State has stopped funding equity schemes - but inadequately supported land transfers are also doomed, writes STEPHAN HOFSTATTER

THE original title deeds to Lelienfontein near Wellington are on display in the estate's boardroom. They were issued by Cape governor Willem Adriaan van der Stel to French Huguenot Philip de Royan in 699.

The Bosman family settled there in 1798. They bought several more farms - De Rust, Olyfboom and, most recently, De Bos in the Hemel en Aarde Valley near Hermanus.

This year, their workers become part-owners of an eighth-generation enterprise that produces award-winning wines and grapes, and supplies the industry with rootstock that regularly wins vineyard block competitions and produces champion wines.

Government land reform grants bought the workers 50% of De Rust, De Bos and Olyfboom - 430ha of some of the Cape's best vineyards. After 10 years, they can buy out the Bosnians, who retain full ownership of the 200ha Lelienfontein. The workers also own 30% of the Bosman cellar and 5% of their lucrative vine-growing business. The operation turns over R30m a year.

But the workers of Lelienfontein could be among the last in the Cape to use land grants to buy a stake in a historic wine estate.

In August, provincial land reform officials were told to freeze payments for equity schemes such as this.

Deals worth an estimated RlOOm in the Western Cape have fallen through. -

The Department of Agriculture's main gripe with the schemes is that they don't lead to land transfer, doing little to alter racially skewed land-ownership patterns inherited from apartheid, when laws restricted blacks from buying farms.

Benefits for white farmers include a cash injection for often failing enterprises, a more productive workforce, insurance from forced empowerment, and better market access.

Yet, they say, the lot of farm dwellers remains unchanged: paternalistic master and servant relationships stay intact; worker tenure rights remain insecure, exposing them to arbitrary evictions; and dividends paid are either negligent or nonexistent, leaving them as poor as ever.

Lelienfontein owner Jannie Bosman, a gruff, barrel-chested farmer, is puzzled by this reasoning. He's been hatching empowerment plans "long before I heard of the benefits I could get from government", he says.

He'd initially planned to buy a piece of land and transfer it to his workers. "But they had no access to information and skills to establish marketing channels. We work better as a team." A nearby farm, fully owned by its workers from day one, offers a cautionary tale. "They are slaughtering dairy cattle for food," Bosman says.

But Agriculture Minister Tina Joemat-Pettersson points out that the government's land reform programme is facing chronic budget shortages, so every available cent must be spent on buying land. "We no longer want black workers receiving equity in a white company," she says. "We want to reverse this to ensure we will empower black people with ownership of land." Many of the government's objections, based on academic research, are justified.

Several studies show workers derive few benefits from equity schemes, with the majority wanting to exit after a few years, while white farms are at least recapitalised. A recent study to determine whether the poor are benefiting found shareholder rights were often unenforceable.

Gus Pickard, who has served as a worker mentor for a decade, shares these concerns. At several projects he has worked on, farmers simply exploited their workers to access funding, paternalistic relations were replicated, and workers who wanted to exit discovered their shares were worthless because their sale was blocked.

But Pickard says officials under intense political pressure to deliver land are often at fault by dishing out money for projects without proper due diligence. "With these schemes, you need officials on top of their game and workers who know what they're letting themselves in for," he says. "But when I suggested mentoring should start 12 months in advance, they said there's no time for that." The schemes also fail to protect workers from eviction."If you ask most farm workers if they want shares or a plot and their own house, they will go for the house," Pickard says.

The Bosmans believe their model addresses most concerns. Workers have been issued share certificates, are given counselling on how to invest their dividends, and trustees receive financial and management training.

Their chairperson, Rita Andreas, claims no one expects a quick buck. "But we are going to make money," she says. "We have no debt and are investing to position ourselves for better market conditions. Then there will be dividends."

Farm worker Ivan Thomas sees the scheme as an investment in the future. "It's for our children. We can give them what our parents couldn't. They will have the opportunities we didn't have." The government's objections reflect several distortions too. The first, and most politically explosive, is on land delivery.

After initially claiming the schemes accounted for less than 1% of more than 5-million hectares redistributed since 1994, the land reform department conceded that figure was closer to 177 OOOha, or more than three times higher. Of this, 157 OOOha changed hands in the Western Cape alone, mostly on wine and fruit farms, where land prices are up to 10 times higher than in the rest of the country.

On evictions, the government has promised solutions for years, including repealing a law preventing farms from being subdivided, expropriating plots and creating agri villages. To date, little has materialised apart from a legal advice unit. Silence on productivity is another grave omission.

One of its own studies looked at 100 projects in the Western Cape in 2005, and found 50-50 equity share schemes were by far the most productive land reform model, scoring 7,5 out of 10 points. Farms 100% owned by workers fared worst, scoring 4,9. "Full ownership carries with it a greater chance of failure," it concluded.

However, share schemes did score lowest on empowerment (4,1), with full ownership faring best (7,1).
The study recommended a simple solution: funding could be made conditional on building in control structures to achieve pre-negotiated targets.

Kobus Pienaar of the Legal Resources Centre, a public interest law firm, says the department is also being disingenuous by failing to disclose that its other land reform models have also done little for the landless poor. Worker share schemes at least have the advantage of a "significantly lower production failure rate". But as with other models, they won't benefit the poor without ongoing independent legal and financial advice, he says.

Others argue that all current models are doomed because they conflate basic land reforms with empowerment.

Telkom executive David Lupafya is trying to establish a commercial grain and vegetable farm near Potchefstroom in the NorthWest.

He says the government's maximum land reform grant of R430 000 encourages group fanning and isdestined to fail. "There's nothing catering for the individual black entrepreneur," he says. "You need a minimum grant of R3m, and loans at prime minus 5% with a one-year grace period to level the playing field with whites who inherited their farms."

Loan and grant conditions should include strict screening for suitability, cessions on off-take agreements, mandatory crop insurance and using land as collateral.

The landless who want to be smallholders, including former farm workers, should he given plots, communal access to machinery, inputs and credit, and a grace period to repay cheap production loans.

"The issue is not whether it's a 100% black-owned enterprise - it's whether it can be competitive with a seventh-generation white commercial farmer," Lupafya says. "You want a black farmer who is successful commercially - not one who keeps needing grants to survive."