Resurrecting land reform
A fresh approach to empowering SA’s smallholder farmers can turn failures into successes
SOME OF THE problems associated with the failure of South Africa’s land reform projects are linked to limited market access for emerging black farmers.
These problems will not go away unless they are reviewed and replaced with workable strategies. Primarily, problems stem from information asymmetries in business agreements and agricultural markets.
The lack of transparency in contracts reported within joint ventures and lack of information on possible products to cultivate and lack of data on buyers lead to high transactional costs that ultimately collapse smallholders.
In the search for workable solutions that will produce a better outcome for black smallholders and help develop a more inclusive agricultural sector, a recent study of Kenyan smallholders within the region of Kilifi County provides a compelling example for South Africa.
The Kenyan agricultural sector, which accounts for almost 75% of the workforce and contributes 26% to GDP, adopts a flexible approach to production and marketing rather than a one-size-fits all.
The study illustrates that for whichever business model is in place to support small farmers, the internal and external re-organisation of the agricultural sector should be aimed at reducing the risks associated with transactional costs.
The study also looks at complementary models for finding markets for smallholders in South Africa’s land reform project.
Innovative ideas aimed at limiting risks have been successfully harnessed in Kenya to support the country’s smallholders. These start from the production process to marketing initiatives that ensure that high income returns and business sustainability are achieved for farmers.
Farmers on smaller pieces of land also outperform their peers (per acre of land) when they diversify their production and use a varied number of marketing avenues to sell their goods. In addition, smallholders have a higher incentive to employ innovative strategies when they own (not rent) the land on which they farm.
Besides dispossession of land from black people, apartheid policies also reconfigured modes of farming and business management for black farmers. After 1994, the emergence of the out-grower model, led by agri-business capital, was supported by various imperatives including policies aimed at black economic empowerment, which would require capital injections into businesses.
The partners tended to be mostly white commercial farmers, who previously owned the land on which black farmers were now resettled through the land reform project. The benefits of the joint venture would be:
1. To bring in financial capital;
2. To introduce new technologies;
3. To transfer skills for mechanisation required for large-scale production;
4. Large-scale agribusiness would bring in new national and foreign markets/buyers; and
5. Large volumes would improve the standard of produce to satisfy demanding consumers.
It is partly against the promises of marketing networks and buyers by agri-business that the joint-venture model of farming has been promoted and piloted for Black smallholders in South Africa’s land reform projects.
But challenges in the model have emerged and have been documented, including cases where Black farmers would hand over pooled land to business partners and wait as “‘armchair farmers’ for money to come or not”. Skills have hardly been transferred in many projects.
The challenges mean that venture businesses need some reconfiguration to work more efficiently and that other modes of business should be advocated alongside the joint-venture model.
Different modes of farming, business management arrangements, values chains, geo-politics, economics and so on, are variables to be considered, with different implications, for what models would lead to successful farming and marketing for small farmers.
Different crops, farming methods and different economies mean different value chains and marketing strategies would face smallholders. As value chains are neither predictable nor set, they can be modified or created as and when required.
The political aspiration to empower Black South African farmers has led to efforts to try and integrate smallholders into the more lucrative value chains via the implementation of joint-venture businesses.
Longer value chains are normally associated with larger profit margins and bigger businesses, mainly because big producers can afford mass production, storage and transportation costs associated with their products. Smallholders can participate in longer value chains through government support or by participating in joint-ventures or co-operatives to benefit from economies of scale.
Smallholders have a higher incentive to employ innovative strategies when they own (not rent) the land which they farm