Chapter 5 Learning from the international land reform experience

2 Conceptual framework: Understandings of settlement support and associated strategies 2.8 Key settlement support strategies and institutional arrangements 2.8.3 Reliance on private sector and partnership arrangements

A strategy adopted by a number of states since the early 1990s – particularly those operating within a market-based framework – is one of relying on the private sector and partnership arrangements to provide the necessary post-settlement and developmental support. These may take the form of equity arrangements, contract or out-grower schemes, sharecropping or company-supported schemes. These have become especially important as part of global commodity value chains supplying large retail conglomerates in the most highly developed nations. The most common have been contract schemes. These involve producing agricultural commodities, such as sugar and timber, for the market under forward contracts that specify the commodity type, time, price and quantity of the goods to be delivered. Three types of contract are common. Procurement contracts or marketing contracts specify sale and purchase conditions. Landowners must produce according to stated quality specifications, using their own inputs. They are simply guaranteed the market and a price. In partial contracts or production contracts, some of the inputs are supplied and the produce is purchased at pre-agreed prices. Total contracts usually require the contracting firm to supply and manage all the inputs and the land reform beneficiary supplies land and labour (Chimhowu 2006). Examples of contract schemes can be found in Brazil, Mozambique, the Philippines and Zimbabwe. These partnership arrangements, particularly joint ventures, have enabled beneficiaries to access a degree of support based on the linkages to the established large-scale private farms and estates (Quan 2005; Mayson 2003). Through joint ventures, land reform beneficiaries have accessed additional sources of capital. Pricing prediction and regulatory structures allow them to take greater risks by venturing into high-value commodities. Some have also been able to access new technologies and inputs that would ordinarily be inaccessible. On the other hand, the private farm or estate contracting the out-grower is assured of a stable source of quality raw materials without bearing any local overheads. The private firm also gains through gaining a positive marketing image as a firm working with formally disadvantaged communities; in some cases, partnerships are used as a marketing tactic on the part of the strategic partner or commodity agent who promotes their products on the basis of empowerment, pro-poor initiatives or fair trade arrangements. In some cases, firms have also accessed concessional loans to promote such ventures. In some cases, it is increasingly commercial farmers who have initiated such ventures, as in the case of Zimbabwe after the land invasions in 2000. There is no evidence, however, that these schemes actually reach the chronically poor who, in most cases, find it difficult to organise or access such strategic links because of their lack of social and political capital (Chimhowu 2006). Land redistribution without PSS may compromise the ability of particularly poor households to make a living based on their new asset. New and emerging approaches of linking up with private farm owners in joint venture agreements may provide a potential avenue, at least in the short term while beneficiaries establish themselves, and as long as the ventures have access to markets and can still make profits. It is, however, still in question whether this approach will help those in chronic poverty. Indications are that better-off small-scale farmers tend to move to exploit such ventures more than poorer farmers do (Chimhowu 2006).