South African fishing company Irvin & Johnson (I&J) has, through its parent company AVI Limited, terminated its partnership with consortium group Main Street 198 and begun a similar relationship with Twincitiesworld, a move that angered Main Street enough to threaten a governmental probe for wrongful termination.
The severed partnership with Main Street, a consortium comprising fishing companies Mast Fishing and Ntshonalanga, comes just three months after I&J announced a 5.1 percent decline in revenue for H2 2022. Total revenue in the six months totaled ZAR 2.47 billion (USD 137 million, EUR 123 million) due to depressed sales volumes attributed to lower fishing rights quotas and reduced total allowable catch.
I&J and AVI originally signed a Black Economic Empowerment (BEE) transaction with Main Street in 2004, a partnership that the involved parties extended in 2012, 2018, and 2022, respectively, before abruptly ending the relationship on 1 July 2023.
The severance of I&J’s relationship with Main Street has elicited a strong response from the latter company, which accused I&J and AVI of terminating their BEE partnership unfairly. Main Street also claims it had never before heard of Twincitiesworld within the industry, making the new partnership even more baffling to the consortium.
Main Street’s current chairman, Mkhuseli “Khusta” Jack, who now faces possible removal from the board, claims I&J used its 20 percent shareholding deal with Main Street to take advantage of the preferential treatment their partnership garnered to win lucrative fishing rights from the South African government over a year ago.
The company, Jack claims, “used and then cast aside” Main Street after the fishing rights were in I&J’s possession and has employed a “revolving door approach” to partnerships.
“As a result, we [Main Street] will derive no benefit whatsoever from the long-term rights that our involvement was instrumental in securing,” Jack said. “This is the most vile perversion of the purpose, principles, and objectives of broad-based Black Economic Empowerment.”
Jack has since threatened to approach South Africa’s Department of Fisheries, as well as South Africa’s Broad-Based Black Economic Empowerment (BBBEE) Commission, to conduct an investigation into the abrupt termination of the partnership between I&J and Main Street.
Many companies in South Africa that don’t have majority Black ownership look for a way of complying with the government’s BEE policy, which is a form of affirmative action targeting broader participation of Black people in South Africa’s economy. This includes scouting for majority Black-owned businesses as possible partners.
Businesses such as AVI benefit from incentives and can receive preferential treatment in governmental procurement processes if they contribute toward BEE through partial or majority Black ownership, hiring Black employees, and contracting with Black-owned supplier companies.
Conversely, some Black-owned entities aim to partner with non-Black majority companies, as they have some leverage in negotiating possible partnerships.
“The 19-year partnership between AVI, I&J, and Main Street has generated significant value, including over ZAR 202 million (USD 11.2 million, EUR 10 million) in net cash to Main Street,” AVI’s notice of the termination to the Johannesburg Stock Exchange (JSE) on 3 July 2023 said.
However, signaling an organizational change, the notice also stated that when the transaction with Main Street 198 matured on 1 July 2023, I&J would begin a new partnership with Twincitiesworld under the BEE policy.
Twincitiesworld, a fully Black-owned company, will acquire 18.75 percent of the issued share capital in I&J Ltd.
“This provides a broad-based sharing of the value created by the company,” AVI said.
AVI also explained that it will register the new partnership with the BBBEE commission, which is a governmental department of trade, industry, and competition that oversees, supervises, and promotes adherence to the BEE policy.
The company will additionally submit a notification to South Africa’s Department of Forestry, Fisheries, and Environment on the change in I&J shareholding to properly comply with the BEE policy for the transfer of commercial fishing rights.
“Twincitiesworld has historic links to I&J, it has strong community ties, and [it] is committed to the long-term social upliftment of those communities … it will make an active contribution to the business,” AVI added.
Photo courtesy of AVI Group
