Dairy Joint Ventures in South Africa’s Land and Agrarian Reform Programme: Who Benefits?

Brittany Bunce

doi:10.3390/land9090328

Abstract

Joint Ventures (JVs) between ‘agribusiness’ investors and ‘small farmers’ or ‘customary landowners’ are being promoted in South Africa’s land and agrarian reform programme as a way to include land reform beneficiaries in the country’s competitive agricultural sector. This paper undertakes an in-depth comparative analysis of two JV dairy farms located on irrigation schemes in the former ‘homeland’ of the Ciskei, in South Africa’s Eastern Cape Province. The community, through government investment, brings the fixed assets to the business: land, irrigation infrastructure and milking parlours. The agribusiness partner or ‘sharemilker’ contributes the dairy cows and other movable assets. The paper explores what incentivizes agribusiness partners to enter into these types of ‘sharemilking’ JVs. The research reveals that investing in ‘moveable assets’ is more profitable for agribusiness and is also viewed as a more politically pragmatic way to arrange production in the context of land reform. These arrangements have led to further opportunities for investment in other parts of the dairy value chain. The social relations of production involved in sharemilking JVs also obscure class and race relations in ways that benefit agribusiness partners. Although beneficiaries are receiving benefits in the form of jobs and dividends, which in certain cases make notable contributions to household incomes, the structuring of sharemilking contracts is not a fair return on investment for the customary landowners. It is also argued that the JV model is at risk of equating ‘black emerging farmers’ with a group of ‘beneficiaries’ who are in reality workers and passive recipients of dividends and land rents.

Highlights

This paper investigates what incentivizes agribusiness partners to enter into joint venture (JV)
As discussed below, there are examples where the New Zealand 50/50 sharemilking model is being implemented in land reform contexts in South Africa, allegedly without challenges
This paper has revealed that sharemilking in the South African context allows sharemilkers/agribusiness firms to avoid tying capital up in costly fixed assets and land, as these are instead provided through government grants and communal land

Summary

Introduction

This paper investigates what incentivizes agribusiness partners to enter into joint venture (JV). Arrangements with customary landowners in South Africa’s communal areas. JVs are being promoted as a way for black landowners to enter the highly competitive dairy industry. JVs typically involve collaboration between ‘agribusiness’ investors and ‘small farmers’ (Cotula et al, 2009; IFAD 2012) [1,2]. “Joint ventures entail co-ownership of a business venture by two independent market actors, such as an agribusiness and a farmers’ organization. A joint venture involves sharing of financial risks and benefits, and in most, but not all cases, shared decision-making authority in proportion to the equity share”. In the South African case JVs are most commonly implemented in the context of the land reform programme. Governance and financial arrangements tend to take diverse forms. Lahiff et al (2012) [4]

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