FREQUENTLY ASKED QUESTIONS PALS
WHY IS THE COMMERCIAL FARMERS PROPOSING THIS INITIATIVE?
PALS members voluntarily commit to support black farmers and empower the agri-workers on their own land, because they believe it is the right thing to do to ensure a sustainable future in agriculture.
Land reform was always a Government driven initiative that was driven in a top-down manner. The commercial farmers of the Witzenberg area decided to act proactive and play their part in land reform in South Africa. On viable commercial principles, the PALS initiative was established. The bottom-up approach follows a framework that makes business sense and allow space for constant inputs from other role players in the Agricultural industry, adjusting the framework for each individual business / project.
Commercial farmers are investing in this initiative because they believe that this initiative can be a radical game changer for land reform in South Africa. They are involved in this initiative because they can foresee the impact that this initiative will have on the socio-economic development of the previously disadvantaged. In achieving this, they will also ensure their own sustainability in the Agricultural sector.
The commercial farmers agreed on the main goals namely:
a) The establishment of successful black farmers;
b) To involve the whole community in an inclusive process;
c) To extend the initiative to other areas and agri related industries;
d) To establish the Witzenberg Centre as “one stop shop”;
e) Focus on mentorships and training programmes.
The commercial farmers and members of Witzenberg PALS aims to become part of the solution and not be part of the problem.
WHAT TYPE OF PROJECTS DOES THE WITZENBERG PALS INITIATIVE ENTAIL?
There are three types of PALS projects namely: Land Projects, Value Chain Projects and Socio Development Projects.
The land projects includes four different forms of empowerment projects:
- Green Fields projects refers to a project that entails a new piece of land that will be cultivated and planted with new orchards and vegetables.
- Projects that includes an existing farm with established orchards and vegetables. In this case the land will be subdivided or transferred to a new PALS company.
- LRAD projects. These are previous equity scheme projects driven by Government. These existing projects will undergo restructuring of the business entity and receive support from commercial farmers.
- Existing Black Farmers. These projects entails black owned farms that have indicated they welcomed support from white commercial farmers.
Value Chain Projects
Although all the PALS land projects provide access to the entire value chain, PALS has launched several value chain projects that provides ownership to black farmers and Agri-workers. These projects range from minority to majority black owned businesses.
The projects includes:
- Cold Stores
- Pack Houses
- Factories manufacturing implements and inputs
- Marketing companies
Socio Development Projects
PALS encourage all its members to maintain and uphold the best social standards on their farms. PALS also recognise that land reform in South Africa in the past concentrated on the provision of land and equipment and underestimates the important contribution of human capital in successful land reform. Therefore, PALS have committed itself and its resources to the social upliftment, training and education of the beneficiaries.
This projects includes:
- Housing projects
- Training Projects
- Social Projects
HOW WILL THE PALS PROJECTS BE FINANCED?
Should confirmation be received from Government that the necessary recognition will be granted in line with the National Development Plan, the participating producers of the Witzenberg PALS initiative is prepared to arrange finance for the different new farming businesses. Obviously the implementation of many projects will be expedited should cheaper finance be made available at rates better than normal commercial banking rates. In this regard it is envisaged that Landbank can set up a special purpose vehicle. In the past Government has provided grants to black beneficiaries, but as with social grants this is not sustainable and it is not a good business principle. It is therefore submitted that Government must rather contribute to a fund with the larger commercial banks to enable the setting up of a special purpose vehicle and cheaper loans to these type of projects.
When a project takes root, the black beneficiary can further apply to Government for additional farming inputs through the CASIDRA and CASP funds.
WHAT IS THE DIFFERENCE BETWEEN PALS AND PAST EQUITY SCHEMES?
- The number of beneficiaries in a project. In the past LRAD projects there where to many beneficiaries that did not want to be responsible farmers and also did not have the necessary skills. The large groups did not support the creating of successful black farmers. PALS aims to create successful commercial farmers. The framework encourage smaller groups that has the competence to grow into successful farmers. The larger groups benefits from a Personnel Trust that provides dividends for the other Agri-Workers.
- PALS projects are initially not financed by the state, but by commercial farmers and producers. If the state wishes to procure more shareholding for the black farmers, they may assist them by utilising the option granted to the black farmer from day one.
- The black famers has an option from day one to obtain the majority or 100% shareholding, which was not the case in LRAD schemes.
- There is a screening and training process of Black farmers that will be selected as individual shareholders.
- Projects will be monitored by a watchdog officeâ€ in terms of business principles, management statements and financial statements.
- The PALS framework was devised by learning from the past mistakes. The framework enables the creation of successful black farmers and benefits the people who work the land, through the unique employees trust.
WHO ARE THE CORE BENEFICIARIES OF EACH PROJECT?
PALS aims to create a class of commercial black farmers. These black farmers will be individuals who has the competencies to become a commercial farmer. The Personnel Trust will be for the Agri-workers, those who work the land. The individual black commercial farmers will be from the area and can be selected through objective criteria. We are in debate with Government and other role players on this matter. Our projects also differ from each other with regards to this issue.
HOW WILL THE INDIVIDUAL BENEFICIARIES BE SELECTED?
The selection of black beneficiaries will be done in terms of an objective criteria and principles agreed between commercial farmers, Government Departments, the Municipality, the agri-workers themselves and the other role players. PALS cannot force candidates on the producers, but we agree in principle that priority will be given to the farmworkers already working on the land. The criteria for each project will differ as each project is unique. The Witzenberg PALS Centre will play the important role of watchdog to oversee the selection of the black beneficiaries.
WILL COMMERCIAL FARMERS NOT USE THE NEW WATER RIGHTS FOR THEIR OWN BUSINESSES?
Any new water rights will be allocated to the new farming business or PALS Company wherein the black shareholder have a right of veto. This originates from the Company Act and is a result of his 30% or more shareholding. The black farmer can be further protected with a special Notarial registration which can make provision for the fact that any new water rights may only be used for the development of black owned agricultural businesses.
The new water rights will also be valued and the black farmer will receive more shares in line with value of the added water rights.
SHOULD RECOGNITION BE GRANTED TO PARTICIPATING PRODUCERS AS PROVIDED FOR IN THE NATIONAL DEVELOPMENT PLAN, WHAT WILL BE THE FORMULA TO ENSURE THAT THEY CONTRIBUTE PROPORTIONALLY?
The extent of irrigation hectares and the ownership of commercial farmers are known and they will have to contribute proportionally with reference to the 20% formula of the NDP or another formula as dictated by the Government.
The participating producers are also doing socio-economic interventions within their current enterprises to also contribute to other NDP priorities. It is envisaged that should Government provide some form of recognition, the PALS Centre will monitor the compliance of the conditions and formulas as agreed. Government will have representation on the Local Land Committee of the PALS Centre
HOW WILL BE INSURED THAT THE COMMERCIAL FARMERS REMAIN INVOLVED TO CONTRIBUTE TO THE SUCCESS AND SUSTAINABILITY OF THE NEW FARMING ENTERPRISE?
The PALS framework provides that the commercial farmer will hold a percentage of shares and this shareholding is an insurance policy for Government and an incentive for the commercial farmer to ensure the success of the new black owned farming business. In Greenfields Projects the risk in the project is during the period that new orchards are established and the cash flow is not positive. Therefore the black beneficiaries are advised to only utilise their option to procure the majority shareholding once the project is closer to break even and the fruit trees are already in full bearing, this takes an average of 7 to 8 years. Even in cases where the black farmer is the majority shareholder from day 1, he can elect to use the commercial farmers expertise and access to the value chain. The monitoring or watchdog function that the PALS Centre will play, will also ensure that new PALS companies provides the necessary reports and compliance with the business plan can be monitored. This will also ensure that any deviation will be red flagged by an early warning system and the necessary remedial steps can then be taken.
HOW WILL ONE ENSURE THAT PARTNERSHIP IS NOT THE OLD “BOSS-BOY” RELATIONSHIP BETWEEN COMMERCIAL FARMER AND BLACK FARMER?
The black farmer is a shareholder and director from day one and is empowered and trained to take part in all business decisions. He is also supposed to take over the day to day running of the farming business from day one or as soon as possible thereafter. Compliance herewith will be monitored by the PALS Centre which will also identify all training needs and facilitate the training in cooperation with the Koue Bokkeveld Training Centre.
This issue is seen as a key matter that needs to be addressed for true empowerment. The PALS Centre will further insure transparency through an independent watchdog committee that will provide a platform for black farmers to freely express any concerns in this regard.
FUTURE VALUE OF OTHER SHARES AND SAFEGUARD THAT IT WILL NOT BE TO EXPENSIVE
In this regard the PALS Board of Directors has already taken the decision that the value of these shares will not be market value but will be determined by an agreed formula which will be below market value. This aims to ensure that the black farmer can use his option to procure the majority or all of the shares. The PALS Board of Directors are consulting openly with relevant role players and Government Departments on this matter.
Shares will also be obtained by the black farmer if he contributes inputs to the partnership in the form of new water, CASP funds or any other resource that contributes value to the new PALS business.