Tuesday, July 29, 2014

Owners and doers in farming

Why 50% employee ownership of farms will threaten food security.

When bright sunlight reflects off frost, ice and snow, we need no reminding that often light comes without heat. It’s a bit like wisdom which does not always accompany age. These thoughts make good metaphors for the land reform debate which has been raging in South Africa.

It is certainly generating much more heat than light, and over time has not led to greater wisdom and rational thinking. No-one can deny its importance and its complexity is compounded by the fact that it is highly emotive and sensitive both politically and economically, as we have just seen in parliament this week. A coherent approach on land reform simply needs far greater clarification even of some basic concepts.

One is that many, including policy makers, are failing to make a distinction between land restitution and land reform. The former is aimed at restoring ownership to those disposed of it by government decree since 1913.The latter is aimed at establishing some form of demographic representation in land ownership. It may suit radical parties to ignore this distinction, but this is needlessly tipping the issue into open conflict and threatening production.

Another is compensation for land repossessed. There are three: transfer of ownership on a willing buyer/seller basis; expropriation with compensation based on a prescribed value, or expropriation without compensation. The first has seemingly failed and the third is highly unlikely, perhaps even unthinkable without inviting some form of rural unrest. Richard Spoor, land reform activist and lawyer warns that the second, transfer on a prescribed value, could lead to even greater delays because of court challenges to these values.

A third and perhaps the real heart of the matter is that production and ownership are seen to be synonymous, often leading to a collapse of production with transfer of ownership. So when Gugile Nkwinti, Minister of Rural Development and Land reform flung the Strengthening the Relative Rights of People Working the Land proposals into the debate, he must have expected some vehement protests not only from current land owners but from agricultural experts and economists. The key suggestion is the transfer of 50% of land ownership to those currently working the land, or farm workers.

Nkwinti subsequently informed the eNCA TV news channel that this was aimed primarily at farm land, and not production. Others have interpreted the draft proposals as meaning the opposite. This alone underscores continuing incoherence around the land issue. More fundamentally and dangerously, it reflects a flawed concept that permeates most of our socio economic life – that wealth per se is a function of assets, of capital and of owning rather than doing.

The vehement defence of capital supremacy, of a faceless golden calf whose pursuit, possession and accumulation represents prosperity in itself is a very powerful force that drives much of the behaviour we see today, including redistribution of capital assets through nationalisation, often misguided BEE actions, costly and faltering ESOPs and land transfers. A system that places inordinate emphasis on ownership and capital accumulation only has itself to blame when it unleashes such behaviour.

It’s a long held ancient, classical even biblical wisdom that it is not what we own that creates wealth but what we do with it. Assets can never be anything else but a means to an end; not an end in itself. Theorists and ideologues love to construct premises on “factors”: faceless, inanimate institutions that all interact in a predictable way. Eventually these premises lose touch with the simple and human behavioural logic that not only underpins the entire system, but threatens many of these carefully constructed premises.

The land reform debate and specifically redistributing 50% ownership can be distilled into a simple analogy. Imagine a farm worker picking an apple and reflecting on the fruit in the knowledge that he owns a small part of it, and the rewards that will come from its sale. Now think of another that does not necessarily own a part of the fruit, but owns part of the land from which that fruit was produced.

Which worker will be more motivated to ensure the success of the crop? Who will be more interested in where the fruit goes, is sold, and who the customers are. Who in the end will be more loyal to the production process? The answers are self-evident and reveal the flaw in the concept that simply transferring assets empowers the beneficiary. Ultimately our true value lies in our capacity to make a contribution to others and ownership of production is a far greater empowerment tool than ownership of land or assets.

Already on average labour accounts for more than half of the wealth created in farming and is not very different from the national average which is just under half, but still the larger share over capital and state. The fact that this seldom translates into recognised “ownership” of production is rooted in some stubborn assumptions about systems and ideologies, not the least of which is capital and shareholder supremacy, deeds and titles, ownership rights, and commoditised labour. Of course, labour itself succumbs very willingly to this expression because it is relieved of the responsibilities of production, mistakenly believing that it is immune to market risks and can dictate rewards through mob action.

Capital, on the other hand has benefitted from this model for decades, mostly victorious in the simple battle plan that “the market” is a resource to be exploited, and that everything but profit is a drag and a cost that has to be squeezed to an absolute minimum. It defends this position on the false premise that it alone takes risks, which entitles it to all surpluses (often vaguely defined) that are generated by the venture.

Ownership always has two contexts: physical and behavioural. It’s a distinction we too often miss in our obsession with ownership rights, but its importance becomes clear in the simple example that a murderer should not be allowed to own a gun. In similar vein, should the predatory shareholders of Aurora have been given ownership if it was clear to the sellers and governing authorities that all they were going to do with productive assets was to strip the mine and destroy production?

The behavioural dimension of ownership is more important than the physical and clearly the former has to be fully understood and embraced before physical ownership can be entrenched.

The simple condition that labour, in this case farm-workers, have to comply with to qualify for ownership of production, is to also assume the responsibilities that comes with that ownership. One clearly is that all rewards in the end are determined by the value of production itself, and they have to be linked to this value through a predetermined yet flexible share of wealth created.

Before one can even go that route, there is a huge task of education and training, and sharing information with the work force, both in agriculture and elsewhere. Only when labour fully understands its contribution and responsibilities towards customers and wealth creation itself, indeed establishing some common purpose with other stakeholders, can one seriously consider making labour co-owners of production, let alone assets.

There are many successful cases, both here and globally where labour has become more directly involved in ownership, either in the form of labour co-operatives, co-ownership trusts, mentorship programmes and worker ownership schemes. (See separate links for examples.) It is clear, however, that the success of these ventures has depended heavily on labour seeing itself as doers before owners.

At the very least some proof of behavioural ownership of production is an absolute pre-cursor to ownership of assets. To do otherwise is a reckless putting of the cart before the horse.

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