COMMERCIAL PARTNERSHIPS IN SOUTH AFRICA S LAND REFORM PROGRAMME: LESSONS AND EXPERIENCE SINCE 1994

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1 COMMERCIAL PARTNERSHIPS IN SOUTH AFRICA S LAND REFORM PROGRAMME: LESSONS AND EXPERIENCE SINCE 1994 Paper presented to the Land Divided Conference, University of Cape Town, March Edward Lahiff University College Cork, Ireland

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3 Introduction Renewed interest in development and commercialisation - of smallholder farming Inclusive business models as alternative to land grabs Towards a typology of commercial partnerships in the context of South Africa s land reform

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5 International Experience High transaction costs Lengthy time-scale - patient capital Horizontal linkages among farmers Size of corporate partners External support and regulation

6 Commercial Partnerships and South Africa s Land Reform Programme Multiple drivers: and reform, BEE, private-sector social responsibility popular pressure Bias towards large-scale commercial farming (Cousins and Scoones 2010) To distinguish between commercial partnerships proper and the wider category of partnerships - including pro bono assistance, mentorships, advice - but which lack a clear commercial dimension. Commercial = contractually-based financial relationship Fits the concept of inclusive business models, as well as most strategic partnerships within the South African land reform context, as well as equity schemes, joint ventures, outgrower schemes and contract farming.

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8 Community-Based Partnerships Typically large restitution cases on highly developed land Most joint ventures have collapsed Exceptions are some wildlife/tourism projects in the Kruger National Park and elsewhere, Makuleke restitution claim Range of successor projects: rental or management contract, with corporate partner in control; broader empowerment issues now marginal Reduced role for the state. Provision for eventual transition to community control not clear Large-scale land rental agreements in the sugar and forestry sectors Based on continuity of supply to the large processors Range of models being developed over long period, large territory

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10 Commodity-based approaches 1 Focussed on existing small farmers with the capacity to advance to more commercial scales of operation Relationships is between the commercial partner and individual (or groups of) farmers, excluding non-producing individuals/households and bypassing community structures such as communal property associations or traditional authorities. Centres on supply of a specific commodity Lend themselves to replication and standardisation, and evolution over time.

11 Commodity-based approaches 2 Smallholders in the sugar industry are effectively outgrowers Corporate (sector-wide) finance and leverage of state funding. success of the commodity-based initiatives can be attributed to its focus on a single commodity and its evolution over many years and with many participants. less capital-intensive and monopolised sectors such as fresh vegetables appear to offer opportunities for smallscale and newly established farmers, wide range of mentorship programmes are underway

12 Key arguments and conclusions 1. Inclusive business models promoted as a means commercialisation for poor farmers and communities 2. Land reform has created new categories of resourcepoor landholders but often lacking the means to use it effectively. 3. South African land reform policy has embraced an ideologically-driven rhetoric of commercialisation 4. Little evidence of learning from international experience. 5. All-embracing joint ventures have mostly failed, but isolated successes. 6. Some JVs have been replaced by a range of more traditional land rental and management agreements.

13 7. Large agro-processing companies in sugar and forestry sectors have driven different model of partnership: Well-resourced corporations long experience of contract farming etc. clear division of responsibilities, with processors dominant); focus on a single commodity within a short, integrated processing chain; steady flow of benefits from an early stage a minimal role for community-based institutions. 8. Many land reform groups have entered low-grade agreements with local farmers 9. Range of mentoring and support programmes noncommercial 10. Signs of interest from a wider range of agri-businesses, particularly in the fruit and vegetable sector.

14 11. SA lacks a credible strategy for empowering smallholders and communities. Land reform beneficiaries and other smallholders and labourers in the sector face enormous entry barriers 12. Much needs to be done to develop the productivity of smallholders and land reform beneficiaries; obtaining access to output markets is a key element, and subdivision of holdings. Contract farming and outgrower schemes in partnership with reputable and accountable companies show potential, but not in dryland or remote areas or amongst the very poor. Elaborate and experimental joint ventures should be avoided at all costs. 13. Central role for the state (and civil society): creating an enabling environment developing and promoting plausible models, brokering finance and other resources regulation and oversight. NGOs, smallholder organisations and communities need to be empowered throughout the process. Private sector cannot be expected to play the role of development agency.

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