What are we trying to achieve?
Vumelana aims to demonstrate the value of Community Private Partnerships as a contribution to successful land reform.
Land reform imperative
Land reform is a moral imperative and a constitutional obligation. Properly managed it can create assets for the poor, stabilise relationships and promote development. Poorly managed, it destroys assets, impoverishes communities and undermines local economies.
South Africa faces a dilemma: The process of land reform has proceeded too slowly to satisfy post liberation expectations. But much of the land transferred has become economically inactive. Assets have been taken out of use, workers have lost jobs and the economy is threatened.
A significant part of the funding available for the acquisition of land is used to recapitalise projects that have failed. The land reform programme is now also due to be scaled up with limited public resources available to meet the objectives.
If resources are to be mobilised and sustainable benefits are to result for land reform beneficiaries then private capital must be brought into the process and new land owners must be enabled to become competitive market participants. In order to do that, partnerships will be required with investors and operators with access to financial and other markets.
Reducing Risk for the partners
Those partnerships are slow to form because the potential partners perceive the risks to be too high. Vumelana aims to reduce that risk for communities, investors, advisors and government.
Vumelana reduces the risks for communities by providing independent, professional advice at no cost to the community.
Vumelana reduces risks for investors by helping to structure agreements with communities. Vumelana carries the cost of the advisory services and carries the risk that no agreement will be made. Investor’s pay the cost of the advisory service only if an agreement is reached. The funds recovered are then applied to building the capacity of the investors new community partners. Thus further reducing the risk for the investor.
Vumelana removes the payment risk for advisors. All work completed is paid for even if no agreement is reached. Vumelana hopes to build a market of transaction advisory and other services to support community private partnerships.
Vumelana mobilises private capital for the implementation of sustainable post settlement partnerships thus reducing the burden on the state to capitalise projects and limiting the risk of a constant drain on state funds.