In the first of a two-part series that looks at using a share-milking business model to incorporate Eastern Cape emerging farmers in the dairy value chain, Jannie Strydom, CEO designate of Agri Western Cape, and Prof André Louw, chair of Agribusiness Management at the University of Pretoria’s Department of Agricultural Economics, Extension and Rural Development, explore the disparities and opportunities in South Africa’s dairy farming industry.
The issues of transformation and expropriation in South Africa have become even more relevant and challenging during the past year. The findings discussed in this two-part series are based on a recent study conducted in the Eastern Cape to determine if the share-milking model could be implemented successfully in South Africa as a means to transform the local dairy industry.
A POPULAR SYSTEM IN NEW ZEALAND
Share-milking has become a significant institutional structure in the New Zealand dairy industry, where the agreements are referred to as share-leasing arrangements. The sharemilker pays rent in the form of a share of production, but both parties (farm owner and share-milker) share the production risk (product quality and price) associated with the dairy enterprise.
In South Africa the model is somewhat different. The share-milker provides the dairy cows, movable equipment and management, while emerging farmers provide the land and necessary fixed improvements. Table 1 presents the various objectives and principles of the share-milking model in South Africa.
It can safely be assumed that the macro-economic forces (low economic growth, a high level of unemployment and the like) that influence large-scale dairy production units also negatively affect the sustainability of smaller farming units.
Commercial farmers are exploring ways to change their strategies, business models and production systems to sustain their competitiveness in the global market. In South Africa and other milk-producing countries, the larger commercial dairy farms are expanding by incorporating smaller dairy farming units. This trend increases the barriers to entry for aspirant black commercial dairy farmers, despite the pressure for transformation in South Africa. Constraints that hamper the successful establishment of these farmers include:
Personal constraints (management and biographical factors);
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