Restored land can be made profitable by drawing investors into the land reform programme, says Peter Setou Chief Executive of the Vumelana Advisory Fund.

12 May 2022: Land Reform –  ‘After climbing a great hill, one only finds that there are many more hills to climb.’ This quote holds true for the Prudhoe Community Trust, who are finally the owners of the Fish River Resort in the Eastern Cape. It has taken more than 20 years for the farms to be transferred into hands of the community after a series of delays including a protracted court battle.

The Prudhoe Community Trust has also secured a R500 million investment partnership for the development of its properties, thanks to the support of Vumelana Advisory Fund – a non-profit organisation in land reform. The partnership will enable the community to launch business activities on its five properties that have already been transferred into its name.

In late 2021, the Prudhoe Community Trust approached the Vumelana Advisory Fund to provide advisory support for the development and maintenance of the Fish River Properties which house the Fish River Hotel and the golf course. “We were already familiar with the Fish River assets based on the support work we did with the Commission in November 2017, so it was relatively easy for us to agree to work with the Prudhoe Trust to identify a suitable investor”, said Peter Setou, the Chief Executive of Vumelana Advisory Fund.

There was a range of investor interest when Vumelana entered the process of supporting the community to achieve its development objectives. A rigorous selection process had to be run over a short period in order to ensure that the community was ready to take over the assets, when the State would exit caretakership at the end of March 2022. Eventually, MahalaX was identified for the partnership agreement with the community.

The Prudhoe Community and MahalaX have agreed to a 49-year lease partnership where the investor will pay a set lease fee for the use of the property. The Prudhoe community has an option to own shares in the development, when it is ready to do so. The investor will maintain, rehabilitate and upgrade the infrastructure and facilities at Fish River Hotel. In addition, the investor will retain all existing staff at the Fish River Hotel and create further micro and small enterprise development opportunities. The agreement will also see the investor contribute towards the creation of an estimated 150 jobs, and towards skills development and skills transfer. “This is what we refer to as a community-private-partnership (CPP) model of development. The commercial risks are a responsibility of the investor and the community is protected from losing its only asset, being the land and improvements thereon”, said Mazwi Mkhulisi, Vumelana’s Programmes Manager.

“We have been waiting for justice for a very long time.  Finally, it seems to have arrived. It is unfortunate that in our case, the government was the stumbling block to the Prudhoe community benefiting from our land resources. It is our view that communities must not rely solely on government but should explore other avenues to claim what is rightfully theirs,” said Gladman Tom, chairperson of the Prudhoe Community Land Claim Committee,

He said, Vumelana Advisory Fund has been instrumental in concluding the deal and noted that the community trust could not have achieved this on their own as they lacked the expertise or policies to manage the properties. “Vumelana was able to support in managing all risks factors in the agreement reached between Prudhoe Trust and the investor. Their contribution to this transaction has been invaluable,” added Tom.

There are approximately 350 families that make up the Prudhoe Community. The Prudhoe community was forcibly removed from their land by the then Ciskei government in the late 1980s. The Prudhoe community lodged their claim in 1998 in terms of the Restitution of Land Rights Act seeking restoration of 26 farms between the Fish and Mpekweni rivers. However, their claim was contested by AmaZizi Community who claimed 85 farms which included the 26 farms claimed by the Prudhoe community. However, the Land Claims Court found that the Prudhoe claimants had a valid claim and the court ordered that the Minister of Rural Development and Land Reform restore the land to the Prudhoe Community.

Reflecting on some of the lessons learned, Mkhulisi said: “This transaction shows that ongoing community support by various stakeholders is crucial for lasting and positive outcomes in land reform. The Legal Resource Centre (LRC)’s work with the community since 2010 in building, preparing and supporting community leadership laid the necessary foundation for our support process, which resulted is a deal between the Prudhoe Trust and MahalaX.”

He further noted that continuity in leadership is crucial for such transactions as institutional memory is retained. With reference to the Prudhoe claim, the community trust managed to retain the same crop of leaders dating from the land claim stage to the conclusion of this partnership with MahalaX.

On challenges he says that it must be accepted that the pace at which this deal was structured could create information gaps amongst community members. We have already started engagements with the Trust, LRC and the investor to ensure that this partnership is anchored on principles of good governance. The outcomes that have been attained here carry a huge potential for local economic development, so leaders must be supported to fulfil their roles effectively.”  said Mkhulisi.

The facilitation of the Prudhoe deal has been funded through a R5m grant partnership between Vumelana and the Sanlam Foundation, initiated in 2021, which runs until 2025. This is the second intervention under this grant, which enables us to demonstrate how restored land can be made profitable by drawing investors, keeping land productive and creating employment, said Mr Setou. The funding covers transaction advisory fees required to structure and sustain commercial partnerships. This demonstrates the role that the private sector can play in supporting land reform and Sanlam Foundation is taking the lead in this respect and we will continue to engage with other corporates to be part of this journey.

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