Best institutional practices for farmworker and community equity-sharing schemes in South Africa.

Abstract

Farmworker equity-share schemes were initiated by the private sector in the Western Cape region of South Africa in the early 1990's as a method of redistributing farm assets to land reform beneficiaries while maintaining the viability of commercial farming operations. This study set out to identify the institutional characteristics of successful farmworker equity-share schemes in South Africa, and to discern a set of best institutional practices that will likely promote the success of future equity-share schemes. A detailed study of nine commercial farming ventures involving partnerships with farmworkers was undertaken in the Western Cape during November 2001 to explore relationships between their institutional arrangements, worker empowerment, management quality and performance. Farmworker equity-share schemes (FWES) have received both positive and negative publicity. This thesis adds to the debate surrounding these land reform projects by comparing the results of case studies conducted by the Surplus People's Project in 1998 with more recent (2001) case studies. The latter suggest that many of the concerns raised by the Surplus People's Project, such as beneficiaries' participation and expectations, power relations between management and worker-shareholders, skills transfer and labour relations, have been addressed. The dissertation also highlights those issues that remain areas of concern, for example, beneficiaries' tenure security, literacy levels amongst worker shareholders, skill and wage differences between men and women, and exit procedures. A cluster analysis of variables measuring four constructs of a successful farmworker equity-share scheme, viz. sound institutional arrangements, effective worker empowerment, competent management and good performance, revealed positive relationships between these constructs. Best institutional practices identified by the analysis suggest that farmworker equity-share schemes should be operated as (or like) a company with voting and benefit rights proportional to individual shareholdings, but with restrictions on certain share transactions to prevent free-riding by non-workers and the loss of creditworthiness through sudden outflows of equity and managerial expertise. However, this positive relationship between best institutional practices and enterprise performance is dependent on effective worker empowerment (e.g. skills transfer and gender representation), good governance (e.g. external auditing) and competent management (e.g. schemes to reward worker performance and to resolve disputes). From a policy perspective it is recommended that public land reform grants should be awarded only to beneficiaries of FWES that have been co-financed by a bank or reputable investor as this ensures a thorough financial assessment of the project, and only to projects that can demonstrate a history of good labour relations. It is also recommended that the Department of Land Affairs should consider extending its grants to regular but seasonal farmworkers who wish to participate in an established project. While farmworker equity-share schemes may not provide all of the answers to land reform they have an important role to play in redistributing wealth and de-racialising commercial agriculture in South Africa.