Inclusive business models and land reform in the South African citrus industry Nerhene Davis, University of Pretoria

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1 Inclusive business models and land reform in the South African citrus industry Nerhene Davis, University of Pretoria The BICAS: Agrarian change in the global South Conference. April 2015

2 Introduction: Inclusive Business Models According to the UNDP inclusive business models aim to include poor people into value chains as producers, employees or consumers, in ways that are both equitable and sustainable (UNDP 2010: 3). A number of partnerships (a type of joint venture arrangement) have been introduced by the Department of Rural Development and Land reform (DRDLR) on land currently under citrus production: 1. which has been successfully claimed through land restitution in the Limpopo province. 2. former farm workers have been given co-ownership or full ownership of former white owned farms in the Eastern Cape. This has resulted in the insertion of previously marginalised and poor rural communities/individuals into highly technical, export oriented and ultimately buyer-driven value chains, through joint ventures with private sector companies.

3 Conceptual framing IBM arrangements these farmers are presented as emerging black commercial farmers. Some reservations about the use of the term due to its normative connotation BUT The term has been coined by SA government to convey the prescriptive trajectory for commercialisation following the example of white commercial farming. Underscoring the SA government s fixation with the hegemony of normative criteria for viability framed in terms of the white commercial farming model. Britzer & Bijman (2014) asserts that commercialisation in the context of inclusive business models should be conceptualised in terms of two considerations: (1) First it should refer to the provision of access to mainstream agricultural markets. (2) Secondly commercialisation should also entail building the capacity of emerging farmers to deal with and adapt to continually evolving market challenges.

4 Raises a number of questions What is the nature (contractual and contextual) of these socalled inclusive business model arrangements What has been the cumulative outcomes of these arrangements in terms of broader processes of commercialisation and corporatisation to date? How do these partnership initiatives fit into the broader agrarian reform challenge of reforming dualism in the South African agrarian structure?

5 Methodological Approach A case-study approach was applied. Restitution Perspective: Hoedspruit/Moletele case research has been conducted over the past 5 years. Involved 4 partnerships. Other Land Reform Projects Perspective: Kat River Valley and Sunday River Valley case still in the very initial stages. (3 partnerships) The case studies are used to illustrate the nature of the relations between emerging farmers and agribusinesses. Detailing these case studies allows a process of uncovering case specific variations before endeavouring to draw generalizations and commonalities in relation to the citrus sector in particular.

6 The context of Inclusive Business Model Arrangements in SA Land Restitution Perspective: Introduced in the Restitution programme in the form of sp s. Restitution claimants enter into agreements with agribusiness partners to manage the land on their behalf, with benefits to be shared between the partners. Broader Land Reform context Kat River Valley (individual land reform beneficiaries) involved formely white owned farms that have been handed to blck commercial farmers furing the 1980 s by the former Ciskei government. Due to a lack of funding opportunities the DRDLR decided the use the sp vehicle to assist these producers to partner with agribusiness with particular contractual agreements. Sunday River Valley (Group beneficiary projects).

7 CONTENDING VIEWS The potential benefits to the claimant communities include rental for use of their land, a share of profits, preferential employment, training opportunities and the promise that they will receive profitable and functioning farms at the termination of the lease agreements after 15 years(hellum & Derman, 2008). To turn emerging farmers into independent commercial farmers by the end of the partnerships. In terms of contractual agreement task of the agribusiness is to share agricultural expertise: ensure quality and quantity, production loans and inputs. In return: exclusive marketing and exporting rights while emerging farmers are inserted as producers. Producers receiving 6-8% of the final product price minus all costs incurred up to the point of export. On the other hand, reviewers caution that these ventures may just lead to new forms of exploitation given differential access to resources, authorities and unequal power relations between the partners in these joint ventures.

8 Strategic Farm Management: 49% shares. MCPA : 51%. Boyes Group: 49% of the shares. MCPA: 51%

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10 Limpopo Partnerships Strategic Partnership: Employment. Community members are living about an hours drive away from the land, at minimum wage transport cost is just not making it as feasible as it was initially envisaged. Casualization of labour in response to perform in highly commercialised agro chain. Dividends : Has not been declared so none paid. Rent: Paid only intermittently. Currently R 7 Million in bank account. Skills transfer: ½ people trained found better paid jobs. Money from Government grants was not paid, Strategic partners are struggling, needed to invest significant amounts to consolidate parcels and now seemingly the community is owing partners.

11 Emerging Trends: Similarities From the restitution perspective: The current approach has undoubtedly transferred nominal land ownership to community groups. BUT the emphasis on strategic partnerships with the largescale commercial sector might have resulted in the lion s share of benefits being captured by downstream actors. Because commercial partners use their own export companies to export fruit produced on the communities land thus they end in up with significant portion of profit 20% (differential power relation). Shift towards these models have also created new opportunities for existing actors (large scale commercial export companies) to reposition themselves to better appropriate value.

12 Eastern Cape Perspective: literature review Preliminary 14 interviews revealed lack of in-depth knowledge and know-how of contractual agreements on individual agreements. From the agribusiness point of view, these contractual agreements offers them an opportunity to expand their activities, to access resources and manage production at the farm level, directly or indirectly. From the contractual agreements it is clear that agribusiness retain major control over production, as the contract takes most decision rights and risks away from farmers but it also ensures compliance. From the land reform beneficiaries perspective: The sense is that emerging farmers are once again incorporated into these citrus value chains, in which they represent only an isolated element and where they have limited orientation power.

13 Discussion The partnerships idea is once again a demonstration of resilient narratives about agrarian transition that assume a linear pathway, and a predictable set of connections. peasant to entrepreneurial farmer or wage worker. Assumed that the restituted community would be able to step into capitalist circuit and become emergent capitalist farmers. Borras and Franco (2009) warning that ownership is only the first step in understanding changing land property relations, where understanding should be informed by directional changes in land control (ie direction/flow and frequency of surplus accumulation).

14 Discussion Increasing shift towards CPP model require commercial partnerships with very well endowed business partners: thus corporate capital interests are ideally placed to step in and promote their own interest. Entrenching not only the dual structure evident in the SA agriculture. But also feeding into broader processes of corporatization and financialization in SA agricultural sector. If commercialisation is understood as a two pronged process, implying the successful introduction of producers into export markets and secondly also creation of empowered commercial farmers. Emerging evidence in the Kat River and Sunday River Valley cases hints at effective commercialisation only from the perspective of inserting these producers into exporting market but questionable outcome in terms of empowerment.

15 Concluding Remarks Inclusive business model arrangements in the context of Citrus value chains could end predominantly only serving the interest of corporate commercial partners trapping new entrants into contractual agreements in order to meet stringent, privately regulated requirements i.e tied capital