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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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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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Case Study Research Report – Creating Shared Value at Grootbos 4
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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Case Study Research Report – Creating Shared Value at Grootbos 16
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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Case Study Research Report – Creating Shared Value at Grootbos 17
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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Case Study Research Report – Creating Shared Value at Grootbos 18
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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Case Study Research Report – Creating Shared Value at Grootbos 19
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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Case Study Research Report – Creating Shared Value at Grootbos 27
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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Case Study Research Report – Creating Shared Value at Grootbos 28
“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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Case Study Research Report – Creating Shared Value at Grootbos 29
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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Case Study Research Report – Creating Shared Value at Grootbos 34
“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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Case Study Research Report – Creating Shared Value at Grootbos 35
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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Case Study Research Report – Creating Shared Value at Grootbos 36
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 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 Tatler Travel Guide voted as one of 101 best hotels in the world
2007 Responsible Tourism Award: Best for Conservation of an Endangered
Species
2008 Tatler Travel Guide voted as one of 101 best hotels in the world
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
points Compliance Target
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
points Compliance Target
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
points Compliance Target
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
points Compliance Target
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.
Porter, M. E., & Kramer, M. R. (2006). Strategy & Society. The link between
competitive advantage and corporate social responsibility. Harvard Business
Review, 78-92.
Porter, M. E., & Kramer, M. R. (2011). Creating Shared Value. Harvard Business
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
given proper support and mentoring?
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
given proper support and mentoring?
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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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Case Study Research Report – Creating Shared Value at Grootbos 82
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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Case Study Research Report – Creating Shared Value at Grootbos 83
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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Case Study Research Report – Creating Shared Value at Grootbos 84
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.
Porter, M. E., & Kramer, M. R. (2006). Strategy & Society. The link between
competitive advantage and corporate social responsibility. Harvard Business
Review, 78-92.
Porter, M. E., & Kramer, M. R. (2011). Creating Shared Value. Harvard Business
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,
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Zadek, S; Tuppen, C; Evans; D. (2006). The materiality report: Aligning strategy,
performance and reporting. London: Accountability, BT Group Plc, LRQA.