In a surprise broad-based empowerment deal the German owner of Da Gama Textiles has given employees a majority R45 million shareholding in the company.

The deal was announced by industrialist Claas Daun to 1600 singing and dancing permanent employees at the company’s Zwelitsha plant yesterday.

The deal gives each employee – from managers to janitors – at least R20000 worth of shares in the company, at R1 a share.

Da Gama is the second largest textile business in South Africa, with annual turnover of R420m. Until now, it was entirely owned by KAP Beteiligungs AG, Daun’s investment company.

“I want to motivate staff by handing them ownership of the company and its assets. In a competitive industry this will make the difference,” explained Daun.

The Da Gama Employee Trust now owns 45 percent of the company on behalf of the employees, and will be controlled and managed by the beneficiaries.

Employees will also elect a representative to the company’s board.

Dividends from company profits will be paid annually and shareholders will have an option to cash these or save them. After five years the employees will have the option to sell their shares back to the trust, or keep them.

A further 15 percent shareholding has gone into a management trust, and Daun has retained 40 percent.

Border-Kei Chamber of Business chairman Les Holbrook called the deal “a gift of amazing generosity”.

“It is staggering to consider that he has given a majority shareholding to staff.”

He said the deal would benefit the region because it secured the future of Da Gama, but added that the challenge will be to educate staff about what the deal means.

Speaking to the Daily Dispatch, Daun was quick to distance himself from black economic empowerment (BEE) deals.

“I am critical of the original ideas behind BEE laws, regulations and charters. Real empowerment is about getting the workers involved,” he said.

In his public address he said he wanted to create his own model of empowerment that included everyone who has something to contribute, irrespective of race.

He said if it succeeded he would like to present the model to government. “I hope this dream will come to fruition, and that this democratic joint venture between workers, management and shareholders may grow.”

While it came as a surprise to most, Daun had confided in Eastern Cape Premier, Nosimo Balindlela, weeks before.

She told the Daily Dispatch yesterday: “This deal shows that the wealth of this country will be shared with the people.”

Addressing the crowd at the factory yesterday she encouraged workers to achieve their goals through hard work and focus, reminding them that with freedom comes responsibility. She thanked Daun for his generosity and vision but admitted: “I still wonder what got into his head!”

Senior shop-steward at the Zwelitsha factory Thandile Maliti said the announcement was a complete surprise to workers, but a “pleasant” one.

The South African Clothing and Textile Workers’ Union representative said: “It is promising, but we do not know how it will work. We need to learn more and understand what this means for us on the ground.”

Da Gama managing director, Bob Funnell, said the company will embark on a worker education programme over the next three weeks.

Although the company had shown a negligible profit over the last two years, Funnell said, a “painful” process of right-sizing had recently made it profitable in a fiercely competitive industry.

The company has retrenched 900 workers over the last year and a half, but in the first quarter of this year it posted its first significant profit in two years.

Similar worker-owner models have been implemented with success at 12000 US businesses in highly competitive industries, such as steel and textiles.