Milling company helps with land reform sugarcane farms

While it’s well-known that the vast majority of South Africa’s land reform transfers have failed due to factors such as inadequate
post-settlement support, in Mpumalanga the opposite is happening, thanks to TSB Sugar’s proactive approach. Lloyd Phillips reports.

South Africa’s 14 sugar mills rely solely on the country’s 375 590ha of land under sugarcane in KwaZulu-Natal and Mpumalanga for their cane-to-sugar milling requirements. And at any given moment, approximately 1 million people are in some way dependent on South Africa’s sugar value chain. Clearly, then, the industry cannot afford to have previously productive sugarcane farms transferred to mostly unqualified and under-resourced land reform beneficiaries to go the same way as so many other failed land reform initiatives.

Enter milling company TSB Sugar, which has operations in Mpumalanga and northern KwaZulu-Natal, and has realised the value of partnering with these beneficiaries for mutual benefit.

“TSB has three sugar mills that are supplied by about 1 400 large-scale freehold growers, small-scale growers (SSGs) on communal land and freehold farming operations. The latter were transferred, through the land reform process, from TSB itself and from white owners,” explains Vusi Khoza, TSB’s general manager for corporate affairs. “For our mills to run at optimal milling capacity and, therefore, economic capacity, as much sugarcane as possible must be produced in the mills’ cane supply areas.”

Negating the risk
TSB is supplied with sugarcane grown on 52 025ha. Of these, 33 384ha are under black freehold ownership or farmed by SSGs on communal land. A massive 62% of these – 20 536ha – are owned by communities that lodged successful land restitution claims. If sugarcane production on this land were to drop significantly, TSB would very likely not survive the financial repercussions.

To negate this risk, it has partnered individually with three land reform beneficiary communities in 50/50 joint ventures. These are the Ingwenyama Simuhulu Trust, the Siphumelele Tenbosch Trust and the Matsamo Community Property Association. The model devised by TSB involves establishing a joint venture company with each of the communities.

This leases the sugarcane land – and, in some cases, the fruit farming land – back from the communities, thereby generating land rental income for them. In addition, the managers and directors of each community’s joint venture company – Libuyile Farming Services, Mgubho Farming Services and Sivunosetfu (Pty) Ltd respectively – are drawn from both TSB and the relevant community.

Primary income

“The joint ventures are significant business enterprises for the communities,” says Vusi. “The model is designed to give the bulk of the financial benefits to the shareholding community. “The primary income streams for each community are rental and dividends from profit-sharing of each joint venture company’s income. Land rental is low risk income and accounts for 90% of community income from these joint ventures. Dividends account for the remaining 10%, so the communities are largely shielded from risk.”

There are also supplementary income opportunities for community members to work for the joint venture companies, or even for entrepreneurs in the community to enter into supply and service contracts.

Crucial Skills transfer
Dr Dave Thomson, TSB’s manager for land reform, points out that the transfer of agricultural production and business management skills from TSB to community members underpins the joint venture relationship. Community development opportunities are offered through bursaries, in-service training, career education, employee development and training programmes, farm management mentorship programmes, and other schemes. “This model also ensures sustainable productive farms for the beneficiary communities, and secures sugarcane supply for TSB’s mills,” he stresses.

A better community
Tommy Khoza belongs to the Siboshwa community, whose Siphumelele Tenbosch Trust has a 50% share in Mgubho Farming Services. He serves as a board member of Mgubho. “Since we entered into the joint venture with TSB, our community has improved in many ways, such as through skills transfer,” he says. “And we’re still looking for ideas where we can improve ourselves even further. In terms of our profit-sharing agreement, our community members are paid cash dividends as a return on their investment with the joint venture company.”

Petros Silinda, another Siboshwa community member, points out that the community decided on the joint venture with TSB because the people lacked farming experience. “We want to learn from TSB because it knows how to farm properly, and over the 22-year lease time TSB has promised to take us along with it and to help us grow,” he explains.

The youth and the future
Attracting the youth into farming remains a challenge. One of Tommy’s main concerns is that few youngsters in the community appear to be interested in a career in agriculture. This puts the management succession plan for the community’s successfully claimed farmland in jeopardy. Efforts are under way however, to promote agriculture as a career choice in the community’s schools. These highlight the fact that there are many jobs available in farming beyond being an unskilled labourer.

For more information, contact Vusi Khoza at 013 791 1062, or [email protected].