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Measuring the performance of equity-share schemes in South African agriculture: A focus on financial criteria

Author

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  • Gray, B.C.
  • Lyne, Michael C.
  • Ferrer, Stuart R.D.

Abstract

This study aims to develop a robust methodology for measuring financial performance of equity-share schemes. Several studies have investigated various aspects of performance of these schemes but no single study has yet measured their performance using an objective set of criteria. Four categories of such objective criteria are proposed: poverty alleviation; empowerment and participation; institutional arrangements and governance; and financial performance. This paper focuses only on the financial performance criteria. Recognised indicators of financial performance are applied to balance sheet and income statement data provided by four equity-share schemes in the Western Cape province. This analysis highlights problems with several of the conventional ratios used to measure profitability, solvency and growth when they are applied to 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.

Suggested Citation

  • Gray, B.C. & Lyne, Michael C. & Ferrer, Stuart R.D., 2004. "Measuring the performance of equity-share schemes in South African agriculture: A focus on financial criteria," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 43(4), pages 1-19, December.
    • Handle: RePEc:ags:agreko:9493
    DOI: 10.22004/ag.econ.9493
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    References listed on IDEAS

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    1. Knight, S & Lyne, M & Roth, M, 2003. "Best Institutional Arrangements For Farm-Worker Equity-Share Schemes In South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 42(3).
    2. Koutroumanidis, Theodoros & Iliadis, Lazaros S. & Arabatzis, Garyfallos, 2004. "Evaluation and Forecasting of the Financial Performance of the Unions of Rural Cooperatives by a Decision Support System," Japanese Journal of Agricultural Economics (formerly Japanese Journal of Rural Economics), Agricultural Economics Society of Japan (AESJ), vol. 6, pages 1-14.
    3. Karaan, Mohammad, 2003. "An Institutional Economic Appraisal Of Worker Equity Schemes In Agriculture:," 2003 Annual Conference, October 2-3, 2003, Pretoria, South Africa 19094, Agricultural Economics Association of South Africa (AEASA).
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    Cited by:

    1. Gray, B.C. & Lyne, Michael C. & Ferrer, Stuart R.D., 2005. "Criteria to monitor the poverty alleviation, empowerment and institutional performance of equity-share schemes in South African agriculture," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 44(4), pages 1-31, December.
    2. Wytske O. Chamberlain & Ward Anseeuw, 2018. "Inclusive Businesses and Land Reform: Corporatization or Transformation?," Land, MDPI, vol. 7(1), pages 1-17, January.

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    Keywords

    Agricultural Finance;

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