Vumelana 2016 – our journey
Vumelana started with an idea – to help communities in the Land Reform Programme to use their land effectively.
- We were struck by the high failure rate of land transferred under the Land Reform Programme and the negative impact of that on the people and their communities who are supposed to benefit, and the economy.
- We realised that when people are dispossessed of their land they lose much more than land. They also lose access to capital, networks and skills.
- We believed that by partnering with investors, communities could get access to the resources needed to make their land useful.
- We understood that these partnerships pose risks that have to be managed.
Funding of R117m was provided by the Business Trust.
Business Trust funding was provided by 140 of South Africa’s leading companies.
At the completion of its work in 2012 the Business Trust decided to build on a five year project that had piloted the development of community private partnerships by setting up Vumelana to support community private partnerships on a sustainable basis.
Vumelana was established in 2012 as a non-profit organisation (registration number 2011/001855/08) to help communities and investors come to fair agreements for the development of community controlled land.
A group of outstanding South Africans undertook to lead the organisation.
The Chairman of the Board is Dr Johan van Zyl (PhD Economics and DSc Agric.), former Group CEO of Sanlam, Vice-Chancellor and Principal of the University of Pretoria, and World Bank Coordinator of Rural Development.
The directors are Bishop Malusi Mpumlwana, Mr Malcolm Dunn, Ms Bongiwe Njobe, Mr Tim Fearnhead and Mr Brian Whittaker.
A business model was developed to reduce the risks for those involved in the development of land acquired under the Land Reform Programme:
- For communities by providing independent, professional advice at no cost to the community.
- For investors by carrying the cost of the advisory services. Investors 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.
- For advisors by paying for work done even if no agreement is concluded.
- For government by mobilising private capital to reduce the burden on the state to capitalise projects.
Since the establishment of Vumelana in April 2012 systems have been developed to select and manage projects, support transactions between communities and investors, develop communal property institutions, and monitor and evaluate results.
Relationships have been built with communities, professional advisors and the government.
Support agreements have been signed with 31 communities, service agreements with 17 advisory teams (typically with 3 people per team), and an Memorandum of Understanding with the Department of Rural Development and Land Reform.
Initial results show the value of commercial partnerships for land reform.
The challenge is to expand impact and enhance financial sustainability.
Where are we trying to go?
As the International Crisis Group has pointed out, if land reform is to succeed in South Africa, new approaches are needed to transfer more land to a much wider group of people with a focus on the poorer segments of the population and an emphasis on post-transfer support.
Support for poor and small-scale farmers does not have to be at the expense of support for the development of more black commercial farmers.
The encouragement of effective land and other markets is not a substitute for, nor is it opposed to, public sector programmes to support land reform and regulate private activity.
We hope that land reform will move toward a more inclusive agenda: one that acknowledges the rights and obligations of all South Africans to redress the wrongs of the past while protecting the future for the generations to come, that strives to overcome poverty and inequality, and uses land reform to improve the lives of the poor while protecting South Africa’s agricultural assets.
If this is to be achieved more resources will be required than assumed by the policies and actions taken to date. More South Africans from the public and private sectors will need to be drawn into the programme.
This should include local communities, investors, analysts, administrators and support agencies. State and market resources must be harnessed. A careful balance will be needed to manage the frustration of those who continue to feel marginalised and those current landowners who believe they will be sacrificed to pay society’s debts.
The contribution Vumelana aims to make is to demonstrate the value of partnerships as a means of increasing access to land that can be used productively; to improve tenure for those who have been excluded; and provide linkages to finance, skills and networks needed to make effective use of land.
How do we hope to get there?
Our work is based on the idea that land owners must forge relationships with investors, suppliers, off-takers and others if their land is to be put to productive use, but that the risks of doing so are perceived to be too high for most of the parties.
Vumelana seeks to reduce those risks by making skilled, independent advisors available to the parties.
Theory of change
Land reform must change from a process that destroys value to one that creates it.
The theory is that:
- if independent skilled advisors are made available, the risks of partnerships will decline;
- if risks can be reduced, partnerships will increase;
- if partnerships increase, productivity will improve; and
- if productivity improves, jobs, income and livelihoods will be enhanced.
The model is designed to reduce risks to communities and investors by providing transaction advisory services at no cost to the community and recovering costs from investors only if deals are successfully concluded.
The process works as follows:
(i) Applications for funding are invited from communities, government departments, advisors or investors.
(ii) A cooperation agreement is signed with the community setting out the basis of the relationship between the community and Vumelana.
(iii) A transaction advisory team is contracted to structure an agreement in terms of which the community makes the land available and the investor undertakes to finance and manage the operations.
(iv) The transaction advisory team procures proposals from potential investors which show how the land will be developed to create jobs, income, skills and other benefits for community members.
(v) Once an agreement is signed, the investor reimburses Vumelana for the costs incurred by the transaction advisory team in putting the deal together.
(vi) The reimbursed funds are used by Vumelana to finance support for the Communal Property Institution for a period of up to two years, providing institutional and governance support.
The road we are on
Sectors and localities
Vumelana works across a range of sectors – agriculture, tourism, forestry and energy.
The work is carried out across the country with the main load of work in those provinces with the most land reform activity – Limpopo, Mpumalanga, KwaZulu-Natal and the Eastern Cape.
The communities supported range in size from 230 households to 5 000 households.
The larger projects are typically on communal land or combine the interests of a number of communities.
The target value of investment to be mobilised ranges from as low as R5m for the development of a small sawmill for a community with access to forests, to well over R100m in the case of the larger tourism and agriculture projects.
The nature of support
The support provided encompasses work to assist:
- communities to find partners, mobilise investment, and build capacity
- the Commission on the Restitution of Land Rights and land owners to finalise claims
- investors to establish partnerships with communities.
Transaction advisory support
The Transaction Advisory Services Support Programme is designed to support the provision of advisory services to Communal Property Institutions and investors to conclude community private partnerships.
These community private partnerships provide opportunities for income, employment, skills development, shareholding and ultimately the transfer of operations to communities.
Click here to read a case study of a partnership.
Communal property institution support
The Communal Property Institution Support Programme is designed to support the development of well-governed Community Property Institution fees recovered once agreements are made under the Transaction Advisory Services Support Programme.
Click here to watch a video of a good governance award ceremony for a Communal Property Institution.
Enabling environment support
The Enabling Environment Support Programme is designed to support the development of a community of practice and a more cohesive approach among public and private actors to the promotion of land reform.
Click here to see land reform scenarios developed by a team convened by Vumelana.
Having received over 250 enquiries, 158 prospects have been considered. These have resulted in the conclusion of ten investment partnerships for communities which will attract some R250m of investment.
Seventeen projects are currently under negotiation with a combined investment value of over R1bn.
Click here for a description of projects in the portfolio.
Note: 2015 figures go up to 31 December. Other years end on 30 June.
The results from inception in 2012 to the end of the financial year at 30 June 2015 were achieved with a net reduction of available funds from R117m to R107m.
Click here for the statement of financial position at 30 June 2015.
Roadblocks and detours
We believe that it is possible to make progress in difficult times.
There are good reasons for hope: resilient communities led by committed leaders, dedicated officials toiling at an increasingly complex task, analysts and reporters making information available under sometimes hostile conditions, human rights practitioners defending the vulnerable, private companies risking investments that create jobs and improve incomes, and support agencies straining to contribute to what can seem like an uphill task.
The attempt to get land reform to work is often hindered by roadblocks and detours.
The sheer weight of policy, legislative and regulatory changes mooted over recent years makes it difficult to keep track of what is happening. Private owners and investors, and people living in communal areas and on farms, are uncertain about land tenure and policy continuity.
Communities have difficulty understanding their rights.
Government officials must work out the status of changing policies and their obligations under them.
The obvious strain on resources leaves many wondering which parts will be implemented and what will fall away.
A shared vision of what can be done with the available resources would help.
We hope that the Land Reform Futures scenarios commissioned by Vumelana will contribute to that.
Public sector capacity
As the size of the land reform task expands the relative capacity of government to develop policy, administer programmes, and perform regulatory functions declines. Improvements are outstripped by the escalating demands to develop and apply new policy, expand the scope of public administration of land reform, and negotiate agreements in a sometimes complex commercial environment.
Sharing the burden would ease the pressure on public resources.
Project scale and complexity
Vumelana’s work has been drawn from deal structuring into pre settlement and post deal support.
There are important contributions to be made in all these areas. But getting agreements made is proving to be increasingly difficult. Pre settlement work focusses mainly on large and complex claims.
Building partnerships between communities and investors is frequently dependent on government funding which adds to the complexity of the deal-making process. Even when agreements are signed implementation is often dependent on regulatory approvals which cause further delays.
Simplified procedures and longer timeframes are needed to cope with the scale and complexity of projects.
Signposts to the future
Some progress has been made in helping communities in the land reform programme to put their land to productive use by establishing properly structured commercial partnerships. However, the operating context is becoming increasingly complex.
We cannot make the contribution we hope to make by working on our own. We think that there are others inside and outside government who also believe that more concerted action is required.
What will the future hold?
At the beginning of 2015, the Vumelana Board agreed to make an extraordinary commitment to the development of land reform scenarios for South Africa.
Our hope was that more concerted action would be possible if South Africans had a shared appreciation of where land reform could go.
Reos Partners was appointed to facilitate a scenario building process. A scenarios team of 40 people with sharply different perspectives on land reform was convened.
They were asked to stand back from trying to persuade one another about the superiority of their different points of view.
Instead they were urged to see if they could agree on alternative scenarios for what could happen, not should happen (a proposal) or will happen (a forecast) – just what could happen.
Four possible futures
After twelve months of hard work four scenarios were produced which the scenarios team think are plausible possibilities for land reform in South Africa. Visit www.landrefromfutures.org to read the four scenarios:
- The first story “Connection and capture” is about land reform captured by politically connected interest groups at the expense of ordinary people.
- The second story “Market power and concentration” is about land reform changing the racial profile of farming without broadening ownership to small farmers and local communities.
- The third story “Occupation and confiscation” is about the illegal occupation of land, eventually leading to confiscation without compensation, made possible by a change in the Constitution.
- The final story is about “Hard bargaining and compromise” by government, large and small farmers, land reform beneficiaries, civil society organisations and financing partners enabled by a government that seeks a collaborative approach to land reform with a primary emphasis on the poor.
Chipping away at the edges
For Vumelana, as for many others, in the absence of a more enabling environment, we will be required to chip away at the edges of a largely dysfunctional system.
Our task will be to continue to demonstrate value, to help communities wherever we can, and do what is possible to avoid the worst excesses of capture or confiscation.
Being part of a new approach
A more inclusive and enabling environment would create more opportunities. It would also require Vumelana to be ready to participate in and support those involved in the hard bargaining that would follow.
Vumelana would also have to confront the emerging challenge of adapting its business model to allow it to contribute at a much larger scale.
In July 2016 Vumelana will enter its fifth year of operation. Land reform will be high on the national agenda as the contest for political power grows in the years building up to the 2019 elections. The way in which South Africa navigates the difficult issues of land, livelihoods, growth and poverty will be a litmus test for this young democracy.
Vumelana will be confronted with the dual challenge of expanding its contribution while enhancing its financial sustainability.