Business

Go-ahead for farm equity schemes

19 November 2010

South Africa is set to re-launch farm equity schemes, in which the state acquires shares in commercial farms on behalf of the farm workers working on them, paving the way for land reform to become the basis for new investment in the rural economy.

A moratorium on the schemes, imposed in June 2009, would be lifted in January 2011, Rural Development and Land Reform Minister Gugile Nkwinti told journalists following a workshop in Cape Town on Sunday.

"The reason we want to lift it is it is a good scheme, but we have not managed it well," Nkwinti said.

Farm equity schemes enable owners wanting to sell their farms to do so through a scheme in which farm workers buy a percentage of the property. This is paid for by government, using funding allocated to the Rural Development Department for land reform purposes.

The government had invested R500-million in farm equity schemes (FES) since their inception in 1996.

Nkwinti said a further amount of R900-million, available in his department's current budget, was earmarked for getting the schemes back up and running. A similar amount would be made available in the next financial year.

'A good policy badly implemented'

"FES was a good policy, but it was badly implemented ... We did not manage it well, both ourselves as government and the farmers," Nkwinti said.

A study last year found that of the about 100 schemes started up, only nine had paid dividends to their members, and half of these were reinvested in the venture.

About 80 of the existing 100 farm equity schemes are located in the Western Cape.

Nkwinti said he planned to meet commercial farmers to discuss what mechanisms needed to be put in place to ensure the schemes' future.

In a speech delivered earlier at the workshop, he said that in many instances former owners "continue to retain their dominant positions as if nothing had changed".

Further, many farm workers still did not have secure tenure and many "may not even be aware that you are no longer only farm workers, but also shareholders in the business in which you work".

According to a document distributed at the briefing, last year's moratorium was prompted, in part, by "the realisation that the contribution of these schemes to redistribution targets had been greatly exaggerated".

While equity and shareholding varied greatly, "in many cases equity in the landholding entity was often as little as nine percent, yet the total extent of hectarage of the land was claimed as redistributed".

'The most productive land reform model'

On the ratio of ownership, Nkwinti told journalists he liked Western Cape premier Helen Zille's call for 50-50 equity share schemes.

At a farmworkers' summit in July this year, Zille told delegates such schemes were the most productive land reform model, giving poor people, historically excluded from land ownership, access to high-value agricultural land while retaining the involvement, commitment and shared risk of commercial farmers.

This was a crucial determinant of long-term viability in land reform initiatives, Zille said. It meant that land reform could happen in high-value sectors of the rural economy, and that land reform could become the basis for new investment and value creation in the rural economy.

However, the government's re-investment in equity schemes should be coupled with enough safeguards to ensure that farm workers were not exploited in the process, she said.

Nkwinti said his department planned to make greater use of Further Education and Training colleges to train those involved in equity schemes. Such lack of training had been identified as one of the reasons for many of the schemes failing to operate properly, he said.

Sapa