Land claims in one of South Africa’s largest sugarcane producing areas, the Nkomazi region, had the potential to cripple the sugar industry, resulting in thousands of job losses and a reduction in economic activity. But RCL FOODS saw land restitution as an opportunity to build better communities and create an exemplary model in which land reform beneficiaries and private companies could work side by side to maintain a sustainable industry and enrich the lives of all involved.
The Matsamo Community Property Association’s (MCPA) land claim settled in the Malelane area included sugarcane fields that provided around 16% of the RCL FOODS Sugar & Milling division’s intake at the Malelane mill. Were this land to go out of production it could have had a highly detrimental effect on the Malelane’s sugar mill.
Dawie van Rooy, Director for Agriculture in RCL FOODS Sugar & Milling division, explained that the land claim settlement was facilitated between RCL FOODS and the MCPA by the Land Claim Commission, a process based on an agreed model that resulted in a business partnership between a community of beneficiaries and the private sector. The three pillars of the model rested on optimising business operations, building and maintaining a sustainable partnership and maximising benefits to local communities.
A joint company called Sivunosetfu was established where MCPA and RCL FOODS each have 50% ownership while the farmland is leased by Sivunosetfu from the MCPA. This gives the community the double benefit of receiving rental income from the land and dividends from the Company where declared.
“The benefit of the partnership to MCPA is largely access to the expertise from RCL FOODS. This is important for sustainability of the business and the MPCA community. One of the benefits of the partnership to RCL FOODS is sustainable cane supply to the mills. Therefore the model and the relationship is unique for creating a win-win situation,” said van Rooy.
The partnership commenced in 2012 and the 3000 hectare sugarcane farm is managed by Sivunosetfu. Over the last few years the company has shown a 26% increase in turnover.
The MCPA consists of 1500 households, making the amount of people benefiting from the land claim and subsequent partnership over 6000 individuals. Moses Thumbathi, Chairperson of the MCPA, stressed that open communication with all beneficiaries is key to ensuring a smooth running of the business and keeping everyone content. “We have daily communication between the MCPA office and the beneficiaries. Beneficiaries are welcome to visit the office, which is located in one of the settled farms (Kaalrug), at any time or have a look around if there are any queries. We take time to explain the processes to them and our reasoning for taking the decisions we do as the appointed CPA leadership.”
Van Rooy added that the biggest challenge when negotiating the partnership was establishing trust between the parties involved. “The parties went through a period of difficult and lengthy negotiations, often sitting on opposing sides of the table. Now we are sitting on the same side of the table, always exploring the best approaches for company profitability.” If the company is profitable, then benefits are created for the shareholders and the beneficiaries.
“To be effective as a Board there needs to be trust and that takes time. Transparency and open dialogue, being able to talk until we find each other and focusing on the right things has helped. The golden thread is always what is best for the company.”
He noted that the biggest lesson learnt throughout the process was the ability to see things from the other person’s perspective. “Sometimes it’s difficult to understand why certain things are an issue, but the moment you put yourself in the other party’s shoes and see where they are coming from and what is important to them, the light comes on. Only then can you get a balanced solution.”
Van Rooy explained that one of the key factors that needed to be accepted by everyone involved was that the sustainability of the company took precedence over anything else. “When we started discussions we had to explain what sustainability means in the sugar industry context: What are the things that need to be done to ensure sustainability and if they’re not done, the risk thereof. Every time there has been a discussion around considering new things that need to be done on the farm, the drive is always about sustainability. Is it in the interest of the company, what would the implications be, would we decrease the risk profile of the company? What do we need to do to ensure we are still farming for the future?”
“With the drought recently suffered by the Industry, the company had to put together a recovery strategy. We had to spend a lot of money in a short space of time to put drought recovery systems in place. Because Sivunosetfu has a Board that fully understands the business and its drive for sustainability, we could act swiftly.”
In addition to the financial implications of the drought, Sivunosetfu is also dealing with the impact of sugar imports which resulted in a significant drop in sugar prices for the industry and, as a consequence, Sivunosetfu. While Sivunosetfu is investing a substantial amount to restore its full production capacity again after the drought, the low sugar prices have resulted in pressure on the company’s cashflow, thereby influencing its sustainability. The sugar industry has applied for higher import tariffs and, if approved, it is expected that the company will recover towards normal profitability and that the beneficiaries will continue to benefit.
The nature of the agreement that underpins the joint venture places much emphasis on skills transfer. Thumbathi said that the partnership has not only meant growth for the farm, but for the community as a whole as well. “Our people can learn and grow and the farm itself can grow and expand because people are being developed or upskilled in the process.”
Stella Mthembu, Land Reform Executive at RCL FOODS Sugar & Milling division, explained that Sivunosetfu ensures that beneficiaries are trained – both as employees of the company and as bursary holders. This is important for skills transfer and creation of a human resource pool for the future. “The shareholders agreement dictates that beneficiaries are upskilled in business operations and Board functions. Sivunosetfu also offers bursaries to beneficiaries that are not limited to plant production, but also finance and engineering as these are all key skills that are needed by the company. A significant number of bursary recipients are granted experiential training opportunities by the company; and many granted employment at the end of training. Some have grown through the company development pipeline to take up management positions.”
Close to 30% of Sivunosetfu’s employees are Matsamo CPA beneficiaries. All employees are from local communities. If there are any job opportunities Matsamo beneficiaries have an added advantage. This is in line with the company’s skills transfer plan.
Van Rooy stated that the biggest positive outcome of the partnership has been the whole transformation journey. “You can either become part of the community or continue in isolation. We believe this is a great model and a good example of working together to benefit the local economy, create jobs and actually be a part of something bigger. In the past it was the community versus the business sector, now it is community in partnerships with business. The whole discussion has changed. We do things together. The biggest benefit by far has been becoming part of this winning community.”
Mthembu noted that this is one of the most successful land reform projects in the country. “This is a story that shows land reform can work where there is willingness. From when the farms have been restored to communities through land reform, there has not been a pause in economic activity. The land is not lying fallow or idle, economic activity has flourished and benefits are derived from it.”
Van Rooy said that despite the negative publicity about land reform in South Africa, the Nkomazi community has been blessed with a good land reform story to tell. “This is very important. The Regional Land Claims Commission and the community understood that if the land restoration process was not successful the region could have lost one, or both of the mills. Land reform can work if there is willingness and commitment from the involved parties, in this case government, the Matsamo CPA and RCL FOODS. Through this settlement process there has not just been a change in ownership but the whole structure of the community has changed for the better. Through successful land reform we can change this country.”
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