Land Reform Policy Committee

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1 Land Reform Policy Committee Department of Land Affairs Departement van Grondsake Kgoro ya tsa Naga UMnyango wezomhlaba PRIVATE SECTOR INITIATIVES IN LAND REFORM (Submitted by the Directorate: Redistribution Policy and Systems) 1. BACKGROUND Reference: PC.DOC.5/1996

2 realisable. The parties government as one of supports the strategies partnerships aimed at between making beneficiaries the objectives and of land other other Such initiatives have taken the form of voluntary partnership reform ownership proposals where a farmer and farm workers agree on some form of and therefrom. and Indeed, utilisation project of proposals land as well of this as the nature division are now of proceeds a common arising joint experience harnessing within and supporting the DLA. such A coherent initiatives DLA is, policy however, on how needed. to go about 2.1 Definition ion of private sector initiatives 2. RECOMMENDATIONS Private beneficiaries sector of initiatives land reform in land reform the private are partnerships/agreements sector which broaden the between partnerships land ownership, may offer take security different of forms. tenure and raise applicants income. Such base of 2.2 Why DLA supports private sector initiatives order The DLA to further shall pro-actively the general encourage objectives of and land support reform private and as sector a means initiatives, of in

3 2.2.1 Widening the scope and efficiency of the land reform process beneficiaries Enhancing as complementary the transfer of knowledge, factors of land skills, reform. and business acumen to infrastructure, of redistributed Providing (such land. beneficiaries as established with access markets) to the often partner s critical business for productive use sector land reform. Mobilising that hold land, the private to seek sector, partnership church arrangements as land owner, with and beneficiaries the corporate of agribusiness infrastructure, Mobilising to follow provide the corporate up requisite support sector, etc) inputs to financing the (credit, beneficiaries. inputs, institutions, skills, and business other gainfully Strengthening settling new and farmers supporting on land. corporate sector initiatives aimed at Creating tenure security.

4 2.2.8 Sharing costs and responsibilities for land reform 2.3 Types of private sector projects Different types of private sector projects can be categorised as follows: engaging with Downstream/upstream in downstream and linkage upstream models production that involve relationships beneficiaries Models input of suppliers contract farming and output belong marketing this category. / processing chains respectively). (e.g linkage arrangements. category. On-farm partnerships Farm worker relating equity scheme, to land use, agrivillages, ownership etc. and belong production in this development Church, Supporting investors is involved. initiatives (e.g New by Farmers) other people etc where and organisations land transfer / such and or as the The projects can be bankable (attracting or involving loan financing in Combination thereof. addition to equity/land acquisition grant), or non-bankable (where no loan

5 finance grant). is involved and thus dependent on owners equity and land acquisition 2.4 Private sector role players DLA following shall role endeavour players to as pro-actively a necessary forge condition working for relationships harnessing private with the to: initiatives in land reform. Such institutions shall include, but not be restricted sector services Private sector financial institutions as sources of credit and other related person(s) other Private ways wishing supporting commercial to form land farming joint reform. ventures interests, with land land holders reform (private) beneficiaries and or in who producers. are Business willing concerns, to enter into such some as working input suppliers arrangements and downstream with beneficiary entities Other sources of development finance

6 2.5 Target group reform supportive The target programme group arrangement of except the private with that the they sector private include initiatives sector, a partnership church, are the same etc. agreement To as date, for the or projects land have commercial focused farmers on farm and workers other commercial who wish entities enter into such joint as ventures banks. In with farm projects workers, which emergent involve loan farmers financing and the existing target small group scale tends land to holders be permanent bankable entrepreneurs. and 2.6 DLA s role and institutional arrangements for delivery programme Commission The same are shall applicable. DLA s taken grants into Furthermore, account and services as it the outlines available recommendations anticipated to the land changes of reform the Strauss financing focus and land mandate reform. of It various should financial be emphasised institutions that that bankable have a projects bearing require to in services additional feasibility of of work. specialists projects. In assessing DLA with national financial such projects, will assessment require provincial support skills to offices for advise brokerage may them require of on deals the the panel participation with the of private specialists of beneficiaries, sector. presently People facilitation being with such established. support skills should and To ensure training be available the is critical. active on the The private sector initiatives shall complement and work within existing

7 land Project offices reform within approval delivery their and allocated mechanisms. implementation budget. It is shall not a be separate in the hands land reform of the provincial programme be adaptive guided The to institutional by changing the current circumstances; framework DLA move for towards private geared sector to decentralisation; offering land policy reform be and initiatives flexible and shall implementation cognisance opportunities of and the capacity constraints existence support of relevant differences to DLA to Provincial such between initiatives. offices provinces while with taking respect to level information to The provide DLA sharing shall information as provide well as on a dedicated brokerage private sector Help with initiatives, private Desk sector national arrange interest and for provincial The DLA will need to: groups. policy a) Create environment capacity and at national fulfill a brokerage level to develop role with the the enabling private framework sector. and b) appraisal/advisory Create a capacity service which to can DLA fulfil staff a brokerage responsible function, for implementation provide project viability projects is which central. involve Such the a service private sector is probably where also the required financial/commercial where of parastatal/state loans are involved. c) on Review a quarterly progress basis of in projects order to which learn lessons involve for major implementation private sector and involvement policy.

8 2.7 Criteria for assessing These functions project may viability require in projects that expertise involving be loan sourced financing from outside the DLA and financed from the professional and special services budget. The profitability. sector determination Different of sets project of criteria viability shall goes be beyond applied assessing depending financial able to initiatives access DLA model Grants under if; consideration. Private sector projects on the should private be it passes financial and economic viability assessment; the project involves development of land resource it passes an environmental viability assessment; conditions improves of employment; the tenure security of the beneficiary and is not tied to and sufficiently the financial healthy status as not of to the present proposed undue partners/enterprise risk to the proposed is assessed partnership;

9 2.7.7 the project broadens the ownership base of land in the country is built into the business plan. 2.8 Mechanisms to protect beneficiaries lifetime involving DLA is keen subsidy beneficiaries to minimise while and pursuit the their possibility of private partnerships. of sector beneficiaries partners As such, loosing should, partnerships their as far once as in a practicable, ensure that: ownership demonstration Commercial is secured, of the Bank projects especially / third viability party for involvement bankable and as a projects, means in project of both inviting funding as a and and locking / or in entrepreneurial Proper planning capability. worth) is stringently adhered and facilitation to. process (e.g valuation of business process Beneficiaries are sufficiently empowered to participate fully in the so venture where Development in DLA s the short clientele to support medium are is expected addressed term. to assume in the business full ownership plan. This of the is more and resultant Sufficient projects. attention is given to monitoring and evaluation of the process

10 2.9 Concessionary advances in special cases The finance) DLA to shall projects not provide except concessionary where: financial advances (bridging impossible there to is an arrange absolute private urgency sector and loan time funding constraint within which the available makes it time clientele s it is sufficiently stake in the demonstrated business; that it specifically increases the DLA proposal; accessed it is sufficiently for reasons demonstrated not including that bank s Commercial concern on Bank the finances viability of can the not be tenure it security is demonstrated and livelihood that not of offering the beneficiaries; such an advance would threaten the the In cases following where is a such requirement; concessionary advances are merited, compliance with with Treasury such funds regulations; are repayable within six month or such time frame consistent

11 funds a so binding advanced Guarantee shall be shall reimbursed be given within by the the relevant agreed party/parties time; that the necessary compliance from time with to any time such and conditions depending as on the the Department nature of the might case; consider the DG approves of the advance in line with Act 126 regulations. Policy Approved by Minister: 20 April 1997

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