Joint ventures in agriculture: Lessons from land reform projects in South Africa

Recent years have witnessed renewed interest in ‘inclusive business models’ in agriculture, as part of wider discussions about growing agricultural investment in lower income countries. Inclusive models aim to include poor people into value chains as producers, employees or consumers, in ways that are both equitable and sustainable. Joint ventures between companies and local communities have received considerable attention in these debates. This report presents findings from research on joint ventures in South Africa’s agricultural sector. The South African experience presents major specificities linked to its history and its recent land reform programme, within which experience with joint ventures has emerged. But it also provides a case where joint ventures have been implemented for some time, and some of the lessons learned may prove valuable for different contexts where discussions about joint ventures are more recent. Under South Africa’s land reform programme, since 1994, previously dispossessed communities have had large areas of agricultural land restored to them and, under pressure from the state, have entered into a range of joint enterprises with commercial partners. Early evidence suggests that these enterprises face multiple difficulties, and the report provides a cautionary tale for international discussions about inclusive business models. This report is based on two case studies of land reform in Limpopo province, Levubu and Moletele. In these sites, large areas of high-value irrigated land have been restored to relatively poor communities. In order to maintain the productivity of commercial farming enterprises, and to maximise long-term benefits for their members, these communities have entered into contractual arrangements with socalled ‘strategic partners’, most of which take the form of joint ventures. While the state funds the land transfer and provides certain start-up grants, the strategic partner is expected to provide technical and managerial expertise and arrange access to commercial sources of credit. In return, the strategic partners expect to benefit from a share of profits, a management fee and opportunities for additional upstream and downstream activities. Communities stand to benefit from land rentals and a share of operating profits, as well as jobs and training opportunities for their members