1.2 Types of business entities questions for IB Business Management

Kliphuis Rooibos Co-operative

[1] Kliphuis Rooibos Co-operative (KRC) was formed in 2016 by 38 small rooibos tea farmers in the Cederberg region of South Africa. Until now KRC has sold its dried tea leaves in bulk to large packers, who blend them with leaves from other farms and sell the tea under their own brands. Members receive about R42 per kilogram.

[2] The co-operative’s chairperson, Nomvula Mokoena, believes members would earn much more if KRC sold its own branded tea. She points out that rooibos grown only in the Cederberg has a story that customers value: it is organic, picked by hand and grown by families who have farmed there for generations. A packaged 40-bag box (about 100 g) of branded rooibos sells for around R55 in South African supermarkets.

[3] Some members are cautious. Gerrit Steyn, the treasurer, notes that building a brand takes years and money, and that the large packers might stop buying from KRC if it becomes a competitor. KRC has R600 000 in its reserve fund and could apply for a small loan from a rural development bank.

[4] Nomvula has proposed a brand called Cederberg Roots, with packaging that shows photographs of members and their farms. She wants to start by selling online and through health-food shops in Cape Town, then approach supermarkets once the brand is known. A marketing student has suggested that KRC should also target tourists who visit the region’s wine and tea farms.

Siobhán Kearney is a sole trader who runs a bakery café in Galway, Ireland. After opening a second café in 2025, she owes her flour and dairy suppliers €38 000, all due for payment this month, but has only €9 000 in the bank. Her accountant has told her that the business is now insolvent. One supplier has said it may ask the court to declare Siobhán bankrupt if it is not paid within 60 days.

Distinguish between insolvency and bankruptcy, with reference to Siobhán’s situation.

Ubuntu Reclaim

Ubuntu Reclaim (UR) is a social enterprise in Cape Town, South Africa, set up in 2017 by Ayanda Qwabe. It employs 85 former informal waste pickers (“reclaimers”), who once collected recyclable materials from landfill sites and streets with no protective equipment and unpredictable earnings. UR collects recyclable waste from apartment buildings and offices, sorts it at its depot and sells the sorted paper, plastics and metals to recycling plants. It pays a fixed monthly wage above the national minimum wage, provides protective clothing and runs a savings scheme for its workers. UR is a private company; all surpluses are reinvested.

Excerpt 1: Email from Ayanda Qwabe to UR’s board

Prices paid by recycling plants for our sorted materials have fallen by about 30 % this year. We are now running a monthly deficit (see below). If nothing changes, our reserves will last about five months. I propose we move from a fixed wage to a piece rate of R1.40 per kilogram sorted, so that pay reflects what we earn. Our best sorters would earn more than now.

Excerpt 1 (continued): UR average monthly figures (R)

Excerpt 2: Social media post by Sipho Dlamini, UR sorter and chair of the newly formed UR branch of the Cape Reclaimers’ Union (CRU)

We left the landfill for a fixed wage, safety and respect. Now they want to pay us by the kilo again, like the old days. The average sorter does about 220 kg a day. At R1.40 that is a pay cut. We were never asked. If UR goes ahead, we will strike. #NotMachines

Excerpt 3: Results of an anonymous survey of UR workers (72 responses)

Excerpt 4: Article in a Cape Town business newspaper

The city plans to require all large apartment buildings to separate recyclables at source from 2027. This should raise the quality, and the price, of collected materials. A large waste-management company has said it will bid for the new collection contracts. Social enterprises such as Ubuntu Reclaim may struggle to compete on price, but the city says it will give “additional weight” to bidders that create jobs for former reclaimers.

Excerpt 5: Email from Lerato Khumalo, impact investment manager at a development foundation

We would consider a five-year loan of R1.2 million at a low interest rate to help UR through this period, possibly linked to converting UR into a worker co-operative. We would need to see a plan showing how UR will become financially sustainable and how labour relations will be stabilized. A strike now would make us very cautious.

Waiora Honey

[1] Hemi Walker is a sole trader who runs Waiora Honey from his family’s land near Gisborne, New Zealand. He keeps 300 beehives on native mānuka scrub and produces about 9 tonnes of honey a year. Hemi employs his cousin Tama and two seasonal workers. He sells most of his honey in small glass jars at farmers’ markets, to three gift shops and through his own website, where customers can read about each hive’s location.

[2] Waiora Honey has a loyal customer base and Hemi charges a premium price. He is proud that every jar is traceable to a single valley and that he knows many of his customers by name. He works long hours but values his independence and the time he spends on the land.

[3] Last month Hemi was approached by Pacific Gold Honey, a large company that exports mānuka honey to China and Japan. It offered to buy all of Waiora’s honey at a guaranteed price for five years if Hemi doubled his hives to 600. Hemi would need to borrow NZ$250 000 for hives, equipment and a larger extraction shed, and to employ four more full-time staff.

[4] Hemi’s accountant points out that the guaranteed price is 20 % below Hemi’s current average selling price, but that his average cost per kilogram would fall. Tama warns that doubling the hives could put too many bees on the land and harm honey quality. Hemi’s daughter, who studies business in Auckland, suggests that he should form a private limited company first.

Kirima and Mlima dairy co-operatives

Kirima Dairy Co-operative and Mlima Milk Co-operative are farmer-owned co-operatives in central Kenya. Each collects milk from its members, small-scale farmers with three to ten cows, then processes it into fresh milk, yoghurt and mala (fermented milk). Profits are shared among members according to how much milk they supply.

Both co-operatives struggle to compete with Brookfresh plc, the largest processor in the region. Brookfresh pays farmers less per litre, but its modern plant processes milk at a lower cost and it supplies supermarkets across Kenya. The boards of Kirima and Mlima have proposed a merger to form Mlima-Kirima Dairies. The merged co-operative would close Mlima’s older plant and invest KES 300 million in Kirima’s site.

Some Mlima members are unhappy: their collection centres would be further away, and they fear that one combined board would pay more attention to Kirima’s larger membership.

Table 1: Annual sales revenue of milk processors in the region, 2025

Table 2: Processing cost per litre (KES)

Ayo Pads

Ayo Pads (AP) is a social enterprise in Gulu, northern Uganda, founded in 2019 by Grace Akello. Many girls in rural northern Uganda miss school during menstruation because disposable pads are too expensive. AP employs 24 women, most of them single mothers, who cut and sew washable cloth pads that last about a year. AP sells packs of four pads to families and small shops, and to non-governmental organizations (NGOs) that give them to schoolgirls. All surpluses are reinvested.

Resource 1: Extract from a regional newspaper article

“Before Ayo Pads came to our school, some girls missed five days of school every month,” says head teacher Santa Lamwaka. Attendance among older girls has risen noticeably. But not all is well: several parents say the stitching on some pads came apart after a few washes, and one shop owner has stopped stocking them.

Resource 2: AP production data, 2025

Resource 3: Email from an international NGO to Grace Akello

We would like to buy 200 000 packs a year for schools across northern Uganda from 2027. However, our donors require all suppliers to hold the national quality certification mark for sanitary products and to keep their defect rate below 2 %. Please let us know whether AP can meet these conditions by the end of 2026.

Resource 4: Social media post by Okello Denis, a local tailor

Ayo Pads does great work, but their machines are old and nobody checks the seams. I could train their team in proper stitching techniques for a small fee. #GuluMade

Resource 5: Information on certification

Gaining the national certification mark costs about UGX 25 million, including product testing and an audit of the production process. Producers must show documented quality procedures at every stage of production. Certification is reviewed every year.