Dynamics of Rural Transformation in Emerging Economies

Dynamics of Rural Transformation in Emerging Economies- New

Delhi, India April 14-16, 2010 Business Trust Case Study

www.businestrust.org.za

Community Investment Programme: Case Study of Maruleng and

Bushbuckridge Community Public Private Partnership Initiative

Golden Mahove: Business Trust

_____________________________________________________________________________________

ABSTRACT: South Africa has historically ranked as one of the most unequal societies in the

world. The SA government embarked on a land restitution programme to redress land

ownership imbalances. Communities claimed land lost under apartheid. These communities

receive large tracts of productive land assets. Under the restitution process 95% of the 79,696

claims involving 2,5m ha have been transferred to date benefiting 1,5m people at a cost of at

least R20,3bn. However, the beneficiaries have limited capacity to manage their new assets.

Investors generally remain cautious due to weak institutional frameworks for engaging in

investments in rural areas or assets with communal ownership arrangements. The Business

Trust, in partnership with the Department of Co-operative Governance and Traditional Affairs

produced economic profiles of 21 areas where 10 million of the poorest people in South Africa

live most of which have such restituted assets. This led to a pilot project called Maruleng and

Bushbuckridge Economic Development Initiative (MABEDI) aimed at mobilizing private

investment to communally owned land assets and building capacity of communal property

associations. The paper provides the road map that led to investments worth R1,5bn being

attracted into these communally owned agribusiness and tourism land assets. It also

demonstrates the value of partnerships between business and government as well as between

Communal Property Associations (CPA) and private investors in creating jobs and economic

value from communally owned properties. The paper further argues that while the transactional

advisory services and CPA administration capacity building efforts have been successful, there

are more systemic issues that need to be addressed if the programme is to be widely replicated.

These issues are: speed of settlement of claims settlement and land transfer to claimaint

communities in order to maintain property value as well as create predictability for investors:

provision of commercial transactional services to CPAs and capacity building support to CPAs

for them to effectively manage their portfolios.

Golden Mahove is a Programme Manager with the Business Trust, an organisation that

combines the resources of business and government to create jobs, build capacity and combat

poverty. The Business Trust believes that by working together, much more can be achieved

than by independent actions. The Business Trust mobilises resources from companies

operating in South Africa to support programmes that accelerate the achievement of agreed




national objectives. Since 1999, over 140 companies have committed more than R1,2bn to the

Business Trust. Golden Mahove is a development economist with the Business Trust and has

16 years experience working in business in development matters. His specialization has been in

private sector development in agribusiness, small enterprise and large business linkages. He

manages the Community Investment Programme which focuses on how to make markets more

inclusive for the poor through productive investments.

KEY WORDS: poverty nodes, Community Public Private Partnership (CPPPs), Communal

Property Institutions (CPI), investments, land claims.

Introduction

South Africa remains one of the most unequal societies with a dual economy comprising an

advanced first world economy on the one hand with sophisticated infrastructure while on the

other, it has an impoverished lot struggling to access even the most basic services. (TIPS,

2009) This high concentration of resources on one end and poverty on the other has

exacerbated economic marginalization and deep poverty. Measured against the Gini co-

efficient, South Africa was at .72 in 2005 up from .62 in 1995 signifying a trend towards more

societal inequality. As a way of example, 3 million South Africans live on less than R5 a day

while R18 million South Africans live on less than R20 a day (Eighty20,2009). This group

constitutes the bottom of the pyramid in South Africa and these are mainly black people. May in

Lahiff 2000 further asserts that South Africa has ‘one of the most unequal distributions of

income in the world, and income and quality of life are strongly correlated with race, location

and gender”.

The main contributing factors to this sustained inequality are:

1) the centralised structure of the economy with high concentration ratios of large firms which

have well integrated value chains from urban to rural areas. This raises the entry barriers for

small firms and discourages their market entry. This is further worsened by the fact that most of

the products which small enterprises would produce and sell are already mass produced and

sold by larger firms.

2) spatial legacy of apartheid which created remote locations under the Bantustans and

apartheid cities. The Bantustans created pools of poverty in specific locations which are

dislocated from the main centers of high economic activity, and

3) highly skewed distribution of assets especially land. The former Bantustans mirror skewed

under investment in human capital, economic infrastructure and access to basic services.

Furthermore, the forced removals of blacks from their land into home lands forced men into

urban labour markets and destroyed the smallholder farming sector leading to ‘de-

agrarianisation’ amongst the black population. As at the end of the apartheid era, approximately

82 m ha of commercial farmland (86% of total agricultural land, or 68% of total surface area)




was in the hands of the white minority who constituted 10,9% of the population. (Levin and

Weiner in Lahiff:2008)

South African Government Response to the poverty nodes challenges

The historical developments of South Africa created pockets of poverty throughout the country.

The government mounted a number of policy and programme interventions to address

inequality and economic marginalization of the poor. Two such interventions, amongst others,

are: a) land restitution and b) targeted programmes such as the Integrated Sustainable Rural

Development Programme (ISRDP) and the Urban Renewal Programme (URP). The land

restitution is facilitated through the Restitution of Land Rights Act of 1994 which empowered

those previously dispossessed of their tribal land to claim it back. A Commission on Restitution

of Land Rights and the Land Claims Court were established to give effect to this legislation. The

focus of the commission is to verify, validate and value the land and come to a decision for

restoring the land, providing alternative land or providing a cash settlement. All in all, there were

over 79,000 claims filed by previously dispossessed communities. To date, 95% of these claims

have been settled at a cost of over R20,3bn and the 5% that remain are mainly in rural areas in

such areas as the poverty nodes (SA Development Indicators).

Land claims need to be resolved in order to:

� Return expropriated land to its rightful owners and thereby empower local communities;

� Create an economically stable environment to encourage further investment in agriculture and tourism assets; and

� Ensure the continued efficient use of commercial farms and their contribution to economic development and job creation.

Land Restitution Process

The land restitution process is laid out below from lodging of the claim to land transfer.




Communities had until December 1998 to lodge their land claims. The commission would then

investigate the claims and when considered genuine, negotiations would start with the sitting

land owners leading to the commission buying the land back, compensating the previously

dispossessed through a cash settlement or offering them alternative land for their use.

Targeted Programme Interventions

In February 2001, the Presidency announced the Integrated Sustainable Rural Development

Programme and the Urban Renewal Programme during the State of the Nation Address. The

aim of the programmes was “to conduct a sustained campaign against rural and urban poverty

and underdevelopment, by bringing in the resources of all three spheres of government

(national provincial and municipal) in a coordinated manner”. Twenty-one (21) rural and urban

poverty nodes were identified, which represented the largest concentration of poverty in the

country, and are home to more than 10 million people. The key characteristics in each of the

nodes are high unemployment, lack of infrastructure, low levels of education (secondary,

tertiary), and little industrial activity. (COGTA, web information)

In support of the programme, the Business Trust in partnership with the Department of

Cooperative Governance and Traditional Affairs (COGTA) agreed on a Community Investment

Programme which aims to increase the level of economic and social investment in communities

that are in need of development and provide Strategic Technical Assistance to COGTA. The

Programme provides an opportunity for the business community to work in partnership with

government to help tackle poverty in South Africa’s poorest areas and to do so in a manner that

seeks to expand markets for the benefit of the poor and demonstrate the solidarity of the

business community with the disadvantaged. The Business Trust provided Strategic Technical

Assistance to COGTA by producing economic profiles of all 21 poverty nodes.




The economic profiling exercise revealed that most of the rural poverty nodes share similar

growth inhibiting conditions including infrastructure and service delivery backlogs, lack of

capacity and skills, poor planning in the municipalities, extreme poverty, illiteracy and high levels

of HIV/Aids.

The key features of this area are:

• Its extreme poverty

• The fact that a large part of the area is subject to land claims;

• The potential for tourism development; and

• The importance of small-holder agriculture

The economic profiles of 21 poverty nodes also provide an accurate picture of the economic

development in the nodes. The profiles give a clear indication of the productive capability;

sectoral composition; employment levels; competitive and comparative advantage opportunities;

and institutional and governance requirements for elevating the engagement with the economic

development agenda.

South Africa is characterised by nodes of

tremendous poverty & underdevelopment

development 1 Zululand

2 Alfred Nzo

3 Bohlabela

4 Central Karoo

5 Chris Hani

6 Kgalagadi

7 Maluti a Phofung

8 O.R.Tambo

9 Sekhukhune

10 Ugu

11 Ukhahlamba

12 Umkhanyakude

13 Umzinyathi

14 Motherwell

15 Alexandra

16 Sol Plaatje

17 Inanda

18 Kwa-Mashu

19 Ntuzuma

20 Khayelitsha

21 Mitchell's Plain

22 Buffalo City

4

6

5

118

2

10

7

13

112

93

21

20

16

15

1719 18

22

14

It is estimated that around 10 million South Africans

are living in these nodes




The economic profile contains the following indicators and information:

� Snapshot of the node: area summary, and key development challenges; � Key data points: geographical features, spatial development, demographics, income and

employment, education, health and a summarized development scorecard; � Governance and investment projects.

Investment Atlas- the economic profiles also summarise the economic potential of each

poverty node through an Investment Atlas. The “Investment Atlas” is a list of over 100 potential

private and public sector investment opportunities in the nodes, spread across tourism,

agriculture, mining, property and commercial development. The opportunities are presented at a

conceptual phase and further work needs to be done to get them to a bankable stage.

The investment atlas lists potential opportunities in the following format:

� Description of an investment opportunity; � Economic rationale; � Employment considerations; � Enabling conditions; � Sectoral location; � Level of action required: public and private sector; � Scale of the opportunity: number of potential jobs and funding requirements; � State of readiness: business plan in place, funding/financing in place, and operational

capacity available.

MABEDI Pilot Programme Initiative

Having produced the economic profiles of the 21 poverty nodes, one was chosen for a pilot

project. The rural poverty node consisting of Maruleng and Bushbuckridge districts was

identified as a node for pilot intervention following empirical analysis commissioned by the

Business Trust and undertaken by Monitor Group to review the 21 nodes in 2005, which

indicated the areas with relatively high market potential and substantial social need. The

Maruleng and Bushbuckridge area is characterised by abject poverty and social distress despite

an abundance of natural and social capital. It has the potential to generate economic growth,

job creation and poverty alleviation if constraints can be overcome and investment attracted.

Maruleng and Bushbuckridge are part of South Africa’s

apartheid legacy.

The Bushbuckridge Municipality was established in the year

2000 as a result of the amalgamation of the three former local

councils. Historically it was made up of the two apartheid

homelands of Gazankulu and Lebowa. Gazankulu was

designated for the Shangaan and Tsonga speaking people.




Lebowa was designated for the Pedi/Northern Sotho speaking people.

Maruleng Municipality was first established in 1997 under the name Hoedspruit / Makutswi

Transitional Local Council. The Municipality was named after the Marula tree – “Maruleng”

means the place of Marula. Historically it comprised the Eastern Transvaal as well as the

apartheid homeland of Lebowa which was designated for Pedi/Northern Sotho speaking people.

Until March 2006 Bushbuckridge and Maruleng were part of the Bohlabela cross-border

municipality that spread across Limpopo and Mpumalanga provinces. Bushbuckridge is now

fully within the Mpumalanga Province and Maruleng is within the Mopani District Municipality of

Limpopo.

The pilot project in Maruleng (in Limpopo Province) and Bushbuckridge (in Mpumalanga

Province) aims to unlock tourism potential, expand agribusiness and launch or turn around local

businesses with the potential to create jobs on a profitable basis.

Living conditions in the poverty node

The economic profile of Bushbuckridge showed that:

• The area is exceptionally poor: over 85% of households live below the household subsistence level and just 14% of the adult population is employed

• The nodal economy is essentially comprised of four divergent sub-economies: o Government and public service: public spending (infrastructure spending,

salaries) is an important source of capital for the area o Services and retail: numerous shopping centres exist in some of the larger

towns. These host national brands like Spar, Shoprite, Jet, OK Furniture, Pep, Chicken Licken, etc. Informal trading is also widespread

o Agriculture: although very limited commercial farming is at present active in Bushbuckridge, many households rely on small scale farming for their livelihoods. Numerous estates lie dormant, which used to be large employers

o Tourism: some arts & crafts trading are found on access roads to the large eastern game farms and reserves. These attractions are also important employers for the region

• However, considerable income is earned outside Bushbuckridge: o According to a USAID study, “almost 70% of working-age males and 40% of

females work outside the area for more than ½ the year, while half the males and 14% of females between the ages of 25 and 59 are long-term migrant workers. “

• The potential for economic growth lies in two sectors: o Agriculture: reactivating dormant commercial farms / unlocking growth in small

holding farming o Tourism: developing local attractions and capturing spending of visitors to

surrounding attractions

• The services and retail sector may also grow. However, this will depend on rising disposable income, which is likely to be derived from the tourism and agriculture sectors.




Land claims continue to have an impact on local development

• Some 877,000 ha have been restored to 88,000 households under the land restitution scheme in Limpopo and Mpumalanga and some 380,000 ha has been redistributed from white farm owners to redistribution beneficiaries.

Business Trust and COGTA Response to the Challenge A service provider was appointed to design and implement a pilot project to address the investment and capacity challenges rampant in the two poverty nodes of Maruleng and Bushbuckridge. ECIAfrica Consulting (Pty) Ltd was appointed to implement the project. The project focuses on developing an operating environment that is conducive to private sector investment by identifying and packaging investments; procuring business linkages (by linking emerging farmers into commercial markets); building the capacity of the local communal property institutions and supporting government resolution of land claims. The project strategy is to focus on the tourism and agriculture sectors and deal with cross cutting impediments that hinder investment.

More specifically, the project does the following:

• Developing small holder irrigation farmers by providing farmer support services that: o Improve productivity & o Link farmers to markets

• Forging partnerships between the beneficiaries of the land restitution process and investors through, so called “Community, Private Partnerships (CPPs)” by:

o Developing and supporting Communal Property institutions (CPI’s) to manage the property acquired through the process of land restitution.

� Mabedi provides financial, legal, administrative and community facilitation services.

o Providing transaction advisory services to the CPI’s that enable them to transact with the potential investors they need to raise the capital to develop their assets

� Mabedi provides legal and technical services, community facilitation services and deal structuring services.

While a number of Communal Property Associations have been participating in the MABEDI

project, this case study restricts itself to two of the largest land claimaint communities of

Moletele and Sandford communities.




Community Public Private Partnership Model

Context

Communities who succeed in their land claims such as the Moletele and Sandford Trust communities, take ownership of massive capital in the form of agricultural and tourism assets. They are however, not well equipped to manage the property acquired. A case in point is the Moletele Communal Property Association where out of a leadership committee of 15, only five can read and write. The community has claims on 73000 ha and this leadership has to engage with private investors and make decisions at board level for newly established private company joint ventures. These dynamics exact huge governance and management demands on the new land owners. Maruleng Poverty Node

Moletele is a community of 1,652 claimants with claims on over 500 farms covering some 73000

ha. In 1970 the Moletele tribe was forcefully removed from their ancestral land in the Hoedspruit

area and relocated to Buffelshoek. They officially registered a claim in 1992, which includes

516 high valued agricultural farms. The claim was gazetted in 2004 and in July 2007 the first 27

properties were restored back to the community. MABEDI has been working with the CPI to

manage the 27 transferred properties.

The Moletele community claim forms a large part of the area’s commercial farming resources –

80% of the economy relies on mango, citrus and game farming and the Maruleng district is the

largest producer of citrus and mango in South Africa.

Bushbuckridge Poverty Node

The Sandford community of 900 claimants has claims on 7000 ha. They are in a prime tourism

area and neighbouring the Kruger National Park. Sandford Trust was registered in 2002 and

began receiving land (in terms of the Restitution of Land Rights Act) in 2003. The community

had claimed the Farm Sandford, which is comprised of about 4000 hectares divided into over 80

different farm portions. To date approximately 30 farm portions have been registered to the

Trust though some uncertainty (and controversy)1 persists around the actual land registry.

The Trust has been dogged by internal disputes since its inception. The overarching perception

(though somewhat superficial) is that there were contesting claims on the Sandford property

(from different clans) and that these were, in the interests of advancing the claim, merged into

one entity – the Sandford Community Trust. The result, predictably, was that once registered

and once land transfers were being realised, splinter groups emerged and pursued their own

1 There are portions of land which the RLCC claims to have transferred to the Trust but of which the Trust

bears no knowledge (e.g. Red Ridge, the Citrus Estate). There is also a portion of land which is registered to the Trust but for which the seller (or previous land owner) claims to not have received any payment (notably the Sandford Lodge property which burnt down in 2004).




interests. The MABEDI project has been working with this community to resolve the leadership

crisis and align the competing interests and rally them around the investment opportunities.

How does MABEDI Assist with Transaction Advisory Services to forge CPPs?

A number of activities are undertaken leading to the realization of the Community Private

Partnerships (CPPs). These are outlined below.

1. Identification of potential opportunities (e.g. a new lodge development on state land adjacent to the Kruger National Park).

2. Conceptualisation of the market opportunity, the economic and social benefits and the possible size and sources of investment (e.g. the potential exists for an 80 bed, 5 star lodge which will generate 150 full time jobs, 300 indirect jobs, is situated next to a community of 4000 people with an 85% unemployment rate and will cost in the vicinity of R40m to complete).

3. Testing the market – an initial probing of reputable commercial operators within the sector to determine the “appetite” of the market for the conceptualised development (e.g. semi-formal discussions are held with operators to determine whether or not commercial operators would respond to a five star lodge development opportunity in Bushbuckridge, adjacent to the Kruger Park with preferential procurement, employment and equity conditions).

4. Packaging – developing a framework for a partnership agreement that defines the probable equity and financing options as well as the terms of operation (e.g. an equity partnership is proposed where the private sector is required to advance 90% of the initial capital + 100% of the operating capital whilst government will finance 10% of the initial capital requirement in the form of infrastructure development. The operating company will further be required to pay a graded lease amount to the local community and guarantee a no risk equity option). This package is comprised of lease, management and Shareholders’ agreements.

5. Investor Mobilisation – the transaction advisor may opt for an open bid (advertised), an invited bid (to key identified potential investors) or a negotiated bid (where one investor is the obvious choice or preference).

6. Negotiation – the three sets of agreements that were packaged in the earlier stages of the project (lease terms, shareholding and management arrangements) are ultimately refined through negotiation where the transaction advisor represents the community interest with due consideration to the private sector requirements. The legal specialists also draft the contract documents – this stage includes contracting.




7. Signing – the final step is typically a small, publicised ceremony.

8. Implementation- the deal is implemented and community labour is utilized to the extent possible.

CPI Administration Support

Claimant groups are typically comprised of hundreds of primary and thousands of secondary

beneficiaries. For a number of reasons, the executive structures of these Communal Property

Institutions are unable to administer the affairs of the community – either credibly or effectively.

As the administrative burden increases (with the addition of commercial joint ventures for

example) the community is at risk of imploding amidst a range of pressures – from basic non-

compliance with legislative requirements to more complex and possibly catastrophic

maladministration cases (including beneficiary lists, asset registers and the distribution of

benefits). MABEDI minimises these risks by providing technical and administrative support to

CPIs.

MABEDI provides technical and administrative support to the Communal Property Institutions

(CPI) in order to empower the communities to manage this asset base and relate to investors on

business terms. The following framework is applied:

1. Land Administration 2. Financial Administration 3. Beneficiary Administration

The CPI Administration Support ensures that CPIs have good governance and management of

the CPI affairs and their associated joint ventures facilitated under MABEDI. This support

provides the Moletele CPA and Sandford Trust with administration support, to manage records,

deal with day to day issues, ensure meetings are held and documented; appoint an executive

manager at a high level who can manage deals and investments and establish the necessary

financial infrastructure.

This support framework was developed using a participatory methodology involving all

beneficiaries of the CPI with the details and fine print being completed subsequently by an

experienced development consultant. The final policy document is endorsed by a quorum of the

beneficiaries, making it the corner stone of good governance and accountability in all “for profit”

and “non-profit” developments of the CPI.

The comprehensive framework covers the following issues:

1. Land Administration a. Commercial Joint Ventures




b. Private Rentals (which land, at what price, for how long etc) c. Communal Areas (including housing, grazing and cultivation) d. Alienation of land (different land use patterns etc)

2. Financial Administration a. CAPEX and OPEX (including CPI administration and the executive) b. Maintenance Costs (of assets) c. Re-investments (in commercial ventures or capital markets) d. Distribution (to households)

3. Beneficiary Administration a. Registers – death, inheritance and the different categories of beneficiaries b. Succession – Household level c. Succession – Executive level d. Notices, Communication and Human Resources (recruitment)

4. Dispute Resolution a. Between members b. Between leaders c. Between partners d. Between stakeholders and the CPA

Besides serving as a governance guideline and a development facilitation tool, the policy

framework is the absolute basis for CPI administration and management – whether this is an

internal or external function.

Moletele CPI Case: The support to the CPI entailed a layered approach that builds up as the CPI gains more confidence in its roles and functions. This allows the community to gradually build its internal capacity. To date the support to the CPA has comprised:

� CPI office establishment in Buffelshoek, � appointing and training a clerk from the CPI members, � inducting and instructing a private service provider to develop the portfolio information

system which acts as the baseline for the CPI administration, � upgrading and relocating the office to Scotia ( better infrastructure) and setting up the

necessary operating and management systems including a fully operational computer centre for basic and adult education for community members, and

� appointing a book-keeper

The next steps involve appointing the legal and audit services to create transparency in the system. In this final project year, the CPI will pick up 50% of the costs and within six months to completion of the project, they will pick 100% of the administration costs. This is premised on the fact that cash inflows have started to flow into the CPA coffers from the different joint venture deals the CPI is a co-investor with private investors. The CPI has already registered for VAT (i.e. they have now reached the R1m income per annum threshold required to be registered for VAT purposes).




The Sandford CPI, will take on a different support structure. In their case, they have opted to appoint a team of professionals to help them to set up the systems and manage them in the interim until such time as they have resolved their leadership crisis. The appointees will form a board of Trustees. This full scale operation will involve appointment of professional functional services of 1) a chairperson, 2) administrator, 3) financial expert, 4) legal counsel, 5) tourism expert to manage the affairs of the Trust for a limited period of time.2

Results achieved to date

Through the provision of transactional advisory services and CPI Administration Support to the

CPIs, the MABEDI project has been able to achieve the following:

• facilitate attraction of investment of R1,55bn to the two poverty nodes;

• Facilitated the creation of 10 joint ventures with a combined investment value of R1,55bn

• Created 4,262 permanent jobs with more jobs to be created as the deals are

implemented and those in the pipeline materialise.

These achievements demonstrate the view that ‘ growth

induced by land reform is only possible if it is followed

by improved efficiency under conditions of capital

scarcity and labour surplus” Chimhowu, 2006.

2 It is envisaged that through professional management, Sandford will accumulate over R10m by the end

of 2010 which will in and of itself make it theoretically possible for the Trust to continue procuring these services beyond the period of the MABEDI intervention

ACHIEVEMENTS

R1,55bn investment

attracted

10 Joint Venture

investments made

4,262 permanent

jobs created

9 joint venture deals

in the pipeline




Moletele and Sandford Community Public Private Partnerships

New Forest

DingleydaleHoxana

Molatele

Private land

532 claims

73000 Ha

1800 claimants

7 Jvs

Sabi

Sandford

Private land

80 claims

7000 Ha

900 claimants

6 JVs

4 Irrigation

schemes

250 farmers

7 products

245 linkages

The case of Dinaledi Estates Agribusiness Venture

An example of one of the Joint ventures is the Dinaledi Estate agribusiness venture. This is a

partnership between the Moletele Community and the Booys Group which exports oranges to

Canada, EU, Russia, Middle East, Japan and Mauritius and provides 270 permanent jobs

seasonal employment for some 450 workers.

Structure of the deal: the private investor and CPI created a new venture with 50%

shareholding from each party. The share capital is R43m. A board of directors oversees the

governance matters of the company with representation from both the CPI and private investor

as well as a government ex-officio board member. The company pays monthly rentals to the

CPI for operating on the CPI’s land. Profits are shared equally at the end of the financial year.

The present joint venture arrangement runs for 10 years and is subject to renewal at the end of

that phase or the CPI can buy out the private investor if they so wish.




Critical Success Factors in MABEDI

The following factors are considered critical for the success of the project thus far.

Collaborative efforts between government and private sector: Effective cooperation

between government departments and the MABEDI project to ensure alignment of projects from

gazetting of land, transfer of land and post transfer investment appraisal efforts

Provision of Transactional Advisory Services to CPIs: Provision of transactional advisory

services to the CPIs to enable them to identify the investment opportunities on their properties,

package them and court investors.

Provision of CPI administration support services: to enable the CPIs to structure the right

institutional frameworks for joint venture investments, negotiate contracts and effectively

manage their assets and their day to day affairs.

Government resource commitment: The role of government in promoting investments by

reducing investment risks to investors as well empowering communities as co-investors has

been critical. An example of this is the government provision of post settlement grants provided

communities with immediate capital to invest as equity in the new joint venture deals.

Private Sector resource commitment: Equally important has been the big business

commitment to work in partnership with government to address poverty challenges by putting

resources to deepen markets and encourage investments in poverty nodes.

A dedicated project management team: the availability of a dedicated professional team

working with the different CPIs, investors and government departments has been the glue

keeping all project elements together.

Pre-conditions for replication of model to other poverty nodes

The MABEDI project is a pilot and its greatest contribution lies not in the R1,55bn deals

brokered, 4,262 jobs created and CPI support models developed and implemented. Its real

value is in sharing what made the different elements come together and how such lessons can

be replicated elsewhere. The following lessons inform the pre-conditions for replicating MABEDI

to other poverty nodes and the several post settlement land cases in South Africa and

elsewhere. The following pre-conditions are suggested:

• Understanding investment context and responding appropriately- aligning

opportunities to investment interests through speedy settlement of community land

claims in order to create a conducive and predictable investment climate. This is amply

informed by careful profiling of the poverty nodes, identification of investment

opportunities and quickly stepping in to capitalize on those opportunities.




• Provision of Transactional advisory services- this is a critical service needed in all

post settlement projects but ideally provided well before the land is transferred. It needs

to be provided on a commercial basis though. However, while CPIs have potentially

profitable assets, they do not readily have cash to procure such critical services. A

revolving fund needs to be created to pre-finance the costs of these transactional

advisory services. CPIs can eventually pay back when their joint venture deals

materialize and their cash flows are stable. This fund could be boosted by the speedy

provision of any grants required by the settled communities which they can use to

implement new deals or enter into new deals.

• CPA administration support- communities are taking ownership of large capital outlays

without the requisite governance and management structures and capabilities. There is

need to provide market based professional services in asset management.

Institutionalizing community support as part of the post land claims support to manage

community expectations/aspirations becomes an integral part of the process. In addition

to the provision of post settlement grants, there is also room for private property

management firms to develop this market as it has upside potential given that large

tracts of land have been transferred and a lot more are yet to be transferred.

• Knowledge dissemination- developing a set of toolkits for practitioners for application across a wide range of staff dealing with land restitution and land reform contexts for their adoption and adaptation to their set of circumstances is required. These can take the form of the CPP Toolkit, a set of CPI Development Tools and the Concession Based Beneficiation model in tourism. The tools will take the form of technical guidelines and toolkits for practitioners.

Conclusion

The inequalities in South Africa need to be resolved. The transfer of land capital to the

previously dispossessed is one such mechanism for redressing this imbalance. When joint

action is undertaken, resources can be pooled and credible results with far reaching impact on

reducing poverty can be realized. The MABEDI project provides one such model where

government, big business and communities come together to create sustainable market based

solutions. The challenge is scaling up this work and promoting systemic changes at the right

institutional and process levels.

The Business Trust wishes to thank corporate South Africa and the Government of South Africa.

The corporates have been instrumental in funding the work of the Business Trust as well as

providing intellectual support. The government has been a willing partner and contributor to the

project work on the ground through the different departments. This project is one amongst many




implemented by the Business Trust which demonstrates that when collaborative partnerships

are engaged in between business and government, anything is possible.




REFERENCES

1. Chimhowu, A, 2006. Tinkering on the Fringes? Redistributive Land Reforms and Chronic

Poverty in Southern Africa. University of Manchester.

2. DPLG and Business Trust, 2006. The Poverty Nodes Profiles

3. Eighty20, 2009. The Bottom of the Pyramid in South Africa- 2009

4. South African Presidency, 2009. South Africa Development Indicators

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Documents

Dynamics of Rural Transformation in Emerging Economies