Feasible indicators for monitoring the performance of equity-share schemes in South African agriculture.
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Date
2004
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Abstract
This study aims to develop a robust methodology for measuring the performance of equity-share
schemes in South African agriculture. Equity-share schemes are privately owned
farming operations that are generally restructured as companies with the original owner and
the farmworkers as shareholders. Several studies have investigated various aspects of the
performance of these schemes but no single study has yet measured their performance using a
comprehensive and objective set of criteria. Four categories of criteria are proposed: poverty
alleviation; empowerment and participation; institutional arrangements and governance; and
financial performance. This study does not aim to assess the performance of existing equity-share
schemes rather a methodology for the four criteria based on empirical evidence gathered
in 2004 from a land reform project in the Midlands of KwaZulu-Natal and seven established
equity-share schemes in the Western Cape.
Poverty alleviation is measured using a transition matrix of households grouped by four
different symptoms of poverty: current income, wealth, health and a principal component
index of housing quality based on building materials, access to safe drinking water and
adequate sanitation. Eight. categories of indicators are recommended for empowerment and
participation: control and ownership; skills transfer; understanding of the structure of the
scheme; information; outcomes; trust; outreach; and participation. A scorecard applying
norms based on empirical evidence gathered at equity-share schemes in the Western Cape is
used to assess the indicators. A scorecard approach is also applied to institutional
arrangements and governance, which are measured using three categories of indicators:
accountability, transparency and property rights.
Recognised indicators ;of financial performance are applied to balance sheet and income
statement data provided by four of the seven equity-share schemes in the Western Cape. This
analysis highlights problems with several of the conventional ratios used to measure the
profitability, solvency and growth of recently restructured farming enterprises whose
'empowerment' status attracts exceptionally high levels of debt capital to finance long-term
investments. To avoid these problems it is recommended that, for equity-share schemes,
profitability should be measured by the return on assets or dividend return; solvency by the
debt/asset ratio; liquidity by cash flow projections; growth by changes in the (estimated) real.
value of shares; and workers' total returns by changes in the sum of the real wage bill, capital
gains, dividends, interest and other benefits accruing to workers in aggregate.
The proposed performance measures are relevant, manageable in number and have feasible
norms based on empirical evidence. These indicators and their norms need to be tested on a
wider scale and over time. Further research should be undertaken to estimate weights for the
empowerment and institutional indicators.
Description
Thesis (M.Sc.Agric.)-University of KwaZulu-Natal, Pietermaritzburg, 2004.
Keywords
Agriculture--Economic aspects--South Africa., Agricultural development projects--South Africa., Stocks--South Africa., Theses--Agricultural economics.