Hoedspruit land claim: coming to fruition

Collapsed land reform farms are depressingly common in South Africa, but in Marulaneng (Hoedspruit) claimants and farmers have teamed up and their fruit estates are flourishing. In fact, the district is shaping up as a model the rest of the country could learn from. But as Stephan Hofstätter found out, red tape threatens to spoil the party.

It came as a shock to most Marulaneng farmers when a land claim was gazetted on the entire district of over 500 agricultural properties, the town and the air force base. Most irrigation farms on this scenic strip between the Blyde River Canyon and Kruger Park produce high value exports, with a combined turnover of about R1 billion.

Many feared the farms would go the same way as other collapsed land reform projects in the region, with a devastating impact on the entire district’s economy, which largely depends on agriculture and downstream processing despite a growth in tourism and lifestyle estates. Most farmers believe the land claim, lodged by the Moletele community and gazetted in October 2004, is inflated. The Moletele people insist they were dispossessed of a range of traditional land rights over the entire area (see box: Dumped next to a railway line). Over 100 farmers are still disputing the claim and want their day in court.

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Many others preferred to become proactively engaged in the settlement process despite reservations about its validity. Land reform pioneers Julius Katzke and Mike Scott were elected to represent a group of willing sellers, and they set out to forge an alliance with the claimants. “We were engaged in black empowerment plans for our workers anyway, so validity wasn’t the issue,” explains Mike, who had two farms under claim. “We wanted to sell some of our land to the government for this purpose, but without compromising on agricultural productivity.”

They set out to find legitimate representatives in the community and formed the Moletele Hoedspruit Land Claim Initiative. Henceforth the claimants and farmers would present a joint position to the Land Claims Commission on anything from farm valuations to post-settlement business plans. On their side Julius and Mike undertook to fast-track processing of the claim by making all documents immediately available to officials and taking them on verification visits to farms. Government-appointed valuers were offered the same treatment. “We did all we could to help. We wrapped up in a week what sometimes takes years on other claims,” says Mike. All offers were “fair and market related”, he says. The owners of 27 farms out of the first batch of 28 farms accepted.

One farmer is apparently holding out for a better deal, as the price of the property he wanted to buy with the proceeds, increased. A non-governmental organisation was hired to undertake claimant verification. This laborious process sometimes delays overstretched officials for years because it requires tracking down claimants scattered over a wide area by forced removals, and processing poorly kept records of thousands of people. In the end over 1 600 claimants, most living in the Acornhoek area near Bushbuckridge, were registered as direct beneficiaries.

This included 700 smallholding farmers in the Dingleydale area. Together with their dependants, this represents a total of over 13 000 people expecting to benefit from the claim. In a vote of confidence for the farmers’ efforts at building bridges with the claimants, 15 of the 16 community leaders were elected as executives of the Communal Property Association (CPA) that will own all the land.

Getting professional help to create the right institutional arrangements, both within the community and between claimants and farmers, proved crucial to success (see box: Professional help).

Joint ventures
Most of the first batch of farms were transferred by the end of 2006 and the remainder in June 2007. The total settlement cost was R76 million, including a packhouse and mango atchar processing plant and two mango drying facilities.

“We commend all the strategic partners for their commitment to making South Africa a winning nation for all its people and call on more white commercial farmers to rise to the occasion,” land and agriculture minister Lulama Xingwana said at the handover ceremony last month [1 July 2007]. This marked the first phase of settling the Marulaneng claim, but forms only a fraction of the 78 000ha claim. Phase two comprises another 36 farms expected to be transferred later this year. The third phase consists of over 400 farms, including those under dispute.

The number of properties to be transferred is clearly set to escalate dramatically, which makes it crucial for the entire district – both psychologically and for market confidence – that the first batch of farms continue to flourish. A lot hinges on the right commercial model being forged now so that successes can be replicated on a larger scale. The provincial agriculture department wanted the first batch of properties grouped in clusters to take advantage of economies of scale and reduced transport and processing costs. Three clusters were identified and put out to tender. Together these three clusters of farms had an annual turnover of R30 million.

Surprisingly, they attracted about seven bidders, who presented their proposals to a committee comprised of the claimants, officials from relevant government departments and the Development Bank of SA . Julius and Mike’s company Strategic Farm Management (SFM) won the tender for clusters two and three, comprising 17 farms producing mango, citrus, seed maize and sweetcorn. The first cluster, mostly comprising intensive shade net vegetable production and tourist lodges on the remaining 10 farms, went to another company formed by three local farmers who owned some of the land. SFM and the claimants formed a joint venture company, New Dawn Farming Enterprises. The CPA would get a 51% stake in New Dawn, paid for by its government grants.

SFM would get 47%, paid for by provision of skills, markets, equipment and farm infrastructure. The remaining 2% would go to a workers’ trust. Julius and Mike are directors of New Dawn, and the CPA has appointed three directors from the claimant community who will receive financial and corporate governance training. The value of equity has not been finalised but is likely to total about R6 million. The company will own improvements and equipment, but not the land, which belongs to the CPA and cost the government R50 million (for clusters two and three). The CPA will receive a market-related rental from New Dawn (about R38 000 per month). Rentals from farm properties, including the house Mike and his family continue to occupy, will go to New Dawn.

A shareholders’ agreement is still being thrashed out. It will include provisions for skills transfer, with suitable candidates selected from the community after a rigorous joint screening process, who’ll be trained up to managerial level with the aim of taking over management of the company after 10 years. The CPA will also be able to buy out SFM after 10 years. A major advantage of this arrangement is the claimants buy into the entire value chain, not simply the low-value primary production segment. This includes delivery contracts with processors for cash crops such as sweetcorn; fixed offtake agreements with minimum price guarantees with foreign importers; ownership of a packhouse and equity in an export company, Alliance Fruit, which has been the biggest supplier of mangoes to Marks & Spencer in the UK for the last 10 years; and local contracts to supply atchar and other mango products using their own processing plant. “We took our markets as they were and put them into the new company,” says Mike.

Who benefits?
Community benefits will take on various forms. Firstly, job quotas have been set, requiring 30% of New Dawn’s workforce to be Moletele’s by 2009. These must come from new opportunities created as no workers lost jobs during the transition. Secondly, income from dividends and farm rentals will fund community projects. Workers in existing compounds on the farms will continue to live there, but no new settlements will be allowed within the vicinity to prevent theft and land invasions. “This land feeds the whole nation,” explains claimant leader Thandios Mashile. “Our policy is: if it’s been developed [agriculturally], then let’s keep it as an economic asset. There’s plenty of land [as part of the claim] that hasn’t been developed, which can be used for new settlements.

” The same cautious approach is being taken to establish the smallholders from Dingleydale. All 700 are eager to move into the Blyde Valley. “They want to move yesterday,” says Thandios. “But not all can be accommodated. There will be frustrations but you can’t please everyone.” He says most had abandoned farming at Dingleydale due to a lack of water, technical support and access to markets and cheap inputs. The Moletele CPA plans to run a pilot for 100 farmers screened for suitability. “We will have to establish who is really interested in developing their skills,” he says. Ideally, the most suitable smallholders will be trained to run New Dawn’s farms within 10 years. The emphasis will be on shadow mentorship and on-the-job screening and training.

Cash flow crunch
Not only have none of its 17 farms suffered a drop in production, but New Dawn has hatched some ambitious expansion plans worth over R12 million. These include replacing 280ha under maize with citrus and building another mango drying facility. But right now New Dawn has more pressing priorities that, if not attended to, threaten to sink the whole business. Its model was based on the expectation that the claimants would be bringing some hard cash to the table. Land claimants are eligible for a variety of grants, including a 25% infrastructure payout amounting to R12,5 million that could be used to cover existing operational costs and expansion plans.

Planning and land claim settlement grants could cover equity. But up to now nothing has been forthcoming, leaving the farmers to foot the bill, ensuring farms didn’t deteriorate and weren’t stripped. “The farmers took over the farms before they were transferred,” says Mike. “We made a commitment that we wouldn’t let [the farms be] run down, and to date not a single light bulb has been stolen.” In the last eight months Mike has forked out R1,6 million. “This is a serious drain on my cash flow. If I’d known the government was so slow I wouldn’t have done this.” Thandios agrees, “Everything is going well except this financial issue. The bureaucratic processes within the [agriculture] department and the Land Claims Commission’s office are frustrating and need to be attended to as soon as possible or there will be some dangers for the survival of these farms.” Thandios explains, “It can’t go on like this.

Our strategic partners have been made to cough up out of their own pockets for such huge undertakings. It’s time for government to walk the talk.” The claimants are eligible for water subsidies, including a capital cost grant that could theoretically cover New Dawn’s repayments of R1,3 million per year to Rand Merchant Bank. This is for the state-of-the-art irrigation pipeline ensuring a reliable source of high-quality supply to Marulaneng’s farmers. New Dawn and the CPA are negotiating with the Department of Water Affairs and Forestry (DWAF) for this grant. But Tshilidzi Mathobo, the DWAF official handling development finance, says the grant is limited to an amount below the cost of the Blyde Valley pipeline. It is also dependent on funds available in any particular budget cycle, although his minister, Buyelwa Sonjica, could waive restrictions if merited.

“This may be considered a meritorious case.” The same goes for efforts by the Moletele community to integrate into their farming plans the additional 800ha of irrigable land made available through water savings from the pipeline. This unallocated land is particularly valuable as the pipeline costs of R2,3 million per year are already being covered by DWAF. But for the Moletele people to get their hands on the so-called Blyde-800, a more detailed proposal must be submitted by the provincial Land Claims Commission and agriculture department, approval must come from a provincial water use committee and possibly an amended mandate from Buyelwa Sonjica, says Mathobo.

“The [Blyde-800] could then be used to enhance the land claim.” Once the Moletele people get their second batch of farms they will own 37% of the irrigation district’s water rights, which equates to productive land in this water-stressed region. This means by the end of this year the district will have exceeded the national land reform target of transferring 30% of white-owned farmland to black owners – seven years before the 2014 deadline. But the business models for the joint ventures that will ensure the continued productivity of these farms were clearly based on the disbursement of land reform grants. If these fail to materialise on time, plenty of goodwill will go to waste along with prime agricultural land.

Professional help

Professionals were brought in to train claimant leaders and ensure community and business structures were in top shape. This was done through the Maruleng and Bushbuckridge Economic Development Initiative (Mabedi), a four-year pilot launched last year and run by rural development consultants on behalf of the SA Business Trust.

The trust is the formal alliance between big business and government, aimed at creating wealth through public-private partnerships. Headed by Absa deputy chairperson David Brink and business magnate Saki Macozoma, its directors include Transnet CEO Maria Ramos, public works minister Thoko Didiza and trade and industry minister Mandisi Mpahlwa. Mabedi is also being implemented in the Hazyview area, where hundreds of farms and lodges are under claim. Some were transferred prior to Mabedi’s involvement and have already declined or collapsed.

Lessons learned from the four-year pilot launched last year will be incorporated into the local department’s National Poverty Reduction Strategy. A key intervention by Mabedi in the Marulaneng land claim was ensuring the new landowner, the CPA, was properly constituted and knew its functions, responsibilities and limits before any land changed hands. CPA executive members were trained in corporate governance principles and helped to develop transparent policies and procedures for areas with the potential for conflict. These include corruption, leadership succession, employment opportunities and interference from commercial interest groups, local factions or politicians. Managing expectations of the broader claimant community and ensuring effective communication with the executive, formed part of the process. “When you’re dealing with so many people there will always be conflict,” explains CPA chairperson Thandios Mashile.

Most revolve around money, so the trick to resolving them is transparent and effective financial management, he says. “You have to be able to account for every cent that comes in and goes out.” Executives are directly accountable to the community, who in terms of the CPA constitution can vote them out of office at five-year intervals if their performance is not up to scratch. A major threat remains infiltration of the CPA by opportunists in the community, often linked to criminal syndicates elsewhere, who will profit from chaos and collapse. “They don’t want the businesses to succeed so they can steal the fruit, ransack the houses and sell the cables,” says Thandios. “But they don’t realise you can only steal fruit once.”

Dumped next to a railway line

Claimant leader Thandios Mashile was at school in Acornhoek when his parents were told to leave their home near Marulaneng. Sotho speakers were forced to move to the homeland of Lebowa, and Shangaans to Gazankulu. People wanting to remain had to provide free labour. “We had to hire [removal] trucks. My father could only afford one load,” he recalls. “So we drove our cattle 50km on foot.” The family was dumped next to a railway line in an area with no water, forcing his mother to walk 20km every day to the nearest tap. “We lost more than half our cattle from the trains.” He’s adamant the Moletele community have a legitimate claim over the entire region.
“Our traditional authority allocated different areas for different activities. There were sites for rituals, grazing grounds, seasonal hunting grounds and areas for settlement. We lost all these land rights.” He says farmers opposing the claim because they hadn’t occupied the entire area, simply misunderstood restitution law, which allows compensation for the loss of a range of formal and customary land rights.

This was confirmed by a recent Constitutional Court judgment in favour of the Popela community, which was cited by land and agriculture minister Lulama Xingwana during her land-handover speech. Xingwana urged farmers wanting to go to court to heed the judgment and reconsider, warning they faced expropriation if talks were dragged out. Thandios says some farmers had already approached the claimant leaders to open negotiations on selling their land. “Clever lawyers make false promises to farmers, and take their money if they win or lose. When farmers stop listening to [the lawyers’] lies we will start making progress.”