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Projects

Summary of proposed guarantee

Summaries of proposed guarantees are provided prior to Board consideration and before final contract signing, and they are therefore subject to change. Project briefs are disclosed after Board consideration and contract signing and reflect the terms of the project at the time of contract signature. Environmental and Social Review Summaries are provided for projects assigned an Environmental Assessment Category of A or B.

 

Project name
Kanu Vineyards (Pty) Ltd.
Project ID
7867
Fiscal year
2010
Status
Active
Guarantee holder
MKV Holdings LLC
Investor country
United States
Host country
South Africa
Environmental category
B
Sector
Agribusiness
Date SPG disclosed
March 01, 2010
Project Board date
March 22, 2010
Gross exposure
 $7.9 million
Project type
Non-SIP

Project Description

This summary covers an investment and shareholder loan from MKV Holdings LLC of the United States to Kanu Vineyards (PTY) Ltd (KVP) in South Africa. KVP is engaged in the manufacturing and export of wine and related products, with principal operations carried out by two subsidiaries, Mulderbosch Vineyards and Kanu Vineyards. The investors have applied for MIGA guarantees totaling $7.86 million for a period of up to ten years against the risks of transfer restriction, expropriation, and war and civil disturbance.

The project involves the acquisition of KVP’s shares which will improve the debt-to-equity ratio of KVP. The sponsors intend to (a) develop the existing KVP assets as well as increase the size of the existing wine-making facility at Kanu to support growth from approximately 100,000 cases to over 350,000 cases over the next five years; (b) design and build a restaurant and tasting room at Mulderbosch; (c) establish additional farm and wine-making equipment to support the projected growth of the business at both the estates; and (d) employ more rigorous viticulture, which coupled with the expansion plans, will lead to increased tourism for the region and significant job creation over the coming years.

Environmental Categorization

The project is a Category B under MIGA’s environmental and social review procedures because the impacts are limited in number, and mitigation measures are readily identifiable. The key environmental issues are waste management (effluent treatment), wetlands management, biodiversity conservation (Swartland Shale Renosterveld) at the Mulderbosch property, and traffic management. An environmental management plan is currently being developed to inform project design and fulfill the requirements for the necessary environmental and planning permits. Withers Environmental Consultants has prepared an environmental due diligence report on behalf of the client, click here to read more.

Both Kanu and Mulderbosch Vineyards are members of the Biodiversity and Wine Initiative. The initiative is a pioneering partnership between the South African wine industry and the conservation sector. The goals are to minimize the further loss of threatened natural habitat, and to contribute to sustainable wine production, through the adoption of biodiversity guidelines by the South African wine industry.

Development Impact

The Stellenbosch region’s main economic sectors comprise agriculture (vineyards and soft fruit), tourism, and the services industry. Despite continuing economic growth, there remains a great deal of unemployment, especially within the lower income groups in the Stellenbosch/Somerset West region. The proposed project will have a significant socioeconomic benefit to the area through the creation of temporary jobs during the construction phase and permanent jobs in the operational phase. Staff will receive specialized training to build on their existing skills. The project will generate rates and taxes for the Stellenbosch Municipality, and will contribute to increased tourism in the area.

MIGA’s proposed support for the project is aligned with the World Bank Group’s Country Partnership Strategy which calls for the use of MIGA instruments to support small and medium-scale enterprises and increase foreign direct investment. The project would be underwritten through MIGA’s Small Investment Program.

 
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