Tax hero: I saved a family wine business in South Africa from bankruptcy

It was a chance encounter with an accountant in a Nairobi desert that saved the Rustenberg family wine business in South Africa from bankruptcy.

The story of how Coenie Middel travelled 1,600 km to restructure the failing farm and vineyard is told in Inspirational Accountants, a book by Steve Pipe.

In an interview, Middel, who runs a ten partner accountancy practice with a team of 150, based out of Centurion in South Africa, described how it was one of the most fulfilling tasks he had ever taken on as an accountant.

Not only did he save the business within two years to make it one of the most successful wine exporters in South Africa, but he helped to persuade the distressed owners, the Barlow family, not to throw in the towel when the going was tough.

Middel’s passion for creating business began in childhood when he drew inspiration from his entrepreneur parents.

“I knew that becoming an auditor and accountant, the biggest contribution that I could make would be to make businesses better and to get them to grow,” he said. “Through that growth I would do a lot of charity by the fact that people would have jobs.”

He met Simon Barlow, the owner of Rustenberg Wines, a family-run wine estate in the Stellenbosch region, while on a group road trip through the Namibian desert.

After the two men hit it off, Barlow asked Middel to look through the farm accounts as the business, which had been in the family since 1941, and that he had personally run since 1987, was struggling.

After Barlow had taken control of the farm he spent the next 20 years bringing the business up to date, investing more than £10 million building a new winery and importing modern, virus-free grape varieties.

But he left much of the running of the farm to a management team.

“He came from the kind of environment where his father was a rich guy and everything was done by management and you had boards and you had people that were advisers,” said Middel.

“They [managers] said ‘look we have problems in the financial field’, they had a lot of debt, it was tough times in the wine industry and they had been trying to sell the land. I immediately realised in the first meeting that the management was a problem,” he said.

The estate was making losses of about £500,000 a year, and had bank loans in excess of £3.5 million.

“They were on the verge of bankruptcy. The winery was full of wine that was not sold. The harvest would come and they would bottle it and sell but they didn’t sell enough. The management were paying themselves exorbitant amounts of money,” said Middel.

The Barlows were devastated and angry with themselves to learn that their business was on the brink of collapse, they were about to lose their family fortune, and that the bank was on the verge of foreclosure.

They called their son, Murray, back from Australia, where he was doing a wine course, and were ready to cut their losses and give up.

Middel’s first major job was to convince them that the business could be saved.

“I realised that I had to help these people and I started working with the owner’s wife, Rozanne Barlow. She was a strong woman and I said to her, listen, we must work with the men and convince them that we can turn this ship around,” he said.

“So I involved the whole family and I started chipping away and made them believe that they could change things around.”

Middel worked out a plan where much of the major restructuring was carried out in the first year.

He spent time winning back the confidence of the bank, setting achievement milestones and giving the bankers constant feedback on progress.

First of all he cut back on unnecessary staff, saving 145 jobs by getting rid of some senior management positions and reducing the salary bill by about 50%.

Middel also reduced inventory holdings by restricting production and discounting slow-moving stock.

He then took a more considered approach to taxation, with better budget forecasting for different business units and making use of tax advantages in foreign jurisdictions that would reflect the fact that 80-90% of Rustenberg wines were exported.

In addition, he encouraged the Barlows to rent out unused grazing facilities, buildings and houses, generating £80,000, and also using the property for film shoots, which earned a further £40,000.

“We originally took the low-hanging fruit and so even though we cut costs to all operations, we made sure that we were spending enough money on marketing,” he said.

Within the first 12 months of his action plan, Middel had reduced the estate’s overall costs by 32%.

“It is now one of most successful wineries in South Africa, with more than 90% of the wine being exported, and they bank no debt whatsoever,” he said. “The family has regained control and taken ownership of what belongs to them and it’s making some of the top wines.”

Middel admits that one of the biggest challenges of the job was to transform the family’s despondency into a determination to get the business back on its feet.

“When it came down to the fact that they could lose everything it created a lot of tension,” he said.

“I had to not only provide financial advice but also work with the wife, work with the husband, and get everyone on board. That was for me extremely interesting because that is not something as an accountant that I am trained to do,” Middel added.

“I spent many days with them in their kitchen, eating supper with them and talking to the wife on her own and then to the husband and then to the son.”

After initially despairing at the state of his family business, Murray Barlow was last year crowned new winemaker of the year and is now the farm’s “biggest evangelist”, said Middel, who remains a firm family friend.

“It has become a real family business,” he said. “It’s thriving.”

Nicola Smith has spent a decade reporting for The Sunday Times on both the European Union and South Asia.