BEST INSTITUTIONAL ARRANGEMENTS FOR FARM-WORKER EQUITY-SHARE SCHEMES IN SOUTH AFRICA

Abstract

Farmworker equity-share schemes were initiated in the Western Cape region of South Africa in the early 1990's as a method of redistributing farm assets to land reform beneficiaries while maintaining the viability of commercial farming operations. This study set out to identify the institutional characteristics of successful farmworker equity-share schemes in South Africa and to discern a set of best institutional practices that will likely promote the success of future equity-share schemes. A detailed study of nine land reform projects intended to empower previously disadvantaged farmworkers was undertaken in the Western Cape during November 2001 to explore relationships between their institutional arrangements, worker empowerment, management quality and performance. Cluster analysis of variables measuring these four constructs revealed positive relationships between sound institutional arrangements, competent management, effective worker empowerment and good performance. Best institutional practices identified by the analysis suggest that farmworker equity-share schemes should be operated as (or like) a company with voting and benefit rights proportional to individual shareholdings, but with restrictions on certain share transactions to prevent free-riding by non-workers and the loss of creditworthiness through sudden outflows of equity and managerial expertise. However, this positive relationship between best institutional practices and enterprise performance is dependent on effective worker empowerment (e.g. skills transfer and gender representation), good governance (e.g. external auditing) and competent management (e.g. schemes to reward worker performance and to resolve disputes).