suggests that the purchasing departments of large firms feel that new and smaller

companies as suppliers are costlier and have a higher risk profile (Herrington, Kew, &

Kew, 2010).

In addition to the critical factors discussed, there are a number of other factors that

contribute to the low TEA rate in South Africa. These are financial support, government

programmes and capacity for entrepreneurship.

There are a number of suggestions made by the GEM report to stimulate entrepreneurship

in South Africa. Market openness is one of the main constraints and this is where

Enterprise Development could provide some solutions. So what does the GEM report

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suggest to overcome market openness? The GEM suggests that networks between large

and small firms in similar sectors need to be improved. Furthermore the GEM suggests

that large businesses need to embrace the role of SMME’s and that government should

provide incentives to established firms that work with SMME’s (Herrington, Kew, &

Kew, 2010).

This is clearly very important however only focuses on large established firms dealing

with small firms. Enterprise Development focuses not only on working with small firms

but also on helping to stimulate entrepreneurship by creating ownership opportunities for

previously disadvantaged individuals. This is done through development, financing,

training and mentoring and by providing a key service through the company’s supply

chain. Worthington-Smith (2008) confirms this view and suggests that if Enterprise

Development is to succeed in enhancing economic development, attention needs to be

given to creating an environment which stimulates entrepreneurship. Furthermore she

suggests that government needs to provide more leadership to guide corporate social

investment (CSI) and Enterprise Development.

3.3 Grassroots development

Even though South Africa has low levels of Entrepreneurship and a culture that doesn’t

promote entrepreneurship, it doesn’t mean that we don’t have aspiring entrepreneurs in

the country. There are many people living in informal settlements that have

entrepreneurial spirits. Culture in informal settlements is very much centred on the

community and not the individual. Entrepreneurs that operate in these settings aim to

uplift the communities and not just the individual. More often than not, these social

entrepreneurs do not have the necessary skills and resources to develop their ideas

further.

Torri (2009) suggests that grassroots development is represented by community based

enterprises (CBE). Furthermore Torri (2009 p.414) suggests that “CBE’s are the result of

a process in which the community acts entrepreneurially, to create and operate a new

enterprise embedded in its social structure and network”. Torri (2009) suggests that in

the past 50 years, international development agencies have been involved in trying to

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alleviate poverty within the developing worlds. Many of these initiatives have not

involved community members and were seen as charity. Very often these initiatives have

been met with diverse challenges and as such, many have failed. These failures suggest

that entrepreneurship differs within different cultural settings especially where economic

uncertainty and poverty reigns. Arguably the values of the western world which

emphasises individualism continue to dominate what entrepreneurship is all about,

whereas in developing worlds, entrepreneurship should be about communities and not the

individual.

This emphasises the point that Enterprise Development could be based on grassroots

development, and in this way Enterprise Development should aim at uplifting

communities. This confirms Porter and Kramer’s (2011) suggestions on creating shared

value, that value must be created to benefit both the company and the community in

which it operates.

Torri (2009) suggests that the CBE approach could represent an alternative and promising

model for community development. This form of entrepreneurship sees communal

values and the notion of common good as fundamental in creating new ventures.

An example of grassroots development on a Macro level is the case of tobacco

production in Malawi. This example illustrates the point that grassroots development is

essential in developing countries. After gaining independence in 1964, the Malawian

government introduced a law which prohibited all smallholders from producing tobacco.

Smallholders are similar to subsistence farmers in that they produce enough to sustain

their basic lifestyles. These decisions by government lead to increased poverty in

Malawi. In 1994, the act was amended and smallholders were allowed to produce

tobacco. The smallholders were given sales quotas and intermediate buyers were

licenced to assist farmers in selling their tobacco on auction. The Malawi rural finance

company (MRFC) established a lending programme which financed almost 40% of the

farmers. Three years later there were 350,000 smallholders producing tobacco. This

change in policy was instrumental in alleviating poverty in Malawi (Poulton, Kydd, &

Kabambe, 2007)

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3.4 Enterprise Development

In 2007, the Broad Based Black Economic Empowerment (BBBEE) law was passed as

an amendment to the original Black Economic Empowerment (BEE) Act of 2003 (Fal et

al 2008). The fundamental objective of BBBEE is to advance economic transformation

and to increase the economic involvement of black South Africans in the countries

economic activity (DTI, 2011). Fal et al (2008) suggests that the aim of the code is to

support and grow emerging black owned business. The BBBEE codes are binding to all

government and public entities and apply to all business who wish to interact with

government and public entities. Government and public entities must apply the codes

when entering into decisions affecting procurement, licensing and concessions, public

private partnerships (PPP’s) and the sale of state owned entities (DTI, 2007).

The new BBBEE law incorporates new codes into the scorecard, one of which is

Enterprise Development.

The Enterprise Development Services (2010) provides the following definition:

“Enterprise Development contributions consists of monetary and non-monetary,

recoverable and non-recoverable contributions actually initiated in favour of a beneficiary

entity by a measured entity with the specific objective of assisting or accelerating the

development, sustainability and ultimate financial independence of the beneficiary. This

is commonly accomplished though the expansion of a beneficiaries financial and/ or

operation capacity”.

In Woolworths (2010 p.16) annual report, the good business Journey, they classify

Enterprise Development as follows: “Woolworths Enterprise Development strategic

aims are to address the challenges facing small black owned business by assisting these

businesses in moving from being survivalist to being sustainable”. The good business

journey furthermore suggests that their Enterprise Development efforts are focused on

emerging enterprises through their supply chain and that these efforts are in line with

their strategy of building long term relationships with its suppliers.

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The Kauffman Foundation et al (2005) as cited by the (DBSA) Development Bank of

South Africa (2007, p.1) defines Enterprise Development as follows: “Enterprise

Development can be defined as applying entrepreneurship for growth of enterprises.

Creating a culture of developing enterprises to grow and be profitable – the strategy is to

promote an Enterprise Development culture that promotes ideas that are turned into

profitable growing businesses by development programmes of mentoring coaching and

incubation” (DBSA, 2007).

Enterprise Development is not only a tool for economic growth in South Africa but can

be found in other developing economies around the world. In Brazil, Care a non-profit

organisation, suggests that a centralised economy does not promote economic equality.

Based on this the main goal in Brazil is to strengthen the local economy through

entrepreneurship. Specifically Care aims to allow entrepreneurs to have fair and

balanced access to markets. In order to do this, Care seeks to facilitate microfinance and

assistance from corporations to include and strengthen the local communities in which

they operate (Care , 2011).

Another example is of the Emerge programme in Chile. This programme is spearheaded

by Anglo American and builds on their vision that “the greatest contribution we can make

to people who live in communities where we operate, is to provide them with the tools to

get ahead” (Anglo American Chile, 2011). Anglo American Chile (AAC) provides long

term assistance to entrepreneurs operating above subsistence levels and who are

developing and confronting challenges in growing their business. AAC either offers

business development training or technical support in developing and implementing a

business plan. After either of these two steps, AAC offers financial support and

mentoring to the entrepreneurs (Anglo American Chile, 2011)

Closer to home Anglo American (AA), has developed Anglo American Zimele (AAZ).

The AAZ is an Enterprise Development and investment fund which creates and develops

sustainable SMME’s. It is specifically aimed at creating opportunities for previously

disadvantaged individuals. AAZ operates four different funds (Anglo American South

Africa, 2011).

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The Supply Chain Fund

The supply chain fund focuses on developing opportunities for black owned SMME’s, by

procuring services from them through the supply chain.

The Khula Mining Fund

The above mentioned fund manages mining related investments, in partnership with the

Khula Enterprise Finance limited, a government entity which promotes the development

of SMME’s.

The Communities Fund

The communities fund provides loans and guidance to community based entrepreneurs

and SMME owners.

The Olwazini Fund

The Olwazini fund is specifically aimed at helping women, the disabled and young

people to establish small business within the communities.

Enterprise Development does however have its shortfalls. Fal et al (2008) suggests that

there has been insufficient communication from government regarding the funding

available to entrepreneurs for Enterprise Development. Most entrepreneurs are also not

aware of the procedures and requirements involved in obtaining funding. Furthermore,

Enterprise Development does not cater to the majority of black entrepreneurs who lack

business skills. Apart from requiring funding for Enterprise Development, these

entrepreneurs require support and business training. There are however a number of

Corporations who have realised this. Anglo American is one of these corporations and

aims to use neighbouring enterprises as suppliers and to provide these enterprises with

mentoring and support (Anglo American, 2011).

Furthermore James (2011) suggests that not enough headway is being made in realising

the potential of Enterprise Development. One of the suggestions to realise the potential of

Enterprise Development is incubation programmes. Abduh, D’Souza, Quazi, & Burley

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(2007) explain incubation projects as an Enterprise Development strategy which aims to

accelerate the formation, development and survivability of new enterprises. Traditionally

an incubator programme selects potential new ventures in local communities; bring them

together to operate under one umbrella which enhances their success due to increased

services being offered. James (2011) mentions that part of the problem is that South

Africa only has 30 to 40 incubator programmes compared to Brazil which has

approximately 4000. The Small Enterprise Development Agency (SEDA) is currently

planning to support another 250 incubator programmes in the short term and 1000 in the

long run. This will definitely help South Africa to realise the potential that Enterprise

Development has to offer.

Most of the corporate sector however is not properly incentivised to embrace Enterprise

Development. Most corporations view Enterprise Development as a social objective and

fail to realise that there is a business case for Enterprise Development. Some

corporations have realised that there could be value created for both entrepreneurs and

the communities in which they operate as well as for the corporation involved. One such

corporation is Anglo American and they have the following goal for generating value.

“Anglo American strives to generate lasting benefits everywhere it operates – to create

value for Group shareholders, but also for the communities where we operate (Anglo

American, 2011). Anglo American has truly understood that there is a strong business

case for incorporating the economically inactive into their core business which moves

away from traditional philanthropy and towards a new era of creating shared value.

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3.5 Creating Shared Value

3.5.1 Creating a customer

According to Drucker (1977) as cited by Wallman (2009) the goal of a business is not to

make profit, but to create a customer. Drucker rejected the idea that firms exist to create

profit and suggests that profit is a condition for a company’s existence and arises from

serving your customers by providing goods and services which the company exists to

produce. Drucker (1992) as cited by Wallman (2009) suggested that the survival of a

company will depend on how well the company interacts with the society in which it

operates and absorbs social costs. Prahalad and Hart (2002 p.2) suggest that “low income

markets present a prodigious opportunity for the world’s wealthiest companies - to seek

their fortunes and bring prosperity to the poor”. They state that “doing business with the

world’s poorest people, an estimated two thirds of the world’s population can be achieved

by tailoring products to meet their needs instead of incorporating them into the business

through the supply chain”. In their article, they suggest that there are four areas that need

to be addressed if considering doing business at the base of the pyramid. These are

creating buying power, improving access, tailoring local solutions and shaping aspiration.

Essentially, Prahalad and Hart’s work revolves around creating a customer, but doing so

in a way which would benefit the company as well as some of the world’s poorest people.

Since their work, there has been a shift to not only creating customers but creating

economic value by incorporating communities throughout the company’s value chain.

3.5.2 Sustainable Local Enterprise Networks

Wheeler, McKague, Thomson, Davies, Medalye, & Prada (2005 p.38) suggests that there

is a whole network out of the companies value chain that creates value for both the

company and the community in which it operates. This concept is called sustainable

local enterprise networks (SLEN). They suggest “SLEN’s are organisational

arrangements that deliver economic and other benefits for all participants. At the same

time they directly address the traditional objectives of of sustainable development and

poverty alleviation”. According to Wheeler et al (2005 p.35) “The challenge is for

multinationals to move beyond alien strategies imposed from the outside to become truly

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indigenous to the places in which they operate. To do so will require companies to widen

their corporate bandwidths and develop entirely new native capabilities that emphasise

deep listening and local co-development”. SLENS were identified to include profitable

business, not for profit organisations as well as other members working together in order

to create value in economic, social, human and ecological terms. In order for SLENS to

operate efficiently Wheeler et al (2005) suggest that the following would be necessary:

1. One of the partners of the SLEN would need to act as the financial anchor for the

entire network and thereby secure its financial stability.

2. All of the partners to have a passion for local socio-economic improvement and

development

3. For all of the partners of the SLEN to share sustainable outcomes. These

outcomes are returns on investments, local economic development and trade,

enhanced quality of life and individual and community economic self-reliance.

Essentially SLEN’s move away from only creating a customer to creating a sustainable

network within communities which incorporate large businesses and community

members alike.

3.5.3 Inclusive Business

The (IFC) International Finance Corporation (2010) builds on Prahalad and Hart’s (2010)

work with their report on inclusive business. Inclusive business moves away from

merely creating a customer, to incorporating community members throughout a

company’s value chain and thereby creating sustainable networks within local

communities. The IFC support clients who invest in inclusive business models which

incorporates offering critical goods, services and livelihoods to the poor in financially

sustainable and scalable ways. Essentially as in Prahalad and Hart’s (2002) work, this

report suggests that 4 billion people or approximately two thirds of the world’s

population live at the base of the pyramid. These people survive on less than $3000 per

year, but are in the unfortunate position of being penalised for being at the base of the

pyramid as they have to pay higher prices for basic goods and services. More often than

not, these services are inferior in quality to what wealthier people have access to.

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Inclusive business models are therefore about companies who are being innovative and

incorporating these people into their value chains. This is done through investment in

supply and distribution chains which provides better income opportunities and as well as

goods and services to the poor.

An example of inclusive business is the case of Coca Cola distribution in Ethiopia. After

realising that traditional distribution channels were not sufficient in Ethiopia, Coca Cola

addressed this problem by incorporating members of the local community in their

distribution strategy. Instead of using trucks, hand pushed carts were used by community

members to distribute Coca Cola to the various vendors. This has allowed low income

entrepreneurs to be incorporated into the core business operations of Coca Cola and has

provided income to these entrepreneurs. This income has helped to lift these

entrepreneurs out of the grip of poverty. There are currently 650 private distribution

businesses in Ethiopia. This is a good example of how Corporations can use community

members in their distribution chain (IFC, 2010).

3.5.4 Shared value

According to Kate, Parris and Leiserowitz (2005 p.8), the most commonly used definition

of sustainable development is:

“Humanity has the ability to make development sustainable – to ensure that it meets the

needs of the present without compromising the ability of future generations”

This is quite a broad overview of sustainable development. In recent years, sustainability

has been viewed in terms of corporate social responsibility (CSR) and even philanthropy.

However according to Porter and Kramer, sustainable development should not be viewed

in terms of CSR but instead value creation for both corporations and local communities.

Porter and Kramer (2006) suggest that Corporate Social Responsibility (CSR) is so

disconnected from business and strategy that it obscures some of the greatest

opportunities for companies and the benefits for society that could arise from the CSR.

Instead companies should analyse their social initiatives using the frameworks which

guides their core business. Porter and Kramer believe that by doing this companies

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would realise that their initiatives are more than simply an extra cost, constraint or

philanthropy, but could lead to opportunities, innovation and competitive advantage. In

order to mitigate this, business decisions and social policies must follow the principle of

shared value. This means that the choices which are made would benefit both companies

and the societies in which they operate.

Building on this Porter and Kramer (2011) suggest that the solution to social

development lies in the principle of shared value. This principle involves creating

economic value in such a way that it also creates value for society by addressing its needs

and challenges. Shared value is about expanding the pool of social and economic value.

There are three key ways to do this. The first is by re-conceiving products and markets,

by redefining productivity in the value chain and by enabling local cluster development.

Local clusters builds on the concept of SLEN’s and include businesses, academic

programmes, trade associations and standards organisations and play a crucial role in

driving productivity, innovation and competitiveness. However more often than not,

clusters have deficiencies and this creates internal costs for firms. An example of this is

poor education. Poor levels of education results in lower productivity and increased

training costs for firms This is confirmed by Herrington, Kew and Kew (2010) who

suggests that education and training are some of the main constraints to entrepreneurship

in South Africa.

Porter and Kramer (2011) further suggests that in order to be able to develop clusters, the

development is subject to open and transparent markets. When markets are not open or

dominated by monopolies, productivity suffers as workers are exploited, suppliers do not

receive fair prices and price transparancy lacks. When markets are open, companies are

able to give suppliers better incentives for quality and incentives and at the same time

substantially improving the incomes and purchasing power of local citizens. Open

markets was cited in the GEM report as one of the major constraints to entrepreneurship

in South Africa.

Porter and Kramer (2011) conclude, that if a firms builds clusters in its key locations, it

will intensify the connection between the communities success and the firms’ success.

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They argue that a firms’ success has multiplier effects on the local community as jobs are

created, new companies are created and that this ultimately stimulates economic growth

and job creation.

3.5.5 Developing social capital

Developing social capital is at the heart of local cluster development. Incite (2008 p.6)

suggests that in order to properly understand sustainable develpoment, we need to

visualise it in terms of capital and income. “Sustainability means maintaining and, where

possible, increasing stocks of certain capital assets, so that we can succeed in living off

the income without depleting the capital”. This idea was conceptualised by Forum for

the Future (2011) in the early 1990’s and suggests that there are 5 different capitals from

which we derive goods and services in order to improve our quality of lives. These

capitals are: Natural capital, Human Capital, Social Capital, Manufactured Capital &

Financial capital. Human capital is defined as: “people’s health, knowledge, skills,

motivation and capacity for relationships, all needed for productive work and better

quality of life. Human capital can be fostered through learning, creativity and enhanced

health”. It is very important to understand human capital as it feeds directly into social

capital. Social capital is defined as: “the institutions that help us maintain and develop

human capital in partnership with others. It includes families, communities, businesses,

labour unions, schools and voluntary organisations. A critical component of social

capital is the development of trust”.

Coleman (1990) as cited by Baliamoune-Lutz (2010 p.304) confirms this view by

defining social capital as “ some aspect of social structure that enable the achievement of

certain ends that would not be attainable in its absence”.

Zhao, Ritchie and Echtner (2011) suggests that social capital helps people in rural areas

transform from traditional resource based livelihoods to entrepreneurship.

Social capital depends on how well human capital is developed. This development does

not refer to how human capital is developed at their places of employment, but in the

communities in which they live. In order to build social capital, a network or cluster of

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different bodies are essential. Social capital is therefore very much in line with cluster

development as suggested by Porter and Kramer (2011). Essentially the development of

social capital creates value for the community as well as for the businesses operating in

close proximity or within the communities as they are provided with a pool of healthy,

happy and educated employees.

3.6 Conclusion

South Africa is a dynamic country, but faces a number of challenges. Some of these

challenges include stimulating entrepreneurship to enhance job creation in South Africa.

The main barriers for people to start their own businesses are a lack of appropriate skills

and resources. Government has realised that job creation needs to come from SMME’s

and as such have created a framework known as the BBBEE scorecard. This framework

serves to incentivise companies to participate in Enterprise Development, one of the

elements of the BBBEE scorecard, by offering preferential procurement. Enterprise

Development is very much about creating shared value, a concept which says that

businesses should incorporate communities into their core business activities as this will

create shared value for both the company and the community. Enterprise Development

however does have its limitations, one of which is that it only serves the supply chain of

companies. The concept of all inclusive business suggests that companies should

stimulate local communities through the entire value chain. This is known as inclusive

business and it is grounded in the concept of creating shared value, not only through the

supply chain, but throughout the entire value chain. Inclusive business suggests that

communities and community members can play an integral part in a company’s core

business throughout the value chain from supply to distribution. It is however important

for inclusive business to be scaled as this provides numerous opportunities for local

community members to escape the grips of poverty. The initiatives at Grootbos are on a

small scale and the case will aim to identify whether these initiatives are in fact creating

shared value and how these can be more closely aligned to Grootbos core business

strategy.

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Case Study: Creating Shared Value at Grootbos Private

Nature Reserve

Picture 1: View of the Villa surrounded by indigenous fynbos

Introduction

Grootbos nature reserve situated just outside Gansbaai in the Western Cape came into

existence in 1991 when Michael Lutzeyer, owner and general manager of Grootbos,

stumbled upon this piece of paradise. In Michael’s words:

“The stunning natural surroundings with blossoms shining in their most brilliant colours,

green fynbos bushes and old Milkwood trees gave me the feeling that here I was part of

paradise”

Michael was born in Cape Town in 1952 after his parents had immigrated to South Africa

from Germany. After completing high school, Michael served one year within the South

African military before moving to Germany for the next 13 years. During this time

Michael was involved in a number of different industries before deciding to return to

South Africa in the mid 80’s.

Prior to purchasing the farm, Michael was living with his family in Cape Town working

for a company that imported machines for the packaging industry. He made the decision

to move his family to this isolated part of the coast with the dream of opening a self-

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catering lodge. Michael was criticised by a number of his friends for taking on such a

risky project. After all, international visitors to South Africa, come to experience the

bush, not a derelict farm situated in the middle of nowhere. Aware of this criticism, and

that he might be making the biggest mistake of his life, Michael pushed forward hoping

to realise his dream.

Michael and his family developed a small self-catering guest lodge on Grootbos which

was aimed primarily at the South African market. It took a number of years for Michael

to realise that the South African market was not sustaining his product and that he would

need to start attracting international visitors to the farm. Slowly but surely with a recipe

of hard work, dedication and passion, Michael and his wife Dorothee, his brother Tertius

and his wife Gaby as well as Michaels parents Heiner and Eva started transforming the

self-catering lodge into a B&B and eventually a five star lodge. At this stage, Michael

also realised what he had bought.

“Up until then, I had no idea what I had gotten myself into and didn’t realise what

wonders lay right outside my doorstep”

Grootbos nature reserve is situated on 1800 hectares of pristine coastal property and can

best be described as a bio diversity hotspot. Grootbos is home to no less than 765

different species of fynbos. Fynbos is part of the Cape Floral Kingdom and is one of the

world’s six floral kingdoms. Fynbos cannot be found anywhere else in the world. Of the

765 different species on Grootbos, 83 are endangered, 6 are new species which had never

been discovered before and some can only be found within the parameters of Grootbos.

Grootbos is also home to a number of endangered Milkwood forests which are also some

of the largest to be found in South Africa. Grootbos boasts a number of different animal

species. Recent footage has confirmed the presence of the once thought to be extinct

Overberg Leopard. Other types of animals include Porcupine, Honey Badger, Spotted

Gennet and a number of smaller antelopes. It was this realisation that pushed Michael to

turn Grootbos into one of the leading five star destinations in South Africa.

This unique offering of nature is one of the reasons why guests chose to stay at Grootbos

and it is not uncommon to hear comments such as one from the Roy Family:

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“A wonderful stay in a beautiful surrounding with a magical view”

Picture 2: “Pin cushions” growing at Grootbos

Grootbos today

In 2011 Grootbos is known as a leading 5 star hospitality destination within South Africa

and has received numerous accolades and awards for both its accommodation and

conservation efforts (See Exhibit 1).

“We are very proud of each of these achievements as they are confirmation of our efforts

to create a unique and truly amazing eco-tourism experience”

These achievements have been awarded as a result of what Grootbos is and has to offer to

the discerning guests who frequent Grootbos.

Accommodation

Grootbos has a number of different accommodation options available to suit every need.

Accommodation is spread across two lodges and newly built villa.

Garden Lodge

The main building which forms the centre of Garden Lodge was adapted from the

original self-catering lodge that was founded on Grootbos. The lodge offers 11 free

standing suites with sweeping views of the Milkwood forests, estate and Walker Bay.

The lodge offers a gourmet restaurant and bar, swimming pool and a beauty salon. The

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lodge is family friendly and accommodates children of all ages and offers an array of

activities aimed specifically at the young ones including a children’s playground.

Forest Lodge

Forest lodge, true to its name is embedded in one of the Milkwood forests on Grootbos

and is described in the following manner:

“Forest Lodge is an exquisite architectural marriage of modern state of the art grandeur

and the perennial beauty of nature”

Considered the main lodge, it offers 16 luxury free standing suites, a gourmet restaurant

and bar, swimming pool and conference facilities. The suites are separated by the ancient

forest and the lodge was specifically designed not to disturb the endangered Milkwood

forest creating a truly romantic experience and idyllic setting for newlyweds.

The Villa

For those seeking a truly undisturbed experience in exquisite surroundings combined

with the luxury of Grootbos, they need look no further than the new acquired villa. A

modern masterpiece which comprises of 6 luxury suites, dining room, wine cellar,

swimming pool. Furthermore guests of the villa are treated to a private chef, private

butler and private guide for the duration of their stay.

Activities

All guests on Grootbos are able to take part in the myriad of activities which are offered.

Kids Play Ground

The kid’s playground also known as the farm yard is a firm favourite amongst the little

ones. Here kids are able to engage with farm animals such as bunnies, chickens, pigs and

ponies whilst continuously being supervised by a dedicated field guide.

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Horse-riding

Grootbos has its own stables and 20 well trained horses. Experienced instructors are on

site and are able to cater to all levels of riding experience. Guests are able to choose

between rides on the estate or a 3 hour ride which incorporates a beach ride.

Nature Walks

Picture 3: Self-guided hiking trail

Daily nature walks are offered by the trained guides lasting approximately an hour.

These walks incorporate the Milkwood forests and guides are trained in the local fauna

and flora available at Grootbos.

Game Drives

For those wishing to see Grootbos from the comfort of a car, special game ranging

vehicles are available. Guests are able to go in groups or can opt for a more private

romantic drive accompanied by a picnic in a remote location on the reserve.

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Bloom Salon

As Grootbos is after all a place of relaxation, the Bloom salon offers an array of spa

treatments for those wishing to unwind from daily stresses.

Dining

Dining is one of the main attractions at Grootbos. Restaurants offering breakfast lunch

and dinners are available at both lodges. The mantra of the executive chef is:

“To create old School dishes with a modern twist that are refreshing and contemporary

and boasts dishes that represent colour, freshness and simplicity”

Grootbos aims to source all of its ingredients locally and makes use of “Growing the

Futures.” This is a social responsibility projected spearheaded by Grootbos to provide

most of the vegetables, herbs, honey, eggs and pork used by the Chefs. Seafood is only

sourced from the local villages and meats are sourced from a farm within the local

communities.

Marine experiences

Walker Bay is famous as being part of the whale route, a small part of the South African

coast line where Southern right whales come to give birth to their young. Gansbaai is

also known for shark diving and many tourists flock here yearly to partake in this

extreme activity. Grootbos offers the perfect escape from which to explore all the marine

life of the area.

Guided tours of local attractions

Daily trips are done to the local beaches of De-Kelders and Gansbaai. A guided tour is

offered at the Klipgat caves situated in De-Kelders. What makes Klipgat caves so special

is that this site was home to middle Stone Age peoples approximately 70,000 to 80,000

years ago.

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“The Klipgat Cave outside De Kelders evokes vivid images of pre-historic times when

modern man lived happily in symbiotic harmony with nature off the bounty of land and

sea when the coastline was still kilometres away.”

A number of archaeological findings have indicated that these people lived here and that

antelope roamed the land, where one would now go to experience the marine habitat.

Sustainability Tour

Michael and the rest of the team at Grootbos are very passionate about the various

sustainability projects which are managed by the Grootbos Foundation. Daily tours are

done where guests are able to engage with the various projects and recipients of the

projects.

The Business today

2008 saw the start of the worst recession that the world has faced since the end of the

great depression in the 1930’s. Some estimate that the amount of people who are without

work has increased from 175 million to 205 million people. South Africa was not exempt

from this recession and it is estimated that nearly a million jobs were lost locally.

Tourism has especially been hit hard with many people not having sufficient

discretionary income to warrant luxury holidays to exotic destinations. This coupled by

the fact that South Africa has a 30% to 35% oversupply of accommodation did not make

the situation any easier.

Grootbos was affected as were most accommodation providers in South Africa with a

drop in occupancy of 19% between 2007 and 2010 (See Exhibit 2). Business improved

slightly between 2009 and 2010 with Gross Revenue of R21 million and Net Revenue of

- R2 million (See Exhibit 3 & 4).

The tourism industry in South Africa was required to adopt alternative strategies in order

to remain liquid and competitive with many choosing to attract visitors from developing

nations especially Brazil, Russia, India & China (BRIC). Grootbos has not yet been able

to attract these visitors and to this day still attract guests from countries such as Germany,

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UK, USA and South Africa. Together these countries make up approximately 80% of all

guests visiting Grootbos (See Exhibit 5 & 6). BRIC countries represent only a small

minority of guests visiting Grootbos with Brazil and Russia not featuring at all amongst

the nationalities for 2010. India and China together make up less than 0.5% of all guests.

The question of whether guests at Grootbos are there as a result of the sustainable

initiatives, activities, location, or a combination thereof, remains an educated guess.

Michael and his employees are easily able to answer this question; however no statistics

on this are collected. It is not uncommon to hear comments such as:

“Definitely, guests come to Grootbos to experience the social and environmental

initiatives that we have taken”

“More often than not when guests come to reception, their first request or query is

regarding the sustainability tour and how they can get involved in the initiatives”

Of course guests are aware of what Grootbos has to offer however the exact reason for

their visit is not confirmed. However once at Grootbos, guests will experience the

various initiatives and leave comments such as the following:

“Playing soccer with the kids was a truly unbelievable experience for my brother and I –

Andryle family”

Being a hotel, Grootbos makes use of a number of different tour operators in order to

secure business (See Exhibit 7). These tour operators play a key role in securing business

for Grootbos and such strategic relationships have been formed with them, it is however

important to note that these tour operators offer general accommodation packages and

cannot be described as Eco tourism specialists. Some such as Wilderness and &Beyond

do work in this area but only consider this a portion of their business. According to

Michael, he does not want Grootbos to be known purely as Eco tourism destination and

has not tried to secure more business from tour operators specialising in Eco Tourism.

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“My view for Grootbos is not to be known as an Eco tourism destination by itself, this is

a part of Grootbos, but once you start attracting eco-tourists there is enormous amounts

of compliance needed which Grootbos does not comply with”

Sustainability

Michael is known as a passionate and ambitious individual. He is extremely passionate

about sustainability and especially social development by providing opportunities for

those who have been affected in the past. These opportunities have been conceptualised

within two components of sustainability, both of which will be explored. The first is

environmental sustainability and the second social development. Michael furthermore

believes that developing social capital should not only create value for beneficiaries, but

should also create value for the business and thereby benefit both parties.

The Grootbos Green Futures Foundation

The recent recession has required that many accommodation providers manage their costs

more efficiently. It is not uncommon to hear accommodation providers say that they are

unable to participate in social responsibility projects or philanthropy as they just are not

able to afford it. Grootbos is no different.

Due to this, sustainability at Grootbos has been conceptualised under the banner of a

Foundation. This has allowed Grootbos to participate in not only one, but a number of

different projects. The formal name of the Foundation is the “Grootbos Green Futures

Foundation” which is registered as a section 21 company. The Green Futures Foundation

incorporates the following sustainable initiatives.

Future Trees

This is an initiative which aims to restore the land by growing and planting trees.

Green Futures

An initiative with the purpose of alleviating poverty whilst preserving the environment by

teaching horticultural and life skills.

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Growing the Futures

An initiative with the purpose of alleviating poverty whilst preserving the environment by

teaching subsistence farming, animal husbandry, beekeeping and life skills.

Spaces for Sports

An initiative which enhances the community and preserves the environment by teaching

basic life skills.

A section 21 company is also known as a “not for profit” company and as such all

retained profits are the property of the Foundation and is only to be used to maintain and

grow the Foundation. Michael serves as a director to the Foundation along with Sean

Privett, a botanist with a Master’s degree in Botany. According to Michael, the reason

why he decided to create a section 21 was to build a sustainable base from which to

develop social and environmental sustainability. Michael explains this as follows”

“Grootbos is a small company and not able to sustain a project like this individually. In

order to realise my dream and build sustainable livelihoods, I had no choice but to form

a Foundation. This allows for donations to be received and for the projects to run as a

separate company”

Michael furthermore believed that more value would be derived from a section 21 as

opposed to an Enterprise Development initiative.

“South Africa has many unskilled workers and the section 21 allows us to benefit many

through developing skills which can then be used to find meaningful work. Enterprise

Development is too focused on creating ownership and not enough on creating lasting

skills at a grass roots level”

As a section 21, regulation requires that the Foundation be audited on a yearly basis to

ensure that funds are not misappropriated. The Green Futures Foundation is audited on a

yearly basis by KPMG. Furthermore this satisfies all stakeholders that every measure is

taken to ensure that the Foundation is managed accordingly. The Foundation lives

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according to a mission statement and a set of objectives to ensure that stakeholders know

what the Foundation is about (See Exhibit 8).

The Green Futures Foundation has the following mission statement

“The conservation of biodiversity of Grootbos and its surrounds and development of

sustainable nature based livelihoods through ecotourism, research, management and

education”

The Green Futures Foundation came into inception in 2003 along with the first students

of the Green Futures project. Since then the Foundation has grown to become a large not

for profit business with Gross revenue for 2010 (See Exhibit 9) of R3 million. This is

nearly a 75% increase from the Gross revenue of R1.8 million for 2009. This large

increase stems mainly from substantial increases in donations and grants received for the

2010 financial year (See Exhibit 10). Donations increased by 75% from R957 000 in

2009 to R1.6 million in 2010 and grants increased by a staggering 116% from R551 000

in 2009 to R1.1 million in 2010.

The Net Margin also increased dramatically from 0.14% in 2009 to 4.15% in 2010 (See

Exhibit 11). It is important to note that this drastic increase is more than likely due to

another initiative named Growing the Futures, which was conceptualised and started

during 2009. No specific notes however were included in the financial reports of the

Foundation to confirm this view.

According to the financial statements of the Foundation, better performance can be

attributes as follows:

“The Foundation has expanded on its performance of 2008/09 after consolidation of the

various initiatives under one Foundation”

During 2009 and 2010, the operating expenses were exceptionally high (See Exhibit 12 &

13). Operating expenses for 2009 was R1.8 million leading to an operating cost of 100%

of revenue. This improved slightly for 2010 with operating expenses of R3 million

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leading to an operating cost of 95% of revenue. Improving on this will allow for more

retained profits which can be used to scale the initiatives even more.

By setting up a section 21, Michael has been able to grow and scale his passion. Had he

created a form of Enterprise Development without the help of donations and grants, the

projects might never have realised their true potential as a result of the financial crisis.

Michael confirms this view with the following statement”

“I do not have sufficient resources available to engage in Enterprise Development.

Having a Foundation ensures that the different initiatives are properly managed and

allows for donations to ensure that the initiatives remain sustainable”

However, running a Foundation is not without its challenges. The financial crisis

affected the Foundation as much as any other business was affected. During 2009 and

2010, the Green Futures experienced a decline in nursery sales as well as revenue

generated from landscaping services. Due to this, a number of initiatives have been put

in place in order to ensure that the Foundation continues to be profitable and continues to

grow and develop the current initiatives.

Online Donations Portal

An online donations portal has been established with the aim of attracting more

donations. This offers a convenient service to donors to quickly make a donation should

they wish to do so.

The Grootbos field guide

The Grootbos field guide is an amazing accomplishment documenting the flora of the

region over more than a decade. The aim of the book is to raise money for the Grootbos

Green Futures Foundation. The cost of the book is covered by the Foundation and all

proceeds are reinvested into the Foundation.

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Marketing

A number of marketing initiatives have been taken to spread the word of the Grootbos

Foundation. Primarily done through e-marketing a dedicated website, blog and social

media campaign has been created.

Volunteer programme

A volunteer programme has been created to assist in keeping wages to a minimum.

Volunteers are provided with accommodation and the use of a Foundation vehicle and are

placed within the various projects offered by the Foundation. A minimum requirement is

that volunteers must be 18 years of age and be able to volunteer for a minimum of 2

months.

Environmental Sustainability

Since Michael discovered the gem that is Grootbos, he has made it not only his goal, but

his mission to preserve this unspoilt piece of land. This started with a project which

involved clearing all alien vegetation from the property. Included in this conservation is

ensuring that all fynbos and other types of vegetation are counted and documented. In

2006 a blazing fire swept through Grootbos destroying part of the reserve including

Forest lodge which at this stage was only about 2 years old. Part of the endangered

Milkwood forest embedded in Forest Lodge was also destroyed. This was considered an

epic disaster which affected many community members including Michael himself. It

literally however turned out to be a vehicle for growth with the count of fynbos species

jumping from 680 to 750 within a couple of months. Fynbos depends on fire for re-

generation so what Michael thought could have turned out to be a disaster was in fact

good for Grootbos.

Michael quickly realised that there was an opportunity to create value which would

benefit local community members who had been affected by the fire. The first initiative

that was set in place was to create beaded burnt proteas. These were made from actual

proteas which were destroyed during the fire. Local community members were allowed

to harvest the burnt proteas and turned them into beautiful objects filled with cultural

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beads and colours. These proteas were then sold and all proceeds went to affected

community members.

Future Trees

Another initiative which stemmed from the week long raging fire in 2006 is the Future

Trees initiative. This project aims to rehabilitate parts of the reserve which were

destroyed during the massive blaze and which have been impacted by humans in the past.

The project also known as “Future Trees Foundation” sells young trees at a cost of R350.

Guests of Grootbos are able to purchase a tree which will then be planted and cared for.

A previous graduate of the Green Futures Foundation is employed on a full time basis to

care for the trees. “Tree planters” as they are known are recognised for their contribution

by receiving a tree planter’s certificate as well as GPS coordinates. The idea behind this

is that a tree planter can sit anywhere in the world and locate exactly where his/her tree is

planted on the reserve and document its growth.

Picture 4: trees available to be planted

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Social sustainability

Green Futures

Picture 5: Entrance to Green Futures College

This programme had its inception in June 2003 when the first students began their

training as fynbos landscapers. Since then the programme has continued to run with a

new intake of students every year. In order to realise the dream that has since become a

reality a public private partnership was formed between Grootbos and the German

development bank otherwise known as the DEG. The DEG, which has been financing

private sector investments in developing economies since 1962 agreed to support

Grootbos on a Rand for Rand basis over the two years it took to establish the school and

training programme. Michael’s drive to initiate the programme stemmed from the

incredibly high unemployment rate of nearly 50% in the area. Michael’s ambition was to

teach community members a set of skills which could assist them in finding skilled

employment and at the same time create value for his business.

The school takes previously disadvantaged individuals from the local community and

teaches them to become level 1 horticulturalist. This programme is built on 2 pillars: The

life skills pillar and the horticultural pillar.

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The horticultural pillar involves a rigorous programme including being able to identify

fynbos species by their Latin names as well as the more common names which are used

in South Africa. Furthermore students are taught soil preparation, how to propagate and

harvest plants.

The life skills pillar involves teaching student’s skills such as; first aid, numeracy and

mathematics, literacy, health issues, aids awareness, interpersonal skills, money

management, basic computer skills and basic business skills. Students are also taught

how to drive and the school offers to facilitate and pay for students to obtain a driver’s

licence. The idea behind this is that when students leave the college, they are not only

able to work as fynbos gardeners, but are able to full fill basic administration skills and

could easily look for positions as receptionists, drivers amongst others.

Part of the training incorporates practical field work at Grootbos. The course is designed

to be hands on and is approximately 30% theory and 70% practical. The practical

sessions involves caring for plants which have been harvested. From this initiative,

Green Futures has opened a wholesale nursery. All the plants are harvested by students

during their practical sessions. Students are then required to care for these plants which

are sold at wholesale prices. The revenue generated from the nursery is used to cover

costs and reinvested into the Green Futures initiative.

Picture 6: The nursery at Green Futures

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During the programme, students are not only taught valuable skills, but Michael has

ensured that they are looked after. All students receive a uniform and equipment, a

monthly pocket money allowance of R30 a day and are given breakfast and lunch during

the school day. Every effort has been taken to ensure that student’s needs are taken care

of and all they need to do is focus on their programme.

A recent initiative at Green Futures has been introduced. Every year, 3 of the best

students are taken on a field trip to the world famous Eden project in the United

Kingdom. Here students have the opportunity work and learn from a leading

conservation effort. The other students are not forgotten and given the opportunity to

work for a period of three weeks at either Kirstenbosch Botanical gardens situated in

Cape Town or at the Harold Porter Botanical gardens situated in Betty’s Bay

Since its inception, 72 students have graduated from the Green Futures. The staff at

Green Futures are extremely proud of the fact that they have achieved a 100%

employment rate for their graduates. It is not uncommon for graduates to continue

working for Grootbos at one of the lodges. A previous student, Chumani, graduated from

Green Futures in 2007 and has since then been working as a guide at Grootbos.

“Before, I was a Sheppard in the Eastern Cape. After finishing at the Green Futures I

was able to find employment as a guide at Grootbos. Green Futures has really changed

my life and I am very grateful for the opportunity. I am now a level 1 horticulturalist and

my dream is to become a level 3 horticulturalist”

Anita is a current student at Green Futures and dreams of becoming a receptionist at one

of the lodges at Grootbos.

“Before coming to Green Futures, I had no opportunities. I like being here learning

about nature and plants. When I graduate, I want to become a guide at Grootbos and my

dream is to become a receptionist at one of the lodges”

The Foundation itself has been able to create employment for one of the Green Futures

graduates. The Future Trees project has employed a past graduate on a fulltime basis to

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look after all of the trees which are planted as part of the project. A position the graduate

would not have been able to do without the training offered at Green Futures.

Going forward and due to the success of the initiative, there are plans to expand the

Green Futures project. Plans include rolling out the school at a site in Cape Town and in

Gordon’s Bay. To achieve this, a partnership has been formed with the South African

National Biodiversity Institute (SANBI) and a project manager funded by SANBI has

been employed to facilitate the roll out.

Growing the Futures

Picture 7: One of many pieces of land used to grow vegetables at Growing the Futures

Building on the success of Green Futures, a new initiative called Growing the Futures

was conceptualised in 2008. It was officially opened on the 9th August 2009 by Derek

Hanekom, Deputy Minister of Science and Technology. Growing the Futures was

brought to fruition through the help of the DEG, the Bright Foundation as well as a

number of other donors. This project aims to create a new year long training project

which would benefit local community members from the Stanford area whilst at the same

time create value for the Grootbos reserve. The project teaches subsistence farming skills

and basic life skills to help students find sustainable long term employment. Growing the

Futures has its roots in food production and every year since its inception 8 women from

the local community are enrolled as students. The programme is based on the same

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model used to develop the Green Futures and includes a life skills and subsistence

farming pillar.

The subsistence farming pillar teaches students the necessary skills to become successful

subsistence farmers. These skills include ground clearing, soil preparation, composting,

animal husbandry and beekeeping.

The life skills pillar teaches student’s skills such as; first aid, numeracy and mathematics,

literacy, health issues, aids awareness, interpersonal skills, money management, basic

computer skills and basic business skills.

As with the Green Futures, students are rewarded for their dedication to the programme

and provided with uniforms, the necessary tools to complete their training, breakfast and

lunch whilst at school and a daily allowance of R44 to assist with covering their basic

needs as they are essentially unemployed for the duration of the programme.

Students at Growing the Futures currently grow and care for numerous vegetables. In

addition to vegetables the students care for a chicken coop which was designed as a

hatchery. The chicken coop is completely free range and chickens are able to roam freely

within a designate area. Free range pigs are also bred and form part of the animal

husbandry which students are taught. Chickens and pigs are able to scratch and search

for food without being force fed like most farm animals one would find in a supermarket.

Beekeeping has turned into a successful initiative and students not only produce, but also

sell the honey they produce to a number of different restaurants and hotels in the area.

The revenue which is generated is ploughed back into the Foundation and used to grow

and continuously develop the programme.

In addition to all of these skills, students are taught how to breed earthworms which

assists in creating compost. The worm “juice” is rich in nitrogen and spread at the base

of the vegetables.

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In an effort to support this programme, Grootbos buys most of their vegetable

ingredients, all of their eggs, all of their pork and all of their honey from Growing the

Futures. According to Michael:

“We buy our ingredients at a premium price in an effort to support this project. The

reason we pay a premium, is that this not only benefits the Foundation as a revenue

source, but benefits Grootbos as our chefs have access to organic vegetables which

makes the dishes they prepare so much tastier and healthier”

Students at Grootbos are delighted at the opportunities which await them when they

finish their training. Liziwe a current student had the following to say about Growing the

Futures:

“I have learnt so much here at Growing the Futures. I dream of owning my own business

when I leave here. I want to use the skills I have been taught and grow vegetables in the

community. I also want to raise chickens and sell the eggs and the vegetables to the

community members”

Tulani, a current employee of Growing the Futures had the following to say:

“Last year, I was a student at Growing the Futures. Before I had no confidence and did

not think I would find work. Now I work for Growing the Futures and am able teach

other women who were like me the skills that I have learnt”

Moving forward, Michael plans to scale up the Growing the Futures project. One of

Michael’s ideas is to work with local government as well as the public in the community

of Stanford. Michael would like to make use of vacant plots to help community members

set up their own businesses and grow vegetables.

“If people and the local municipality allow us to use their vacant plots, they will

indirectly be supporting our cause. Furthermore, we will clear the land for them and

they will directly be involved in helping to stimulate social development within their

communities. If they want to build on their plots, it will be as easy as clearing the

vegetables and starting on a new plot”

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This project is currently in its planning phase and if all goes well will be opened by 2013.

Spaces for Sports

On 20 April 2008, the Spaces for Sport project was officially opened by Overstrand

Mayor, Mr Theodorus Beyleveldt, Barclays Group Vice Chairman, Mr Gary Hoffman,

Absa Group Executive Director, Mr Happy Ntshingila, and Michael Lutzeyer. The

project is a collaboration between The Grootbos Foundation, ABSA, Barclays,

Overstrand municipality, the Barclays Premier league and the Western Cape Department

of Cultural Affairs and Sports.

The idea came to Michael in the build-up to the 2010 Fifa world cup soccer when he

realised that there were not sufficient sporting facilities available within the Gansbaai

community. It became Michael’s dream to build a multi sports facility that would serve

as a community development project.

Picture 8: The astro turf soccer field at Spaces for Sports

At present the facility offers a soccer field and netball courts and there are talks of

incorporating a rugby and cricket field as well. The field is fitted with third generation

Fifa artificial grass pitch which was donated by Tiger Turf UK. This is the first artificial

pitch of its kind in Southern Africa.

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The project is aimed at the youth of the communities and aims to integrate them into

society through sport. The project is grounded in the philosophy that through sport we

are able to break down social barriers and bring people together on even terms. Due to

the location of the facility, 3 different communities of different ethnicities are benefited

by the project. This assists in teaching the youth how to interact and engage with

different cultures and that the end of the day we are all actually the same.

The belief is that that sport would benefit youth development and teach them vital life

skills which will be essential for them to become young adults. The skills which are

transferred to the students through the sports initiatives are discipline, team work, respect

and most importantly how to have fun.

Coaches play a vital role in this and act as mentors to the young athletes, many of whom

do not go to school or come from broken homes. Many of the youngsters are also

subjected to parents who are addicted to alcohol or other forms of addictive narcotics.

Coaches are therefore very often their only role models and take their jobs very seriously.

Here children are able to be children whilst learning valuable life skills.

The Foundation uses the Spaces for Sports as an opportunity to teach youngsters about

environmental sustainability. Youngsters are encouraged to recycle and help keep their

communities clean and a project has been initiated where recycling can take place at the

sports fields.

To make the project successful and ensure that youngsters obtain the most benefit from

the project it is essential that not only training is offered but that they are able to play

matches. The project is supported by the football association of South Africa and along

with Lean Terblanche, project manager for Spaces for Sports, leagues and matches are

organised.

The programme is managed under the Green Futures Foundation and as such is a “not for

profit” project and relies heavily on donations and government grants to stay afloat.

These are used to maintain the project and to source sport kits including uniforms for the

children. Children do not just receive a sport kit when they start using the facility. Part

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of the recycling initiative which has been put in place rewards children who recycle with

tokens, which can be used to “purchase” sport kits, an initiative which teaches children

the value of working towards a goal. Providing the beneficiaries with their own kits

which they worked and saved for has instilled a sense of pride in them and it is not

uncommon for coaches to be greeted by 100 youngsters wanting to participate in the

sports.

Future initiatives

The South African Government has indicated that job creation and ultimately Economic

Development needs to come from SMME’s. Grootbos has realised that they are able to

play a role to assist with this and such have started with a grass roots initiative which

creates value for the community as well for Grootbos.

The idea stems from a lady who in 2011 was a student at Green Futures. Each year,

Michael aims to take students on a field trip to help broaden their horizons around

horticulture. In 2011, the students embarked on a trip to the world famous Eden project

situated in Great Britain. The lady in question returned with great vigour and

determination to showcase South African township life in the form of a small business.

She discussed her idea with Michael, who immediately saw the value in the idea and

agreed to not only assist her in developing the project but to give her complete ownership

of the business.

The idea was to create a traditional township shop or better known on Grootbos as the

Spaza Shop. What makes this idea so interesting is that the Spaza Shop would be located

at the Garden Lodge, thereby offering yet another unique offering and activity for guests

to enjoy. The Spaza Shop would sell a number of different cultural items which are made

on site. Furthermore guests would be treated to traditional music and cuisine when

visiting the curio shop. At present, the curio shop has not been opened due to an

unforeseen setback. Unfortunately one of the reasons why Michael has not been involved

in Enterprise Development in the past has been the cause of the recent setback with the

person behind the idea, leaving to pursue greener pastures in Cape Town. Michael has

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not allowed this to deter him and Grootbos will continue to move forward with the

project and aim to open later in 2011.

Picture 9: Site where curio shop is being developed

Picture 10: The actual curio shop where guests are able to engage with the owner and purchase locally crafted items.

This type of business could easily be classified as Enterprise Development. Due to the

setback, Michael has decided that the curio shop would be donated to the Green Futures

and be managed by the Grootbos Foundation, thereby transferring ownership from the

community to a Foundation. According to Michael, who seemed taken aback by the fact

that the lady would just up and leave- .

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“I am running a small business and do not have the necessary resources to engage in

Enterprise Development. I am unable to donate time and money in order to mentor and

create small businesses for the community, especially if they decide to leave. I need

suppliers who I can trust and will consistently provide a service to Grootbos and due to

the nature of Grootbos cannot make use of unreliable sources”

At present, Michael and Grootbos do not have a BBBEE scorecard and have no

ambitions to create one in the near future. Specifically Enterprise Development requires

companies to create ownership for previously disadvantage individuals in a project that

would supply a product or service in line with the company’s core business through the

supply chain.

Michael has considered both the BBBEE score card and Enterprise Development and

believes that there are too many challenges which he will need to overcome. He sees the

main challenges as:

How does one obtain the relevant funding to participate in Enterprise

Development?

As Enterprise Development is not under the banner of a Foundation with

dedicated staff, how does a small company dedicate time to mentor the Enterprise

Development initiative?

In participating in Enterprise Development, the initiative would need to offer a

service through the supply chain. Grootbos needs to be able to have reliable

sources and most of the community members aim to leave for Cape Town or the

other big cities where they believe there are more opportunities for them.

Furthermore, Michael believes that Grootbos is a small company and does not aim to

attract any government business. Based on this BBBEE is not part of Michael’s current

or future strategy for Grootbos (See Exhibit 14)

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Looking towards the future

Grootbos has come a long way since its inception nearly 20 years ago. Michael has

clearly been the driving force behind company ensuring that it not only becomes one of

the leading accommodation providers in the area but does so whilst aiming to preserve

the environment and uplifting communities through social development. Michael lives to

create value for both the community and Grootbos and has used the Grootbos Foundation

as an excellent marketing tool and incorporating all of the projects into his core business

(See Exhibit 15)

Going Forward, Michael is considering the following:

Whether he will consider BBBEE as part of his future strategy and if so, how will

he do this?

Whether he will develop more initiatives and whether this will form part of the

Grootbos Foundation.

If he is to engage in more initiatives, how he will go about these initiatives to

ensure that they are part of his core business.

How to improve business profitability whilst at the same time continuing to social

and natural capital?

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Questions for discussion

Question 1

A) Is Grootbos creating shared value?

B) Are the initiatives at Grootbos in line with their core strategy? Justify your

answer. If not, how can they be adjusted to be in line with their core business?

Question 2

A) Is BBBEE relevant for Grootbos and what are the advantages and disadvantages

of Grootbos incorporating BBBEE into their strategy?

B) If Grootbos chooses to engage in Enterprise Development, how would they obtain

funding?

C) What initiatives can be taken to ensure that Enterprise Development initiatives are

given proper support and mentoring?

Question 3

A) Is there a business case for this model of development? Highlight the advantages

and disadvantages of the model

B) What additional strategies could be implemented?

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Case Exhibits

Exhibit 1: Awards and Accolades

British Awards: Tourism for Tomorrow, Protected Areas and National parks.

Highly Commended 2000.

MTN & Western Cape Tourism: Winner Eco Tourism experience of the year

2001

The Iris Darnton Award: for International Nature Conservation 2001

AA Travel Guides: Accommodation Awards, Gold Achiever 2002

2003 Imvelo Best Environmental Management Programme Award

2003 Imvelo Overall Winner for Responsible Tourism

2003 Imvelo Responsible Tourism, Most Improved in one year

2004 Responsible Tourism Award - Best protection of endangered species

2005 Tatler Travel Guide voted as one of 101 best hotels in the world


2006 Tatler Travel Guide voted as Best Family Hotel in the world

2006 Conde Nast Traveller annual Green List 2006


2007 Responsible Tourism Award: Best for Conservation of an Endangered

Species


2008 Finalist: Tourism for Tomorrow Awards

2008 The Good Safari Guide: Best Community Property in Africa 2008

2008 Amarula Best Retreats in Africa Award: Winner: Heart of Africa 2008

2009 GEO Saison Green Palm 2009 for Michael Lutzeyer

2009 The Good Safari Guide: Best Community Safari Camp 2009

2009 Amarula Best Retreats in Africa Award: Winner: Most innovative Retreat in

Africa 2009

2010 The Good Safari Guide: Best Ecological Safari Property in Africa 2010

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Exhibit 2: Occupancy Statistics at Grootbos

Exhibit 3 – Gross Profit for 2009 and 2010

69%

58%

46%50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2007 2008 2009 2010

Occupancy Percentage

Occupancy Percentage

17683000

21186000

15000000

16000000

17000000

18000000

19000000

20000000

21000000

22000000

2009 2010

Gross Profit

Gross Profit

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Exhibit 4: Net Profit

Exhibit 5: Top Nationalities visiting Grootbos

‐2900000

‐2173000

‐3500000

‐3000000

‐2500000

‐2000000

‐1500000

‐1000000

‐500000

0

2009 2010

Net Profit

Net Profit

32.66%

22.72%

13.90%

9.32%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

South Africa Germany UK USA

2010

2010

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Exhibit 6: BRIC Nationalities visiting Grootbos

Exhibit 7: Top ten volume producing Tour Operators

0% 0%

0.31%

0.13%

0%

0%

0%

0%

0%

0%

0%

0%

Brazil Russia India China

2010

2010

Top Ten Tour Operators

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Exhibit 8: Objectives of the Foundation

Engaging in conservation, rehabilitation and protection of the natural

environment, including flora and fauna on Grootbos and in the Cape floristic

region;

The promotion of, and education and training programmes relating to,

environmental awareness, greening, clean-up and sustainable development

projects;

The provision of education by an adult education “college” aligned with the

Agricultural Seta, including horticulture, conservation, ecotourism and life skills

education;

Training unemployed women in sustainable agriculture and life skills

development with the purpose of enabling graduates to grow and sell their own

food;

Research including ecological, educational, social, scientific and technological

research on conservation, rehabilitation or protection of the natural environment,

including flora, fauna or the biosphere;

The development of sports facilities as a tool to integrate society, provide a

healthy lifestyle for the youth and promote environmental awareness amongst all

communities

The utilization of income received from donors to pursue the above activities;

The development of an indigenous plant nursery that will generate income for the

above activities.

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Exhibit 9: Green Futures Foundation Gross Revenue

Exhibit 10: Increase in donations and grants received

1834000

3200000

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

Gross Revenue

Rands

2009 2010

957955

551542

1683796

1194498

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

Donations Received Grants Received

Rands

2009 2010

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Exhibit 11: Net Margin for Grootbos Foundation

Exhibit 12: Operating expenses

4.15

0

1

2

3

4

5

Net Margin

Percentage

2009 2010

1843445

3143703

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

Operating expenses

Rands

2009 2010

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Exhibit 13: Operating cost as a percentage of revenue

100

95

92

93

94

95

96

97

98

99

100

Operating cost as a % of revenue

Percentage

2009 2010

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Exhibit 14: BBBEE Scorecard

Ownership. Total points - 28 (including bonus points) Description Weighting

points Compliance Target

Voting rights Exercisable voting rights in the enterprise in the hands of black people.

6 25% + 1 Vote

Economic interest Economic interest of black people in the enterprise 9 25% Realisation points

Ownership fulfilment 1 Yes Net value 9 25% Bonus points

Involvement in the ownership of the enterprise by black women

2 10%

Involvement of black participants in employee ownership schemes in co-operatives; or o broad-based ownership schemes

1 10%

Management Control. Total points: 27 (including 2 bonus points) Description Weighting


Black representation at top management level 25 50.1% Bonus points

Bonus points: black women representation at top management

2 25%

Employment Equity. Total points: 27 (including 2 bonus points) Description Weighting

points Interim Target(Years 0-5)

Compliance Target(Years 6-10)

Black employees who are management as a percentage of all management using the ARFG

15 40% 60%

Black employees as a percentage of all employees using the ARFG

10 60% 70%

Bonus Point for meeting or exceeding the Economically Active Population (EAP) targets in each category above

2 A A

Skills Development. Total points: 25 Description Weighting


Adjusted skills development spend on learning programmes for black employees as a percentage of leviable amount

25 2%

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Preferential Procurement. Total points: 25 Description Weighting

points Interim Target(Years 0-5)

Compliance Target(Years 6-10)

BEE procurement spend from all suppliers based on the BEE procurement recognition levels as a percentage of total measured procurement spend

25 40% 50%

Enterprise Development. Total points: 25 Description Weighting


Average annual value of all qualifying contributions as a percentage of the target

25 2% of NPAT

Socio-Economic Development. Total points: 25 Description Weighting


Average annual value of all Socio-Economic Development contributions as a percentage of the target

25 1% of NPAT

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Exhibit 15: The Grootbos Model

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4 Teaching Notes

4.1 Case Summary

This case tells the story of Grootbos private nature reserve, a South African nature

reserve which provides 5 star luxury accommodations. The case follows the

implementation of sustainable ventures at Grootbos and the legal structures which were

created.

The case highlights:

Why the current legal structure was chosen

How the initiatives were brought to life

Successes and challenges faced during some of the different stages

How the initiatives creates shared value

How the initiatives tie into the core business of Grootbos

4.1.1 Background

Grootbos was founded by Michael Lutzeyer and his family during the early 1990’s. It

started as a self-catering accommodation provider and has grown to become one of the

leading 5 star hotels in South Africa offering 2 lodges, a private villa and a number of

activities for guests to participate in. Michael’s passion for social development and

environmental sustainability has led to a section 21 company being created under which

all of the sustainable ventures fall. An initiative which has not only benefitted

community members from Gansbaai and Stanford, but has also created value for

Grootbos.

4.1.2 Intentions behind implementation of sustainable ventures

Due to an excessive unemployment rate of nearly 50% within the local communities,

Michael felt the implementation of social development initiatives would have the

following benefits for the community and for Grootbos:

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Decrease unemployment

Increase the number of skilled workers in the area who would be able to find

sustainable employment and thereby reducing the amount of poverty within the

local communities.

Offer services that would benefit the core business at Grootbos

Creating a sense of pride among the communities which ultimately leads to happy

and healthier community members and provides Grootbos with a pool of suitable

employees.

Preserve the environment in which Grootbos operates through environmental

training and projects aimed at restoring the land.

Educate the community about the environment and their role in preserving it.

4.1.3 Implementation of sustainable ventures

The case focuses on the different projects which were implemented and what partnerships

were formed in order to implement the projects. The case goes on to tell the story of the

different projects and how they have contributed to the community and to Grootbos.

4.1.4 Successes and challenges

The case highlights the successes from the different projects as well as some of the

challenges which will need to be overcome in order to expand on social development and

incorporate community members into ownership of different initiatives.

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4.2 Teaching Approach

This case can be used for the following subjects:

Business Government & Society: The case discusses topics such as public private

partnerships and provides examples of successful collaboration between business,

government and society.

Strategic Management: The case discusses emerging economy strategies such as

creating shared value and as the world embraces new strategies which

incorporates sustainability this will become more relevant to strategic

management and strategic planning.

Sustainable Enterprise: Ultimately the case is focussed on sustainability and the

legal structures used to engage and create sustainable ventures.

Operations Management: The case discusses innovative ideas of how companies

can incorporate the local community through their supply chain.

4.2.1 Target Audience

The target audience for this case is business students who need to:

Know more about creating shared value.

Know more about grass roots development.

Learn more about novel ways of implementing sustainability.

Know more about social and economic development within an emerging market

context.

Learn more about BBBEE and specifically Enterprise Development.

Learn more about emerging economy strategies and how these strategies can be

implemented through the supply chain.

4.2.2 Learning objectives of the case

After working through this case, students should be able to:

Identify what shared value is.

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Identify what Grass roots development is

Identify what Enterprise Development is

Identify challenges that companies face in the implementation of sustainable

ventures.

Debate the appropriateness of the model that Grootbos is using and whether more

suitable models are available for a company of Grootbos nature.

Why CSR doesn’t work

Why BBBEE is relevant within the South African context

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4.3 Analysis of the Case

Students should be asked to read the case and work through the questions prior to coming

to class. It is expected that the case including analysis will take approximately 2 to 3

hours. In addition, students should read the following articles in preparation for the case.



Review, 78-92.


Review, 62-76.

Torri, M. C. (2009). Community Entrepreneurship amoong lower castes in India:

A grassroots contribution towards poverty alleviation and rural development

under conditions of adversity and environmental uncertainty. Journal of

development entrepreneurship, 413-432.

Wheeler, D., McKague, K., Thomson, J., Davies, R., Medalye, J., & Prada, M.

(2005). Creating sustainable local enterprise networks. MIT Sloan management

review, 32 - 40.

Questions 1, 2 and 3 are suitable for class discussion.

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4.3.1 Question 1

A) Is Grootbos creating shared value?

B) Are the initiatives at Grootbos in line with their core strategy? Justify your

answer. If not, how can they be adjusted to be in line with their core business?

In order to answer this question, students should interrogate the sustainability section of

the case study as well as Exhibit 15.

Is Grootbos creating shared value?

In order to answer this question, it will be useful to provide a description of what shared

value is. Creating shared value is a concept where businesses aim to incorporate local

communities into their core business through their supply chain. It is an initiative which

moves away from philanthropy or charitable donations by creating opportunities for

communities and opportunities which benefits the company. Ultimately the initiative

should aim to create lasting skills for community members which essentially will lead to

sustained employment. It is based on the principle of “give a person a fish and they eat

for a day, teach a person to fish and they eat for a life time”. Porter and Kramer (2011)

suggest that the solution to social development lies in the principle of shared value. This

principle should involve creating economic value in such a way that it also creates value

for society by addressing its needs and challenges. Shared value is about expanding the

pool of social and economic value. Furthermore Porter and Kramer (2006) suggest that

Corporate Social Responsibility (CSR) is so disconnected from business and strategy that

it obscures some of the greatest opportunities for companies and the benefits for society

that could arise from the CSR. Instead companies should analyse their social initiatives

using the frameworks which guides their core business. Porter and Kramer believe that

by doing this, companies would ensure that their initiatives are more than simply and

extra cost, constraint or philanthropy, but could lead to opportunities, innovation and

competitive advantage.

Based on the above statements, one can answer that yes Grootbos is creating shared

value. On a high level, Exhibit 15 confirms this. Grootbos was not only involved in

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conceptualising the various initiatives but provides support and donations to the Grootbos

Foundation. The Grootbos Foundation benefits both the community and the environment

and at the same time provides certain services to Grootbos. These services are through

Grootbos supply chain which ultimately benefits the guests who stay at Grootbos. The

guests are made aware of the various initiatives and have the opportunity to get involved

and thereby assist in stimulating the local environment and communities. If the model

that Grootbos has implemented did not create shared value, there would have been no

value created for Grootbos through the supply chain and there would have been no

additional value created for the guests. If this was the case, the initiatives would have

purely been philanthropic initiatives which would have only assisted certain people from

the community.

Specifically, Grootbos is creating shared value as follows throughout the different

initiatives:

Green Futures

Students are taught valuable life skills as well as specific skills on how to become fynbos

landscapers which enables them to look for skilled employment. Ultimately this benefits

not only the student but the student’s entire family. This is social development and on a

large enough scale leads to economic development.

Grootbos benefits as they are able to source employees through this programme. These

employees generally work as guides as they have built up sufficient knowledge about the

local environment. This saves Grootbos on hiring and training new guides who do not

have this experience. Essentially as was stated by Porter and Kramer (2011), this has

allowed Grootbos to minimise its internal costs. The training provided by the Green

Futures is in line with Grootbos core offering and minimises internal training costs which

can provide Grootbos with a competitive advantage as the money which would have been

used for training could now be spent on sourcing new business.

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Growing the Futures

Students are taught valuable life skills as well as specific skills on how to become

subsistence farmers which enables them to look for skilled employment. Ultimately this

benefits not only the student but the student’s entire family. This is social development

and on a large enough scale leads to economic development.

Grootbos benefits as they are able to source organic and fresh vegetables from the project

which allows for healthier food. Furthermore, this allows Grootbos to carry less

inventory as they are able to source ingredients daily, resulting in less stock on hand and

less wastage.

Future Trees

The local environment benefits and is restored due to the trees which are planted. This

restores the environment to what it was before human settlement and has benefits such as

improved soil conditions, improved water filtration and CO2 absorption. Furthermore

long term sustainable employment has been created as a graduate from Green Futures has

been employed on a full time basis to look after the trees.

Grootbos benefits due to the initiatives behind the scenes. Donors are given GPS

coordinates to track the progress of the tree and are also given a certificate. This

constantly reminds guests of Grootbos and is an innovative marketing initiative which

ultimately will create returning guests.

Spaces for Sports

The local community benefits as the programme builds life skills for youngsters and

breaks down social barriers. The programme also instils a sense of pride among

community members.

Grootbos benefits as a pool of potential employees are being groomed through the

project. Ultimately the skills which are taught will have a lasting effect on the

community and will most definitely lead to economic development as the skills are the

Foundation of what is needed to succeed in life. Indirectly this benefits Grootbos as it is

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one small initiative which adds to a stable economy. Grootbos benefits directly as well as

being involved in a project such as this makes them look very good and will be useful as

a marketing tool.

Spaza Shop

The person involved with the curio shop benefits as they are given ownership of the

project. Furthermore they are given mentorship and guidance which benefits them and

their immediate family by creating sustainable employment. As this initiative has been

transferred to the Green Futures Foundation, the Foundation will benefit as it will be

provided with another income stream which can be used to maintain and develop the

project even further. This benefits Grootbos directly as it is providing an additional

service to its guests which sets it apart from other accommodation providers.

Are the initiatives at Grootbos in line with their core strategy? Justify your answer.

If not, how can they be adjusted to be in line with their core business?

Green Futures

Yes, conservation of the environment is very much part of Grootbos core business. The

reason for this is that the environment in which they operate is what makes Grootbos so

special and is a feature that attracts many visitors. Due to this guides play an integral part

of the team at Grootbos and require significant training to become knowledgeable about

the environment. Green Futures provide this training and Grootbos is able to benefit

from it. Students of Green Futures are also required to work in the Gardens at Green

Futures which provides a skilled gardening service to Grootbos. This in line with

Grootbos core business as beautifully maintained gardens are part of offering a 5 star

service

Growing the Futures

Yes, dining is a key part of what Grootbos has to offer. Within the luxury 5 star

hospitality industry, guests travel as much for the dining experience as for the

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accommodation. Due to this innovation is required and being able to offer fresh local

free range and organic ingredients is definitely a benefit to Grootbos.

Future Trees

Yes, this is the same as with Green Futures. The environment is part of Grootbos core

business as it is one of the reasons why guests visit Grootbos. Looking after the

environment is ensuring that it will remain as is which will create sustainability for

Grootbos.

Spaces for Sports

Yes, being situated in such a remote location, it is extremely difficult to find educated

employees. Due to the low levels of education in South Africa, many people are not

taught basic life skills. This project aims to rectify this with the youth and even though

Grootbos will only be able source employees from these youngsters at a later stage, it

definitely is in line with Grootbos core business. Being a 5 star hotel, it is essential that a

certain level of education and basic life skills are found in employees as this adds to the

service which guests receive.

Spaza Shop

Yes, activities and offering merchandise are part of a 5 star hotels core business. Most

luxury establishments have retail spaces where guests are able to purchase African items.

Generally these operations are owned by the hotels or are outsourced to well-known

established companies. Creating an opportunity at a grass roots level for a community

member to provide a retail experience is unique and provides guests with an additional

value. Many international guests are interested in experiencing township life and

purchasing items from curio shops. Grootbos has brought this to the guests by offering it

on site and thereby creating shared value in line with their core business.

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4.3.2 Question 2

A) Is BBBEE relevant for Grootbos and what are the advantages and disadvantages

of Grootbos incorporating BBBEE into their strategy?

B) If Grootbos chooses to engage in Enterprise Development, how would they obtain

funding?

C) What initiatives can be taken to ensure that Enterprise Development initiatives are


For this question, it is suggested that students familiarise themselves with the QSE

BBBEE scorecard by referring to Exhibit 14. For additional information students can

visit the following website should they chose to do so.

http://bee.thedti.gov.za/

Is BBBEE relevant for Grootbos? Justify your answer.

Yes. It is not law for companies to participate in BBBEE however it does make it very

difficult to do business if you are not engaged in BBBEE. Recent years have seen

business changing from creating value for shareholders, to creating value for

stakeholders. There have been numerous protests for economic freedom around the

world whereby society protests against capitalism. More recently, civilians have

protested against a European bank bailout deal as they believe that the money should not

go to institutions that are the cause of the recession, but should go to helping ordinary

people. This is no different in South Africa. The government has realised that more

needs to be done since the inception of BEE. The BBBEE is a company’s social licence

within South Africa as it aims to incorporate the economically inactive into playing a part

in economic development.

In 2010, Grootbos achieved Gross Revenue of R21 million. According to the DTI

(2011), this classifies Grootbos as a Qualifying Small Enterprise (QSE). BBBEE has

acknowledged that not all companies have the resources to participate in all seven of the

pillars that form the BBBEE scorecard and due to this a QSE is only measured on the

four pillars where the company performs the best. Exhibit 14 indicates that each of the

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pillars is worth 25 points out of a 100. The generic BBBEE scorecard for companies who

earn in excess of R30 million has a completely different grading criteria.

Based on this, Grootbos is able to obtain preferential procurement from Government if

they participate in BBBEE. This means that should Grootbos aim to attract government

to utilise its hotel for conferences etc., they will have to have a BBBEE scorecard.

Furthermore, more and more companies are becoming aware of BBBEE and when

engaging in business with other companies, they are starting to insist on BBBEE as they

are able to claim points which they can use to populate their own BBBEE scorecard.

In the past Grootbos has been involved in a number of PPP in order to get the various

projects off the ground. Government and public entities must apply the BBBEE codes

when entering into PPP’s. This means that should Grootbos wish to create a partnership

with a local development bank or government entity that they will need to comply with

BBBEE. This might be why Grootbos has in the past made use of the German

Development Bank as they will not have the same criteria as South African institutions.

Based on the initiatives that Grootbos has taken, they are able to claim BBBEE points

under Socio Economic Contributions. According to Mpahlwa (2007, p 74) previous

minister of trade and industry and author of the BBBEE Codes of good practice states the

following:

“Socio-Economic Development Contributions consists of monetary and non-monetary

contributions actually initiated and implemented in favour of beneficiaries by a measured

entity with specific objectives of facilitating sustainable access to the economy for those

beneficiaries”

On the generic BBBEE scorecard, Socio economic development only counts 5 points.

However as has been indicated, on the QSE scorecard, this counts 25 points.

Grootbos will also be able to claim BBBEE points for preferential procurement. As

Grootbos procures ingredients from Growing the Futures, an initiative which aims to

assist previously disadvantage people, Michael will be able to include this on his

Scorecard. Even though Michael does not currently engage in BBBEE there are a

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number of established initiatives that will add to his scorecard and as indicated, not

having a BBBEE will leave you with little business in the future as it is just good practice

to participate in it.

The question is why are companies such as Grootbos, not eager to participate in BBBEE?

Essentially BBBEE is very similar to creating shared value. The main difference is that

creating shared value does not include paperwork or compliance. In order to engage in

BBBEE, compliance is necessary. Porter and Kramer (2011) suggests that economic

value should be created whilst addressing the needs of local communities and at the same

time be in line with the company’s core strategy which will create value for the company.

This is exactly what BBBEE aims to do. Many companies believe that BBBEE does not

make business sense, yet at the same time would like to participate in initiatives which

create shared value. As indicated, BBBEE does make business sense as it is a driver for

economic and social development which also benefits the company who is involved with

it.

If Grootbos chooses to engage in Enterprise Development, how will they obtain

funding?

Firstly, Grootbos is properly geared to participate in Enterprise Development if they

choose to do so. The Spaza Shop or the initiative to obtain land and grow vegetables for

the community would be excellent Enterprise Development initiatives. There are

numerous sources where funding can be obtained. Grootbos has already engaged with

one such entity, the DEG. Locally one could approach a number of institutions that are

willing to supply funds to SMME’s. The most prominent and relevant of these is the

Small and Medium Enterprise Development Programme (DTI). These institutions aim to

improve economic development within South Africa and Africa and as such are willing

to support Enterprise Development initiatives.

What initiatives can be taken to ensure that Enterprise Development initiatives are


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As Michael indicated, he does not have the resources available to mentor and provide

support to Enterprise Development initiatives. This is essential when participating in

Enterprise Development. Furthermore, Michael believes that Enterprise Development

initiatives will not always be reliable as participants will continue to seek greener

pastures in larger cities. This is quite common even for larger firms and as the GEM

report (2010) indicated, established firms do not want to purchase from new or smaller

firms due to their high risk profile. Michael has indicated that he would be more than

willing to pay for a consulting service which mentors Enterprise Development projects.

Michael’s idea was for an aspiring entrepreneur to develop an opportunity for themselves

by starting a service like this. It would need to be an inexpensive service that generates

revenue by having a number of QSE clients facing the same problem. Research however

indicates that there does not seem to be anyone who offers this service, however the

SEDA is currently considering 250 additional incubation programmes with the aim of

growing small grassroots Enterprise Development initiatives. It might be well worth it

for Michael to consider partnering with the SEDA to implement an incubation

programme within the local communities surrounding Grootbos.

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4.3.3 Question 3

A) What is the business case for this model? Highlight the advantages and

disadvantages of the model

B) What additional strategies can be adopted and implemented in order to create

shared value?

For this question it is recommended that students analyse the Foundation section of the

case as well as the financial Exhibits for Grootbos.

What is the business case for this model? Highlight the advantages and

disadvantages of the model

The business case for this model is that Michael is able to contribute to sustainable

initiatives without using resources from Grootbos Nature Reserve. Michael has indicated

that he does not have sufficient resources available to be able to engage in all of the

activities which are managed under the Foundation.

Advantages

The Foundation is properly managed and provides support, mentorship to the

various initiatives which according to Michael, Grootbos would not be able to do

by itself.

The financials are audited on a yearly basis which means that funds cannot be

misappropriated and that they are used correctly for the purpose it was intended

for.

Allows for a steady stream of grants and donations to keep the initiatives running.

Donations from Grootbos are tax deductible.

Being part of a Foundation has allowed the initiatives to be scaled.

As Grootbos has been struggling during the recent recession, having the initiatives

under a Foundation has meant that Grootbos did not need to make use of their

resources in order to ensure the initiatives remain viable. Had this been the case,

some of the initiatives might not have survived.

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Being part of a foundation has created more stability within the local communities

which has created trust between community members the local government and

Grootbos. This ultimately provides Grootbos with a social licence to operate

which is extremely valuable within the South African business context.

Disadvantages

Being part of a Foundation means that the initiatives are not material to Grootbos core

business even though Grootbos derives benefits in line with their core offering. It is

important for companies to decide what, is material to their core business before deciding

to engage in sustainable initiatives. This comes back to the concept of creating shared

value which suggests that companies should stimulate local economies by incorporating

them into their core business strategies. An example of this is South African Breweries

(SAB). SAB was one of the first corporations in South Africa to get involved in

Enterprise Development. When SAB got involved with this, BEE or BBBEE had not

even been conceptualised yet. SAB looked at what was material to their business and

involved stakeholders to come up with the following initiative. SAB used to own all of

the trucks which it used to transport its products. All truck drivers were directly

employed by SAB. As the trucks represented major costs in maintenance and

depreciation, SAB decided to sell the trucks to the drivers. Finance was organised to

assist in the purchase which truck drivers then paid back. This allowed the drivers to

own their own trucks and work for SAB with a guaranteed income. SAB benefitted from

this as they did not have to carry the costs of the trucks or keep the trucks on their

balance sheet any more. The drivers benefitted as they had ownership of a small business

which supplied a service to a major company. Ultimately this initiative stimulated socio-

economic development.

According to Zadek, Tuppen & Evans (2006 p.4) state that: “the challenge of sustainable

development requires businesses to shift from viewing it as a matter of compliance to one

of value generation”. Realising this will assist businesses in identifying what is material

to them and how this can be used to create economic and social development. Based on

this, some of the disadvantages are:

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A section 21 is more of a philanthropic venture as it does not create ownership

opportunities for previously disadvantaged individuals. Something which is

essential for economic development. As has been identified, in South Africa, the

BBBEE scorecard aims to create ownership opportunities for previously

disadvantaged individuals. This means that Grootbos has limited stakeholder

interaction as the foundation serves as a single stakeholder which represents

community members. Economic development relies on multiple stakeholder

engagement. If the initiatives were not formed under a foundation, there would

be more stakeholders for Grootbos to interact with. Namely; local business and

suppliers.

The initiatives cannot be claimed under Enterprise Development on the BBBEE

scorecard.

Setting up the initiatives under the banner of a foundation has allowed Michael to

believe that BBBEE is not relevant to his business. The reason for this is that he

is participating in socio-economic development and does not believe reporting on

it will make a difference to his business. As has been identified, it clearly will

make a difference as it will provide Michael with additional benefits which he is

not able to make use of with his current structure.

What additional strategies can be adopted and implemented in order to create

shared value?

According to Porter and Kramer (2011), developing local clusters within the local

communities will intensify the connection between the community’s success and the

firm’s success. Local clusters refer to business, academic programmes, trade associations

and standards organisations. Furthermore they suggest these clusters play a crucial role

in driving productivity, innovation and competitiveness. It must be acknowledged that

this article was written with large organisations in mind, however can be appropriate for

small companies if developing clusters at a Grass Roots Level. Michael has already

started developing clusters within the local communities which serve both the community

and Grootbos. Here we are referring to Green Futures and Growing the Futures which

act as academic programmes. Both Growing the Futures and Green Futures also act as

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small business. Michael has furthermore engaged in the Spaza Shop and has plans to

develop vegetable gardens which serve the communities and thereby establishing more

businesses. The Future Trees initiative is centred on environmental sustainability and the

entire Foundation is grounded in belief that the environment needs to be protected. The

benefit of this as stated by The GEM (2010) is that educational facilities are critical to

cluster development as it improves productivity and stimulates entrepreneurship. This is

exactly what is needed within local communities to stimulate economic development.

An example of cluster development or sustainable local enterprise networks (SLEN) is

the case of Honey Care Africa. Honey Care Africa, is a commercial honey producer

based in Kenya. The Honey Care model is to buy, process and sell high quality honey to

the East African market as well as the European market. Furthermore, Honey Care

modifies and sells hives to the local community. All the honey is sourced from small

scale rural beekeepers, whom are paid a guaranteed price for any honey they produce.

Honey Care has also partnered with micro finance institutions and Non-Governmental

Organisations (NGO’s) which allows poor farmers to buy hives and which is paid back in

honey production. Honey Care also works with NGO’s to provide farmer training. All

of these initiatives combined with Honey Cares growth have provided income sources to

approximately 7800 of Kenya’s poorest farmers. Honey Care not only tries to create

sustainable jobs for the community, but also encourages biodiversity by incentivising

farmers to protect the areas where bees collect their honey. Honey Care has also created

the bees for trees partnership, where farmers receive free hives in exchange for

reforestation of areas of land. This business model is currently being replicated in

Tanzania as well as other African countries (Wheeler et al, 2005).

Additionally, Grootbos could consider other initiatives which would create shared value.

Some suggestions are as follows:

Produce guest amenities

Guest amenities are part of Grootbos core business as hotels are often judged by the

standards of amenities which are offered. Currently Grootbos makes use of Charlotte

Rhys, a well-known brand in South Africa. There is however an opportunity for

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Enterprise Development to produce amenities for Grootbos using fynbos. Fynbos is well

known for its healing and fragrant properties and this would provide Grootbos with

unique selling point and at the same time further socio-economic development within the

area. This is also an initiative that could be scaled to supply other hotels within the area

and could therefore be a complete value chain initiative. Other hotels would jump at the

opportunity as there are not many amenities of this nature available.

Produce vegetables for the community and other hotels

Michael has already indicated that he would like to make use of vacant plots in the

Stanford area to create small business for local community members. This is an excellent

initiative at grass roots level which could be scaled to provide other restaurants with

organic and free range vegetables.

Township curio shop

The township curio shop is an excellent example of grass roots development creating

shared value. Michael has indicated that he will continue with this project.

All of these initiatives would fall into cluster development and assist in helping the

community break free from the current 50% unemployment rate.

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4.4 Conclusion

To conclude the case study, it is important to note that Michael has done exceptionally

well in stimulating economic and social development within the local communities

surrounding Grootbos. There is clearly an opportunity for Michael to make the initiatives

more “material” to his core business as this will create a sustainable competitive

advantage for Michael and will contribute even more towards economic development

within the area. Michael has some tough decision to make when considering a future

strategy for Grootbos including whether to participate in BBBEE. All of this needs to be

considered in line with economic development as well with creating a competitive

advantage for Grootbos.

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5 Teaching Notes Bibliography

DTI. (2011). BBBEE scorecards. Retrieved 11 17, 2011, from the dti BBBEEE website:

http://bee.thedti.gov.za/10.htm

Herrington, M., Kew, J., & Kew, P. (2010). Global Entrepreneurship Monitor 2010. Cape

Town: Gem Consortium

Mpahlwa, M. (2007). Broad Based Black Economic Empowerment Codes of Good

Practise. Pretoria: DTI.



Review, 78-92.


Review, 62-76.

Wheeler, D., McKague, K., Thomson, J., Davies, R., Medalye, J., & Prada, M. (2005).

Creating sustainable local enterprise networks. MIT Sloan management review,

32 - 40.

Zadek, S; Tuppen, C; Evans; D. (2006). The materiality report: Aligning strategy,

performance and reporting. London: Accountability, BT Group Plc, LRQA.