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.

The lonely soldier.

Waving the flag for state owned enterprises in a hostile environment.

Five decades of exposure to companies through journalism, management consulting, and study in organisational theory exposes one to some weird consultant interventions and processes.

One of the more bizarre 'monthly flavours', the remnants of which I came across in one client, seemed to have structured its intervention on a war game. Senior managers were encouraged to read biographies of military figures; the battleground was the market; competition the enemy; workers the troops and management were various levels of ranks. To be fair, I experienced only a few remnants of this strange structural thinking, and more specifically in one highly placed executive, who cut a straight backed colonial figure, spoke with a clipped Oxford accent that barely masked his Yorkshire background and always referred to the work force as the “troops”. But it was not the first time that I had come across military jargon in companies.

So meet one of the modern day company troops. He is Daniel (not his real name). His rank is private. His speciality is telecommunications technician. His company (both in the analogous military and real business sense) is Telkom. Let’s imagine that Telkom is playing this war game, and views the market as its theatre, with customers as its conquests. To equip themselves for this game, its leaders have been studying the military exploits of Julius Caesar and Adolf Hitler.

The Romans had little if any competition in building their empire; perhaps because of their tactic to befriend their conquests and invite them to become citizens of mighty Rome. The Third Reich, on the other hand, had some very stiff competition. Yet Hitler saw his conquests as slaves, cannon fodder, some as vermin, and all as resources to feed his ego and the Reich’s coffers.

As an aside, Eskom is another of those SOEs -- or as we can now call them -- state owned empires. The ungrateful conquered subjects of any empire will always grumble, whether under benign Roman rule, or malevolent Reich subjugation.

So I was not surprised when, just after the recent power outages, and waiting to cross a robot-less Swellendam street, a fellow next to me loudly bellowed the most creative Overberg expletives I had ever heard -- and I’ve heard plenty since settling here! I’ve never fully understood why mothers become the targets for such tirades. His wrath was directed at a hapless Eskom “troopie” who was sitting in a marked company bakkie across the street.

My heart went out to him and my immediate thought was that if you want your troops to operate in a war zone, you shouldn’t place them in marked vehicles. This acrimony can sometimes literally become a battleground as Eskom discovered in violent protests in Soweto and elsewhere recently. There, the empire had 15 of their chariots torched.

But the indomitable Telkom Empire standard bearer, Daniel, would probably have held his ground. I met this courageous soldier after I became an unwilling subject of Telkom rule, and when I chose to live in an isolated area, with poor cell phone reception, no access to normal ADSL and a constantly failing landline. They discovered that the landline problems were caused by the increased height of peach trees in the grove where the overhead cable crossed. Not even the mighty Telkom can force a peach grower to cut down his source of income.

The problem was eventually solved when my empirical masters graciously installed a system called Wimax, which transmits data via a signal beamed from some tower, and linked a VOIP telephone to the system. So Daniel packed up his armour, took his standard and left.

Then, in early December last year, the whole thing crashed. With the empire having closed its barracks in Swellendam many months earlier, and lacking a landline and internet connection, we had to contact Telkom via a cell phone to the 10210 complaint line. Now, any subject who has tried this facility quickly discovers that its sole purpose is to discourage popular dissent and is as impenetrable as the ancient walls of Rome.

After spending some R300 on air time we had secured a precious reference number that somehow gave us an assurance that a centurion had the matter in hand. Then we received an SMS falsely claiming that the fault had been restored. In desperation we sought another provider, only to discover that it bought its data from the empire and relied on its infra-structure to transmit that to non-citizens.

We then discovered that the empire had an SMS facility and informed the office bearers there that indeed the system had never been restored. A few days later, Daniel arrived, his chariot groaning under the weight of steel ladders and from which he emerged carrying the weapons of his trade. So this lonely soldier set about clambering onto the roof; cutting off tree branches several meters from the ground; plugging and unplugging thingies into thingies, and spending hours trying to connect to the same 10210 line.

He left having achieved little, still singing the praises of the empire, but expressing huge frustration with his superior officers. He promised to return the next Monday.

He never did and we yet again received a message saying the fault had been restored. And so the whole process had to be repeated...and repeated! In the meantime we simply had to fall back on an erratic service from a local supplier. Daniel eventually returned, bringing with him two other legionaries, two extra chariots and a determination to solve the problem once and for all. They did, four months after the problem first occurred. When it happened again, we decided to finally escape the empire’s rule and settled for the erratic local offering. At least we now have an intermediary with the empire.

As so often is the case in subjugation, the conquered learn to love and respect those that have to apply empirical rule but get to hate the empire and Caesar, especially when it dawns on them that in the end, Caesar, his senate, and his commanders are interested in little else but the gathering of gold and silver.

It’s the sad tale of many organisations today, lonely soldiers desperately trying to find meaning in their day to day tasks and being of service to others, but in the end overwhelmed by contamination of short term self-gratification from the top.

And soon they become the same…rebelling against their masters for their own self gain, and also viewing subjugated citizens as little more than collateral.

Retirement, control and GAD.

Entering the fray of who, what and why of retirement advice.

If you don’t know what GAD means, you clearly have not been following OPT (the Oscar Pistorius trial). It’s not an admission I make likely, but at times I have been absorbed by the proceedings. In the process I have learned something: that I most likely suffer from GAD, which, according to evidence led by an esteemed forensic psychologist, means Generalised Anxiety Disorder.

On reflection on my own three score years and ten, nothing seems more designed to aggravate GAD than age and retirement. I am loathe to ruffle the feathers of old and new colleagues, but much of the hullabaloo that has featured in spats on the subject between writers and advisers that I deeply respect, has simply been missing the point. The fact is both are right and wrong. To say (see article here) that age and experience are essential to retirement advice ignores that old quip: “Wisdom comes with age, but sometimes age comes alone.” As this article here points out it is stretching a point to say that the young are not qualified to give retirement advice.

Nevertheless, most of the interchange has been enlightening, even to someone whose life’s cup has been filled to overflowing with not always pleasant elixirs. (Don’t most geriatrics say that?). The fact is that retirement advice has so many facets that it takes a multiple of disciplines to be comprehensive – and then mostly in a specific case at a specific time.

It was one of the requirements that made me stay away from specialising as a personal finance writer. Generalisations in these matters are extremely dangerous and disclaimers aside, I don’t think I could live comfortably with someone investing his life savings in a unit trust on the eve of a market collapse, or a terminally ill individual pouring everything into a single premium RA simply because I paraded their merits on air or in print. The esteemed Mervyn King added to this sensitivity when, after being a guest on our TV Business programme, Diagonal Street, he advised me to include a disclaimer in the closing credits.

Valid advice can be informed by research, others by experience, but most simply by common sense – albeit not so common. The best advice I have ever been given said simply: “follow your heart, but make sure it has a good road map.” As long as you are sure and comfortable with where you want to go, the drawing of this map can and should be informed by many contributors, including young and old, expertise and experience.

Providing for retirement is very different from preparing for it. It was a distinction I tried to draw in my own modest and earlier contribution to the subject in the three part Moneyweb series on the financial issues; the living issues and life issues of retirement. Financial issues are clearly the domain of experts where age makes little difference. The living issues, such as where to live, health, reducing attachments and clutter are best informed by experience. The life issues relating to one’s mental preparedness and achieving serenity can be informed by both expertise and experience, and are seldom part of an investment adviser’s or a journalist’s tools.

At the risk of generalising, I would argue that the single, biggest desire of a retiree is serenity. Serenity is simply the absence of anxiety, a state implying a multitude of attributes, attitudes, behaviours, resources and actions, for which advice can never be obtained from one source, least of all from an adviser’s theories or the journalist’s keyboard. What most find difficult to accept or act upon, is that serenity is far more self-defined and self-created than externally created. The best adviser that I have come across on this issue is Viktor Frankl and his work “Man’s search for meaning.” Read it soon, or read it again!

A critical element of anxiety or its absence is our deep-seated desire to control – both people and circumstances. Understanding this and understanding ourselves to acknowledge and adjust this trait takes hard work, but the results are far more rewarding than anything else you have ever done to “prepare” or to “provide”.

It is critical for the retiree. Here I can talk from experience, not because I have achieved the serenity of a floating guru in the Langeberg, but more from the blunders I made in trying to achieve serenity through control. I will share these with you in future because many of the fairly common things I did, including following the advice of others, led to awful unintended consequences which I could have avoided with a deeper understanding of the self.

Money is clearly at the centre of control. The more we have, the more we feel we have a grip on life. If that is your belief, you will most likely get caught in the hedonic treadmill of never having enough and blowing your serenity apart in trying to gather more or preserving what you have. You also run the risk of being totally blind-sided by those events this article warned about and which will leave you far more desperate and anxious than if you had reduced attachments in the first place.

At one or other point you have to accept, (like I did rather unsuccessfully with my own touch of GAD) that you are in a race between provision and longevity. Sometimes that provision irrationally extends to the financial comfort of more than direct dependents and often enough too, that legacy creates either rancour or delight at your passing.

As a retiree you will experience many things that rob you of perceived control. They include increasing frailty and a greater sense of vulnerability, the increasing loss of friends and acquaintances, a greater awareness of your mortality, and changes in many things, including your job and sense of purpose that you clung to as anchors in your life. You cannot provide or plan for most of these things, let alone expect sound advice on doing so.

The only answer lies within you, living in the moment, and avoiding your day to day experiences becoming locust food. Rich man, poor man, beggar man, thief -- we all have the capacity to do that.