Rehabilitating a community-owned blueberry orchard - Phase 1

VISION

The Rural Action Committee of Mpumalanga Province (TRAC-MP) works with disadvantaged rural and peri-urban communities to promote human rights, tenure rights and sustainable development in the Province of Mpumalanga. TRAC-MP’s overall mission is to ensure that rural people in Mpumalanga Province secure their land rights as a platform upon which to build sustainable livelihoods. To facilitate this, it is essential that rural people acquire and/or retain land for residential and development purposes. TRAC-MP envisages this process happening, in a participatory manner that promotes gender equity and environmental sustainability.

OVERVIEW

TRAC-Mpumalanga works with disadvantaged rural communities to promote human rights, tenure rights and sustainable development. This project enables TRAC to facilitate the rehabilitation of a blueberry orchard on the Coromandel Trust farm Bosoord, measuring 6176 hectares, between Lydenburg and Dullstroom in the Thabu Chewu Municipality, Ehlanzeni District of Mpumalanga Province. The Coromandel Trust is a large Land Reform for Agricultural Purposes project funded by the Department of Land Affairs (DLA) grants and a loan from the Land Bank. With individual applicants qualifying for a grant of R 25 000 an opportunity was created for Coromandel farm workers to buy the farm through the Coromandel Trust, consisting of 248 shareholders and their families.

Coromandel has a solid business plan in place, producing milk, blueberries, peaches, nectarines, maize under irrigation and soya and beans on dry land. The 6ha blueberry orchard has experienced declining yields through frost and hail damage, however, and needs to be rehabilitated and protected against further damage. A mentored rehabilitation programme including training of staff will ensure that the blueberry crop increases and improves in quality, raising the farm’s turnover over the next three years, helping the trust to pay off a loan to the Land Bank and improving the shareholders’ financial security.

WHAT WE LIKE ABOUT THIS PROJECT

• The ultimate result of this project will be the increased generation of wealth for the Coromandel Trust members.
• The project will stimulate the local economy in the Thabu Chewu municipality and will realise foreign exchange earnings for South Africa, given the growing demand for blueberries on international markets.
• The image of South Africa’s land reform programme will also benefit from having a successful project that can portray the programme in a positive light both nationally and internationally.
• Coromandel is already an exceptional project in that the former farmworkers are managing the project with almost no external assistance, and it has been referred to as a model land reform project by many researchers.
• The social impact of this project will be significant and positive since the 248 shareholders and their dependents will feel more secure about their future on the farm. Increased job security and incomes for the permanent and seasonal staff working on the orchards will greatly improve their household living standards. This will also have a motivational benefit for them, family members and all members of the project as they see success in the enterprise. This will improve the cohesiveness of the shareholders, their commitment to participate and support aspects of the project, as well as their interest in developing other economic opportunities, e.g. producing blueberry jam, and packaging and transport services related to the blueberry orchard.

EXPECTED LIFE CHANGE

An investment of R873 550 over 3 years will enable a mentored programme to rehabilitate the blueberry orchards on Bosoord Farm.

• The beneficiaries of this project are 248 adult farm workers who reside on the property. Each of the farmworkers is a household head with a spouse and dependents.
• All the shareholders in the Coromandel Trust and their 865 dependents – a total of 1 113 people – will benefit directly from this project as it creates more stability on the farm and reduces the threat of liquidation. This security is important in terms of the sense of well-being and commitment to support the Trust from the ordinary shareholders.
• Particular benefits accruing from the expansion and rehabilitation of the blueberry orchards would include increased job security for nine permanent and 57 seasonal workers in the blueberry orchards.
• There will be additional temporary employment of staff to work on the rehabilitation project for a period of two to three months for the rehabilitation phase of the project.
• Additional seasonal jobs (four month contracts) may be created during the harvest season in years 2 and 3.
• The incomes generated from the blueberry orchards would increase from year 1 (due to the rehabilitation exercise). This would further increase in year 2 and in year 3 of the project. These improved income levels would greatly assist Coromandel Trust to service the current debt with the Land Bank, reducing the threat of bank repossession.
• The improvement to the existing orchards would increase the value of the farm, making the farmworkers more eligible to obtain further production loans.
• Direct life change at R785 per person.

This project has breadth because it affects so many people’s lives through helping the farm to remain viable. It has depth and intensity because it involves training and equipping the farmworkers with skills to better manage both the orchard and the farm in future. The project has permanence in that the increased blueberry yield will result in improved income and ability to service debts, and this will in turn improve the Trust’s access to loan finance and put the farm on a sustainable footing long-term.

NEED

Taking into account the current productive capacity of the farm, their ability to cover operational expenses as well as generate dividends to service their Land Bank loan, is very limited. In addition since they have a large loan to repay they cannot access further loan capital from the Land Bank or from the private lending institutions, to expand commercial operations on the farm. Currently the Trust has not had the funds to maintain the existing six hectares of blueberries. As such there has been a gradual decline in yields and the quality of blueberries produced. Without rehabilitation this lucrative enterprise will decline further- thus reducing repayment abilities even further.

If they are unable to service their loan amounts they will eventually face liquidation and have the farm auctioned off. This would be an extremely disruptive and painful experience for all the farm dwellers, most of whom have resided on the farm since 1951. In all likelihood no single individual would be in a position to buy the entire farm so it would be cut up into pieces and sold to different owners. This might result in significant job losses as well as possible attempts to evict the families from their homes.

STRATEGY

This project involves the rehabilitation and protection of the 6 hectares of blueberry orchards with the following expected impact:

• It is estimated that the rehabilitation of the existing 6 hectares would provide an additional profit of R299 085 in year 1.
• In year 2 it is estimated that a profit of R339 296 would be generated on the rehabilitated orchards.
• In year 3 it is forecast that a profit of R 390 497 would be generated. These increased profits would greatly contribute towards the current loan repayments Coromandel has to make. In addition the profits forecast are extremely conservative, implying that it is likely that they would be higher.

Currently Coromandel produces three grades of blueberries that are supplied to three different markets as follows:

Grade	Market	Price Per kg	Current Production per grade (%)	Envisaged Production per grade after rehabilitation (%)
1st grade	European Union	R 40.00 –R 70.00 per kg	10%	25-50%
2nd grade	Local Market supplies Pick and Pay and Woolworths	R 30.00 – R 50.00 per kg	40%	25-50%
3rd grade	Local market for jams	R 22.00 – R 32.00 per kg	50%	25-50%

The rehabilitation of the current blueberry orchards will result in an improvement in the quality of blueberries produced. This will improve the price and overall profitability of the orchards. (Note that the prices fluctuate significantly in all the markets depending on supply, foreign exchange rates as well as demand both locally and internationally.) Below is a detailed projection of costs, incomes, profit and loss on the project

CURRENT AND FUTURE CASH FLOWS ON THE BLUEBERRY PROJECT
Year	Net Income	Costs*	Profit/Loss
Current*	320 000	480 000	-160 000
Year 1	1 117 500	818 415	299 085
Year 2	1 215 000	875 704	339 296
Year 3	1 327 500	937 003	390 497
Total Profit/Loss	3 980 000	3 111 122	868 878

• A 7% increment in operational costs are included for years 1, 2 and 3.

Other benefits include:

• Improved ability to secure a significant marketing contract. With the scale of production and quality improving in the next three years, Coromandel will be able to attract a sizable marketing contract for their blueberries. This stable income would be extremely valuable in terms of keeping the project financially secure.
• Increased residential security of tenure, as the loan payments are serviced the risk of loosing their homestead decreases.
• Improved community cohesiveness, participation and ownership of the project due to higher levels of employment and income generation.
• Improved skills amongst the project members as they gain further knowledge and experience in the production of blueberries.
• Overall income levels of seasonal and permanent staff would improve due to the stability of the orchards and the farm overall.

ACTION PLAN

Preparation

Basic preparation is already completed. Coromandel will need to get quotes from nurseries for the cultivation of the blueberries as well as for the purchase of material. Thereafter the Trust will enter into a contract with the service providers (2 weeks). Coromandel will need to undertake a detailed evaluation of the existing orchard as well as irrigation infrastructure for the rehabilitation phase (3 weeks). Coromandel will need to recruit additional staff on a fixed-term contract during the rehabilitation phase to repair hail nets, erect protective sheets for frost and plant trees (3 weeks).

The preparation phase could therefore be completed within a 2-month period.

Implementation

• Conclusion of service agreements with sub-contractors or suppliers (1 month)
• Payment of deposits or purchases in terms of these agreements (ongoing)
• Monitoring the work of sub-contractors appointed to rehabilitate the irrigation equipment, and monitoring of staff in terms of the rehabilitation of the existing 6 Ha of orchards (4 months)
• Final disbursements to sub-contractors upon completion of the work (2 weeks)
• Identification of training needs and the appointment of a training institution (6 weeks)
• Implementation of the training programme, most likely in the form of various short courses (4 months)
• During this period it would be essential to negotiate with the marketing agents to secure a contract for the following season (2 months).

Total project implementation can be done within nine months as many of these activities can be done simultaneously.

Monitoring

Monitoring of the implementation of the project plan will take place at weekly meetings of the Coromandel Trust. TRAC-MP will attend monthly progress meetings to measure progress against the detailed plan. In addition a mentor will be appointed to assist the blueberry orchard manager with technical support as well as to identify training needs on the project. TRAC-MP would like to involve both the Department of Land Affairs and the Department of Agriculture’s officials in the project for capacity building and networking purposes.

Evaluation of the project will be done on various levels. Firstly all role-players in the project team will measure performance based on the projections made in the detailed implementation plan (monthly). At the end of the first harvest the impact from the rehabilitated orchards in terms of volumes for sale and incomes will be evident. This will be the first real test to determine project success. On an annual basis thereafter sales can be compared to the 2006 harvest (the baseline) to indicate increased incomes from the project.

The impact of the training on the existing staff working on the blueberry orchards will also need to be evaluated. Indicators that measure productivity of staff will need to be developed in consultation with the orchards manager.

This project will also be evaluated independently by the Department of Land Affairs’ Monitoring and Evaluation Unit at various intervals, most likely annually.

ORGANISATIONAL EVALUATION

TRAC has a good record of working in this sector – it is well aware of beneficiaries’ needs and the social problems that they are facing. The organisation has strong relationships with other role-players on a national basis, and there is a strong emphasis within the organisation on research and building staff capacity. The current director may leave, but there is a clear succession plan in place. TRAC knows its future requirements (HR, systems, infrastructure etc.) but needs additional financial resources. The organisation received qualified audited statements in 2005 because of its lack of financial reserves. Income generation activities should be increased and more resources allocated to fundraising.

RISK PROFILE

Key Strengths

• Concept: Coromandel Trust is already farming blueberries, so consolidating this aspect of the operation makes sense. The Trust has all the technical skills needed to upgrade the blueberry orchard, which will ultimately increase its income, but lacks finance in the short term. The project will result in improved livelihoods for all the families who are part of the Coromandel Trust. A better blueberry crop over the next three years will help repay the Trust’s bond with the Land Bank, which will in turn enable it to start accessing more loan finance.
• Design: This is a thoroughly designed intervention involving a detailed plan for the actual rehabilitation, as well as mentoring and training. The use of windbreak trees shows forward thinking, as they will last long term once the plastic sheeting deteriorates. The project funding is being matched by Coromandel Trust who will pay the administration, packaging, transport and staff costs. TRAC-MP has consulted extensively with the Coromandel leadership around the development of this project. TRAC-MP has developed contracts for employment of mentors, staff and service providers that will be used on this project – proven effective in the Mpumalanga Management and Mentorship Pilot Programme in promoting self-sufficiency and independence of the Trust. The training aspect of the project is designed to be practical and participatory to ensure that the management and staff acquire appropriate skills that contribute towards improved production both in terms of increasing yields and minimizing costs.
• Capability: The staff on the farm are experienced in running the orchard, and the TRAC-MP staff have the necessary skills for the successful implementation of the project. Staff from the Department of Agriculture’s Nooitgedacht office will also provide technical inputs and support in terms of the propagation of the blueberry seedlings. The main service provider will be a mentor appointed to advise and support the orchards manager. In addition an accredited training institution will be appointed to train both managerial staff and workers working in the orchard. A local nursery will be appointed to cultivate the blueberry bushes.
• Control: TRAC has a good record in terms of financial control and the funding for this project will be channelled through TRAC.
• Sustainability: With the rehabilitation of the existing six hectares there will be immediate increases in the income generated by the farm. This will enable Coromandel Trust to service their loan. If the Trust’s loan repayment is regularly serviced the Trust will be able to apply for additional loan finance to cover production costs, maintenance and new economic opportunities that may arise. This will greatly enhance the independence of Coromandel Trust as they will not be at risk of loosing their jobs and homes. The business is sustainable – the farm has a market for its products and a plan in place for expansion. TRAC-MP attends monthly meetings at Coromandel and will continue to monitor their progress. TRAC-MP will build Coromandel’s capacity, including improved business skills. Coromandel has National Development Agency funding to expand the blueberry production and increase turnover, and it is diversifying by renting out houses on the property for income. By having a training component this project will further strengthen the sustainability and independence of the project as the trained staff will be able to make important management, maintenance, planning and quality assurance decisions themselves.
• External:

Key Risks

• Design: The way the project is structured means that its success depends to a high degree on the effectiveness of the mentor, not yet hired, over the nine-month period.
• Capability: An appropriate mentor has not yet been found and someone with the right combination of skills and sensitivities may be difficult to find. Coromandel Trust do not at present have the skills to draw up a business plan themselves, but this is mitigated by TRAC-MP’s assistance and the training that will be provided.
• Sustainability: Plastic sheeting lasts 3-5 years only, and hail netting will need repairs, but this is mitigated by the fact that the windbreak trees will be bigger by then. A bond of R1.2 million has to be paid from Dec 2008 which puts pressure on the Trust, since non-payment could result in repossession of the farm by the bank. This is, however, mitigated by the expansion and diversification of production, as well as this project, which should substantially increase income.
• External: Conflict between management and workers is possible. Skilled black managers may leave. The Trust has a land claim pending against it (but only involving a small portion of the farm). Frost and hail may be worse even than expected. Duikers and bush pigs may eat the blueberries from the young trees. The price of blueberries may drop (but this is mitigated by the fact that the farm is diversifying).