Umgano

A community fights poverty through innovation

- 2 September, 2016

A total of 7000ha was transferred to the Mabandla community in Kwazulu-Natal as part of government’s land reform programme. The community has since established several successful ventures, including a commercial forestry enterprise, on the land.

As part of government’s land reform programme, 7 000ha of southern KwaZulu-Natal’s Mabandla area were transferred to the Mabandla Traditional Authority (MIA) in 1995. Over the next 18 years MTA established a commercial forestry enterprise, as well as a number of other business ventures, to economically empower its community of 20 000 people. With the assistance of the Industrial Development Corporation (IDC) the Department of Agriculture, Forestry and Fisheries (DAFF) and Umsonti, a non-profit organisation established by forestry experts Peter Nixo4 Themba Radebe and other rural development experts, MTA has become a successful community project empowering the community through the creation of sustainable ventures. The MTAS first initiative was the establishment of its commercial forestry enterprise. In 1996, the late iNkosi Lenford, the leader of the MTA at the time, recruited Peter and Themba to assist in the establishment of the MIA’s mixed pine and eucalyptus plantations. Three years later, the first trees were planted.

Umgano Devco

According to James Ballantyne, Umsonti managing director, the MTA first established the Mabandla Community Trust as the legal vehicle through which the investments, expenses and income from the MTI(s commercial forestry enterprise were managed. However, in 199&i t became evident that the commercial forestry enterprise was only the fit step towards alleviating local poverty, and that the MIA’S 7 000ha could be utilised to generate even more income through other ventures. “It was decided that the community’s enterprises needed to stand alone from each other. It would not make financial sense to use [one] enterprise, such as the forestry enterprise, to cross-subsidise another,“ explains James. So with the assistance of Umsonti and other supporters, the MTA formed a commercial company, Umgano Development Company (Pty) Ltd (Umgano Devco). This became the umbrella management company of all the community’s subsidiaries. The company is 100% owned by and accountable to the Mabandla Community Trust.

Forestry

Umgano Forestry (Pty) Ltd, which is wholly owned by Umgano Devco, was founded on 1350ha on the lower slopes of the Umgano Mountain with an R1 million grant from the Eastern Cape Department of Land Affairs (now the Department of Rural Development and Land Reform) and a R2 million loan from the Land Bank. The company employs over 100 full-time and 30 part-time employees and has a net asset value of R48 million. It also generates an annual turnover of more than R12million and its mixed pine and eucalyptus plantations are certified by the internationally recognised. Forest Stewardship Council. Umgano Forestry produces 1 800t of timber per month from its 900ha of eucalyptus plantations. Most of this output is sold to paper giant Sappi Southern Africa.

Timber

Umgano Timbers (Pty) Ltd, which became operational in 2016 is a small-scale sawmill that produces sawn timber from the 450ha community-owned pine resource. It also produces treated timber from the community’s eucalyptus plantations. Zweli Baleni CEO of Umgano Devco, explains that the forestry industry requires a long-term commitment, and that the community started making a profit from the enterprise only in 2008. “Our people decided that it would increase job opportunities and overall community income if these profits were reinvested into developing and operating additional business units. Umgano Timbers was one of these.” The company was established with an R16million loan from the IDC. Umgano Devco also invested R400 000 for 70% ownership, while Umsonti invested R200 000 for 30% ownership. Umgano Timbers’ projected initial annual turnover is R4.6 million and it is expected to generate R1″1 million net profit per year.

Livestock Association

Umgano Devco established the Umgano Livestock Association in 2015. The association which is wholly owned and driven by the community, aims to generate a sustainable income for Mabandla’s cattle owners, so that they are able to afford good breeding veterinary care, supplementary feed and fencing. With funding from DAFF’S Land Care Programme, the Umgano Livestock Association cleared and recovered jungle wattle areas, and created fenced grazing camps for its cattle. “The aim is to have as many of Mabandla’s cattle owners as possible putting their animals into the Umgano Livestock Association” says Themba Umsonti’s social and technical facilitator. “These will form a nuclear breeding herd that will be managed effectively using the knowledge and experience of experts in beef production. The Mabandla cattle owners who contribute animals to the association will share future profits on a pro-rata basis depending on how many animals they contributed.” Fifty-three cattle have already been given to the association and the goal is to have at least 100 cattle to ensure the business’s economic viability. “Mabandla’s cattle owners are very attached to their animals. Many are taking some time to decide to contribute their cattle to the association. When they do, they’ll realise that these animals will be well looks=d after, will regularly produce good quality calves, and will start getting regular income from their contribution.”
CROPS MTA” Umgano Devco and Umsonti are also developing a business plan for a crop subsidiary, Umgano Agrico. According to Zweli, this project, utilising 140h4 will consist of a timber and vegetable seedling nursery, a crop and fruit production farm, a vegetable processing plant and a packaging house. “Umgano Agrico will employ about 321 people and will be majority-owned by Umgano Devco. An investment of around R48 million is needed, and the projected annual turnover in five years is expected to be R54 million, with a net profit of R17million.”

Eco Adventures

Umgano Devco plans to further develop Umgano Eco Adventures (established in 2014) to attract more tourists to the region. The subsidiary is 70% owned by Umgano Devco and 30% owned by Umsonti. Activities in development include kayaking, river tubing, white water rafting, canyoning, birding and hiking. Tourist accommodation is in the process of being built with wood products from Umgano Forestry and Umgano Timbers. Zweli says that Umgano Devco and Umsonti are sourcing the R46 million funding required to get Umgano Eco Adventures fully operational.

Training Academy

Umgano Devco’s and Umsonti’s Umgano Training Academy was registered in April 2016. This subsidiary will offer relevant accredited training to two groups of people: Mabandla community members, in order to improve the skills productivity and safety of those employed in Umgano Devco’s subsidiaries and entrepreneurs in Mabandla wishing to establish their own businesses. “The Umgano Project has a proven track record of almost 20 years in rural community development. A fundamental principle of its ongoing success is to acquire skilled personnel for each business unit and link them to a comprehensive skills transfer programme for community members,” Zweli says.

a community fights poverty– this article was extracted from the 2 September 2016 edition of the Farmer’s Weekly Magazine. See article here: Farmer’s Weekly – A community fights poverty through innovation