Using a Modified Business Incubator for Black-Owned Agricultural Development in South Africa

Abstract

In this paper, we propose a theoretical enterprise development model of a Modified Agricultural Business Incubator (MABI) that is specifically tailored to the developmental needs of South Africa’s agricultural sector, both for primary producers and agri-processing businesses. This model is specifically designed to provide a supportive business environment for black agricultural business owners where particular focus is placed on their developmental needs.

Full text

1
Using a Modified Business Incubator for Black-Owned Agricultural Development in South
Africa
Dawid Diederichs1,2, Leonard Diederichs1,3, Wandile Sihlobo4, Lyndre Nel1,2
1 Ethics and Leadership Institute, South Africa, 7130. Corresponding author: leonard@eli.co.za.
2 Hungarian University of Agricultural & Life Sciences, Hungary, 2100.
3 Netherlands Business School, The Netherlands, 4116.
4 Agricultural Business Chamber of South Africa (AgBiz), South Africa, 0040, and Wits School of
Governance, Johannesburg, 2050.
Abstract
The South African agricultural sector’s aim of inclusive economic growth faces a distinctive mix of
developmental challenges, a weak investment environment, lack of expert business skills, failure of
land reform businesses, access to markets, and climate change impacts. To address these dynamic
challenges, a unique and tailor-made solution must be provided to the industry soon or economic growth
endeavours will fail, retarding inclusive economic growth in the country. When considering such a
solution for the agricultural sector, the answer may lie in the efforts employed within the technology
sector worldwide. Many similarities exist between agricultural (primary production and agri-
processing) and technology businesses, both require huge initial capital investment and continual access
to cashflow, significant over-draft facilities, specialist product knowledge, and advanced business skills
are crucial to navigating tough market conditions. Both types of businesses experience high failure
rates. Business Incubators have been developed to minimize tech business failures so that they may
contribute to the economic growth of countries. Similarly, for agriculture, this sector contributes
significantly to South Africa’s food security and job creation. The sector also faces a momentous test
in enabling fair equitable racial inclusion, to effect inclusive economic development. Agricultural
Business Incubators are used in several countries, and all are uniquely designed to address regional
challenges within their agricultural sectors. For South Africa, such a business Incubator has to focus on
agricultural business support, technical production training, management training and market access to
improve business viability. In this paper, we propose a theoretical enterprise development model of a
modified agricultural Business Incubator (MABI) that is specifically tailored to these current
developmental needs of South Africa’s agricultural sector, both for primary producers and agri-
processing businesses. This model is specifically designed to provide a supportive business
environment for black agricultural business owners where particular focus is placed on their
developmental needs. This would contribute considerably to the success of agricultural businesses and
is essential to the success of agricultural land reform programs that have been and will be implemented.
Such a model offers great potential for current case studies in South Africa and could be scaled-up
through government-private sector programs for greater support of more black-owned agricultural
businesses.
Keywords: agricultural enterprise development, business incubator, SMME, land reform
Introduction
South African agriculture contributes significantly to South Africa’s food security and provides jobs
directly to, on average, about 858 000 people between 2015 and the first half of 2020 (Department of
Agriculture, Land Reform and Rural Development, 2020). The industry faces a momentous test in

2
allowing fair and equitable racial inclusion, to effect inclusive economic development in line with the
government’s National Development Plan (Greyling, 2015).
The 2017 Agricultural Census shows that 40,122 commercial farmers produce more than 80%
agricultural output in value terms. Meanwhile, over two million small-scale and subsistence farmers
produce the rest of the 20% output (Stats SA, 2019). However, these variations are still broadly reflected
in specific demographic terms, with white farmers mainly producing at commercial scale while black
farmers are at smallholder level. Moreover, black farmer’s contribution to South Africa’s agricultural
commercial output remains marginal, averaged 5% in 2019, as illustrated in Table 1.
Table 1: Black farmers contribution to agricultural output
Commodities
Average: 2015-2019
Employment
Production Value
R'000
Black Farmer Share in
Output
Maize
29,289
27,038,097
4.7%
Soybean
7,654
5,698,270
3.1%
Wheat
2,912
5,805,830
1.3%
Cotton
3,876
1,967,187
2.4%
Citrus
128,219
15,046,134
12%
Deciduous
79,443
15,660,627
10%
Viticulture
163,441
7,057,260
1.6%
Potato
42,158
6,972,320
1.0%
Tomato
9,764
2,364,149
8.6%
Wool
23,976
3,397,506
11.0%
Mohair
6,765
554,582
12.8%
Cattle
89,752
31,992,265
34.0%
Poultry
52,836
47,863,345
4.2%
Source: National Agricultural Marketing Council, 2019
The primary question for South African policy makers is how to sustainably grow the agricultural sector
with an increasing contribution share from black-owned small, micro‐ and medium enterprises
(SMME), as well as major commercial farming enterprises. There is sufficient policy space within
which to act, when one considers the policy framework such as the National Development Plan (NDP)
and the Presidential Advisory Panel on Land Reform and Agriculture Report (National Planning
Commission, 2011; Presidency, 2019). There is also specific legislation like the Agricultural Marketing
Act of 1996 and the Land and Agricultural Development Bank Act of 2002 for financing, which all
have developmental mandates embedded in their objectives (Sihlobo and Ntombela, 2020).
Chapter six of the NDP of South Africa proposed a three-tier approach for agriculture and agro-
processing to reach its fullest potential of creating one million jobs by 2030. Namely, the development
of underutilized land, especially in former homeland areas and underperforming/underutilized land
reform farms (which offers approximately 400 thousand jobs), the expansion of export-led high growth
areas (approx. 250 thousand jobs), and investment in agro-processing with integrated up- and
downstream linkages (approx. 350 thousand jobs) (National Planning Commission, 2011).
In the report by the Presidential Advisory Panel on Land Reform and Agriculture (Mahlati et al., 2019),
these failures were evaluated against the current situation and suggestions were made on the
implementation of a national reform program that would involve beneficiaries such as youth with
agricultural education, women farmers, and small-scale or subsistence farmers, amongst other
categories.

3
The government has committed to continue supporting land reform and the beneficiary selection criteria
will be partial to youth and women (Mahlati et al., 2019). These candidates will be new agri-business
SMME owners that enter the agricultural sector and market, which requires a high level of specialist
business support and engagement, and they will face immense challenges in the current economic
climate. In addition, the estimated two million black small-scale and subsistence farms previously
mentioned also need a similar level of business support and face the same challenges.
For this purpose, new agricultural SMME owners need the support that can only be provided through a
business incubator specifically adapted for their business development needs. Incubators were
originally developed as an economic development tool to decrease business failures, particularly used
in the technology industry, so that they may contribute to the economic growth of specific industries
within country economies (Webb, 2008). Many similarities exist between agricultural (primary
production and agro-processing) and technology businesses. Both require huge initial capital investment
and continual access to cashflow, significant over-draft facilities, specialist production knowledge, and
advanced business skills are crucial to navigate their tough market conditions, creating scenarios that
increase the probability of business failure (Mian et al., 2016). Agriculture is a type of business that
requires specialist technical knowledge for production and a high level of business management and
marketing skills for market access and general farm management (Bruynis et al., 2000; McElwee,
2006).
Incubators for various business forms exist throughout the world, but sparingly so for agricultural
businesses through farmer incubators (Calo and De Master, 2016; Hackett and Dilts, 2004). In the
United States, the National Incubator Farm Training Initiative have provided a toolkit which described
the formation of farmer incubators. Amongst other things, this toolkit outlines organisational structures,
and solutions to major challenges faced by their sector, particularly the aging farmer population issue
(Winther et al., 2013). The World Bank Group ran Agribusiness Incubation and Agribusiness
Entrepreneurship training programs, as infoDev, in South Africa and other developing countries
between 2005 and 2014, but it is unclear what the uptake and results were (infoDev, 2013). Where the
U.S.A. has easily accessible business financing, business support, and diverse markets, South Africa’s
agricultural sector faces tough challenges. These include accessing finance and production technology,
literacy levels impacting on information assimilation, poor accessibility and transport logistics in some
rural areas, lack of technical production support and expertise, and difficulty in managing institutional
matters such as business banking accessibility, entity support and communication (Aliber and Hall,
2012; MacLeod, McDonald and van Oudtshoorn, 2009; Mukwarami, Mukwarami, and Tengeh, 2020;
von Loeper et al., 2012).
A modified agricultural business incubator (MABI) model is proposed which aims to support, establish
and improve the viability of black-owned South African SMME agribusinesses, and land reform
beneficiaries, for both primary production and agro-processing businesses. The MABI model provides
a comprehensive range of services to agricultural SMME’s which specifically addresses contextual
challenges to ensure business viability so that enterprises may become competitive and self-sufficient
within the South African agricultural industry.
We summarize the current challenges for agricultural SMME’s in South Africa and how the MABI’s
functions and application presents a feasible enterprise development instrument (i.e. special purpose
vehicle) to successfully establish and support black-owned agribusinesses as part of the post-transfer
support on land reform and general farmer development. The MABI’s use in agricultural industry
expansion on a regional level, business investment, and business turnarounds and development are
discussed. We show the organisational composition of such a modified incubator model, to function
strategically between government, funders and the private sector, all while functioning in a manner
consistent with current free-market practices. In addition, we detail how this model can develop a
business ecosystem for black agri-businesses at the sector level for improved regional economic

4
functioning as it addresses enterprise development, job creation, business sustainability, and regional
economic and rural development in South Africa.
The Modified Agricultural Business Incubator (MABI) Model
The MABI model’s (hereafter Incubator) functions are based on the technology sector’s business
Incubator and Accelerator models, the food industry franchising model, and agricultural cooperatives
(co-op) (Table 2).
Table 2: Various enterprise development and management models’ functions provided to SMME’s,
which informs the organisational structure and specific functions of the modified agricultural business
incubator (MABI) model.
Incubator Model
• office space, in-business support services
• process support
• foster entrepreneurship
• regional economic development
Accelerator Model
• evaluating market opportunities
• mentorship
• network development
• access to funding
Franchising Model
• standardised business and production
processes
• certifications and compliance
• ensured product quality and quantity
• strong brand identity
Agricultural Cooperative (Co-op)
• market access and market power
• profit maximisation (economies of scale)
• integrated supply chain and purchase power
• business resource sharing and distribution
• economic synergy and knowledge sharing
Source: from Combs and Ketchen Jr. (2003), Hackett and Dilts (2004), Pauwels et al. (2016), and
Tortia, Valentinov and Iliopoulos (2013).
The MABI’s functions are thus a mixed-used version of these four well-established business
management models, with additional agricultural business consulting functions, e.g. for family
businesses (Reay, Pearson and Gibb Dyer, 2013). The role of the Incubator is to create and manage the
systems which enables the incubatee (SMME) to proactively participate and develop in the local
agricultural market, supporting a business ecosystem that increases business viability and effective risk
management. Figure 1 visualises the relationship that the Incubator has with incubatees, and with
markets and value-chains in the agricultural sector.
Figure 1: The Modified Agricultural Business Incubator (MABI) Model functions and roles between
the incubatees (agricultural SMME’s) and agricultural market/value chain.
Source: Authors deductions

5
The way in which all the management elements of these models work together, and leverage synergistic
business activities, for an improved return is a new approach to agricultural enterprise development.
Beneficial synergistic business activities could be described as the compounding interactions that
increase the Incubator’s organizational ambidexterity which increases business viability, i.e. between
sales contracts, market access, group bargaining & negotiation, customer relations, brand identity,
standardised practices that deliver quality products, and specialist industry knowledge transfer (Cao,
Gedajlovic and Zhang, 2009).
Broadly these management models aim to create and manage viable and sustainable value/supply chain
operations, identify potential participants, develop them to operate as participants in the value chain and
enhance their chances of success by providing protection and specialist support in terms of key risk
areas within this unique economic opportunity created for the participants (SMME’s) for a period until
the SMME’s have generated sufficient capital, experience and knowledge to successfully exit the
enterprise development mechanism (Bruynes et al., 2000; Gillis and Castrogiovanni, 2012; Pauwels et
al., 2016). As approximately 75% of agricultural businesses are family-run worldwide, possibly much
higher in South Africa, the Incubator also has to provide specialised services to fulfil these distinct
business needs (Lowder, Skoet and Raney, 2016).
The uniquely set-up MABI include specific steps of development, i.e. agricultural business
opportunities, assessing economic feasibility and scope, recruiting and selecting incubatees, training
and supporting incubatee SMME’s, managing cooperation of incubatee SMME’s, establishing and
maintaining value chains, and facilitating SMME competitiveness for self-sufficiency.
Identify agricultural business opportunities
This Incubator approach starts by analysis of a targeted geographical area, its climate, historical
agricultural products produced, analysis of the product pricing cycles and determining minimum
production viability volumes. Detailed analysis of the agricultural potential (i.e. area, climate and other
production factors such as water, veld or soils), access to energy, distance to labour, logistics, and
political stability is undertaken to identify the most suitable products to produce.
Assess feasibility and scope
The next step is to rate and test these products in terms of economic potential. The economic potential
provides insight on resource requirements for the SMME’s to be profitable and sustainable to the
SMME owner. Detailed analysis of the particular industry around the identified crops is undertaken,
including supply and demand, price volatility, industry structure, and affordability for new entrants.
Some products may fit into the technical feasibility but is rejected due to their cyclical nature in terms
of pricing, or excessive resources required to participate in the industry. The analysis outcome is a “Best
product for the Incubator” identified.
The Minimum Resource Requirement (MRR), as a critical success factor in enterprise resource
planning, is identified. This requirement would indicate the smallest production quantity a prospective
producer/grower/SMME needs to produce to be viable and sustainable (Al-Mashari, Al-Mudimigh, and
Zairi, 2003). Qualifying participants should have access or be provided access to the Minimum
Resource Requirement. Failure to have access or product at the MRR will lead to the SMME not being
able to achieve sustainability in terms of targeted Incubatee income.
Recruit and Select Incubatees
The next step in the model is identification of potential participants, as SMME’s, for the Incubator.
Unregistered participants’ enterprise registration as a SMME are facilitated by the Incubator.
Train the Incubatees

6
The identified participants undergo structured training over a period of at least two years. During the
first year, training is provided on technical aspects of the product to be produced by production
specialists. The training program follows a strong approach of 30% theory time and 70% practicals
whereby industry experts assess the skills of the incubatees, not only in the class/training room, but also
on the farm/business premises.
During the first year of training, the incubatees, with the guidance of the Incubator team, develop their
production units to activate their revenues as soon as possible. The second year of training focusses on
the business side of the operations. Key skills to plan, organise, lead, and control the business is taught
in an Action Learning Approach (Smith, 2001). The Incubator judges the effectiveness of the training
program and application of learning by the participant through the performance of their SMME
(indicators include quarterly turnover, crop yield, etc.), evaluated against product and business
management benchmark. Important to note that the Incubator must establish, administrate, and monitor
a set of Key Performance Indicators to track actual production performance of its incubatees. Examples
of Key Performance Indicators are establishment cost per hectare, production cost per yield unit (kg),
labour cost per hectare, feed conversion ratio, absenteeism, and crop failure/livestock mortality.
Establish value chains
The next step in the model provides details on the development of the SMME’s in the value chain. The
MABI model as catalyst for sustainable rural development, employment and economic transformation
is fundamentally based on the principle that an SMME will produce something that has a demand and
value to someone else, using the Incubator to funnel its produce with other SMME’s in order to create
or generate decent volumes. The SMME must produce the product that adheres to quality requirements,
agreed timing of production or delivery and in a manner whereby the income is more than the cost of
production, thereby making profit and providing economic opportunity.
In terms of quality requirements, support provided to the SMME’s includes the centralised
administration and maintaining accreditation of a relevant quality management or compliance system
such as HACCP, Global GAP, FSSC for all its SMME’s. The consistent supply of quality products has
been a major factor in new farmers losing market contracts (Mabaya et al., 2011). SMME performance
is monitored through information obtained from grading, pack outs, dressing percentages and other
industry related feedback systems. Feedback is provided to the SMME and kept on record to assess
against the next harvest and evaluate improvement. The Incubator has a dedicated person that manages
market quality and food safety compliance.
Support them to become successful
Specifically designed functions and roles, Table 3 (informed by the established business management
models previously mentioned), are carried out to support incubatees and facilitate engagement within
their regional agricultural sector. The Incubator supports production and delivery times through
supporting the SMME’s with jointly developed production plans which the Incubator staff monitors
with the SMME’s (see full list of MABI functions in Table 3). The production plans are then also used
to calculate production yields and delivery necessary for negotiating with markets. The production plans
are evaluated in terms of planned production versus actual production. During post-harvest reviews, the
incubator team will sit down with the SMME and review the past season in terms of production
achieved, ability to have produced according to specification (size, colour etc.)
The Incubator supports the SMME’s to achieve their profit objectives by jointly developing business
plans with the SMME and monitoring planned versus actual budgets. This activity requires the
Incubator to have insight in the performance of each SMME. Performance is measured in terms of costs
incurred and incomes generated from those costs. The Incubator has a financial person that tracks each
SMME’s performance and provides feedback on a standardised monthly or quarterly budget versus
actual system.

7
Table 3: The Modified Agricultural Business Incubator (MABI) Model functions provided to incubatees
to support the development of black-owned agricultural SMME’s in South Africa.
General Function
Specific Function
1. Institutional
Support
1.1. Closed Corporation establishment per incubatee: CIPC registration,
Entity Structuring and Registration
1.2. Tax Registration, Clearance
1.3. Constitution Management, facilitate meetings with owners and investors,
facilitate AGM
1.4. Facilitate partnerships for enterprise growth
1.5. Family business specialisation: succession and continuity planning,
generational development planning, organizing and educating members,
smart structures and processes, relationship management counselling,
ownership alignment, securing legacy, and board development.
2. Financial
Admin
2.1 Opening of business bank accounts, Payroll Management, Tax
compliance (incl. SARS), Management of signatories
2.2 Cash Flow Budget and Monthly update of budget
2.3 Appointment of auditors, Annual Financial Statements
2.4 Debtor and Creditor Management System
2.5 Legal Matters of litigation
3. Human
Resources
3.1 HR Filing and Work Contracts
3.2 Employees: potential aptitude tests, Training Management
3.3 Effectiveness measurement of development intervention
4. Business
Administration
4.1 Farm admin: Title Deed Copy, Assets Registers & Balance Sheet, GPS
Coordinate and mapping of farm (size, location), Arable Lands, Water
Rights, Lands under irrigation, Production Records
4.2 Financial admin: Costings, open and manage accounts with agricultural
shops
4.3 Legal admin
4.4 Tax admin: compliance, auditing, B-BBEE.
5. Marketing
5.1 Market analysis of region, Prices Realised
5.2 Current Products survey vs. Target Products
5.3 Develop marketing program
6. Sales
6.1 Manage market and sales relationships and accounts
6.2 Negotiation of sales contracts
6.3 Coordinate SMME’s production, informed by market demands
7. Equipment &
Logistics
7.1 Planning with Seasonal Review
7.2 Equipment rental, maintenance records
7.3 Negotiation of transport contracts
7.4 Record System of contracts
7.5 Verification undertaken
8. Technical
support
8.1 Farm setup: Fencing, Electricity, Access Roads, Fixed Infrastructure
Analysis & upgrading
8.2 Management team setup: Communication analysis & management
8.3 Farm Development Plan: Historical and Current Activities, Planned
Activities
8.4 Production specialist consultations
8.5 Where necessary: Food Grade Quality System implemented and
Accreditation obtained (e.g. GlobalGAP, ISO2200)
9. Training
9.1 SMME training support; business administration, technical production
and processing, marketing and sales, HR, budgets, and general
management.
Source: Authors deductions

8
Incubatee Exit
The final step in the model is the exit strategy of the SMME’s. Incubatees exit the Incubator when they
fulfil certain factors, e.g. trainings completed, minimum revenue generated based on production type,
when Closed Corporation “outgrows” business support provided, etc. Depending on their situation, this
may vary in time as economic climate, environmental conditions and management changes through
time. At such time, where good business relationships exist between partners, the exiting incubatee may
negotiate a marketing contract with the Incubator to maintain their marketing and sales involvement.
The business relationship thus turns into a service providing one, whereby the now established
agricultural business secures market access for their produce.
The objective of the Incubator is to establish successful, competitive and profitable agricultural
SMME’s. The value chains and markets that are established for the incubatees requires consistency of
product and quality. The quality, production and financial systems established and managed by the
Incubator thus stays relevant to the core business operations even when the SMME becomes profitable.
This comprehensive support aims to provide incubatees with a “safe” business environment in which
they can develop to match the needs of their growing business, all while gaining relevant training and
skills. Additionally, the methods of ‘standardisation of practices’ as employed by franchise business
models are centrally integrated into the organisational functioning of the MABI, particularly concerning
all administrative support provided. These standardized practices ensure financial efficiency,
maximized profits, legal compliance, best production practices, organisational learning, and a
conducive training and personal development environment (Michael, 2000; Robinson, 2008). These
practices support robust business management which, in turn, provide favourable investment options
for potential investors.
How does the MABI address agricultural-business development challenges?
The new black-owned agricultural SMME incubatees face various challenges which limits their
business progress over time, which the MABI specifically aims to address and compensate for.
Challenges facing agricultural SMME’s in South Africa include, amongst others, the following:
Access to Funding/Post-settlement Support
As the major constraint in developing agricultural enterprises are access to capital, the Incubator gives
access to a line of credit for agricultural expenses and inputs and administrates the incubatee budget.
When necessary, they can use the overdraft facility when spending budget on pre-approved items and
services in line with their business development plan. After each successful production year, the balance
and budget will be revaluated and adjusted to better serve the incubatee.
Profitability
With the sale of produce, the incubatees receive their share of profits from product sold minus expenses
and debt incurred on their Incubator expense account. The budget is reviewed every quarter during
business management coaching sessions, where improvements on spending and income goals are
discussed. The Incubator receives a percentage share of profits made in line with market prices for
business support and marketing services (when a profit is recorded this can become dividends to
shareholders). Shareholder dividends in the Incubator are paid out according to the previously agreed
upon investment schedule.
Personalised Business Plan: The incubation process starts by identifying highest value crop production
available for the incubatee farm, given the current soil, climate and infrastructure, following a thorough
business feasibility analyses, business plan strategy set by Incubator. When the enterprise selection
stage is complete the potential annual income and expenses can be generated using industry standards.

9
Investment: Given the structure and traceability of the incubation support system, the Incubator can be
set up as an attractive “for-profit” option for private investment as upward integration into the
agricultural value chain can open up new and bigger markets with greater financial gain. The Incubator
will be uniquely positioned to identify development strategies and investment opportunities within their
regional business ecosystems and working with government to fulfil economic development targets.
This will give the incubatees the opportunity to grow their own enterprises and reach financial
independency, while growing diverse local agricultural economies on regional scales.
Bargaining Power
The agricultural marketer from the Incubator leverages Incubatee crop quantity and quality consistency
to establish strong market relations to negotiate favourable crop or livestock pricing. Also setting up
value-chains between the various business types of the Incubatees to secure total control of production,
processing and distribution which can contribute more favourably to the Incubatees functioning.
Entrepreneurship Skills & Access to Knowledge
The adaptive management nature of the Incubator enables speedy reaction to market demands and
challenges, and production challenges, which provides an additional level of business security to
incubatees.
Basic and Advanced Training: Incubatees are given access to training materials and information on
crops, production process, machine maintenance, budgeting, personnel management. Agricultural
professionals develop a standardised crop product manual, farm budget and production plan for each
Incubatee, which also serves as a personal development plan per business.
Technical mentoring: Incubatee businesses are visited by agricultural production specialists on a
quarterly basis, contracted by the Incubator, to advise and mentor on technical aspects to improve
production practices.
Certification: The Incubator facilitates and arranges necessary certifications for Incubatee businesses
as required by market specifications, i.e. Global GAP, ISSO 2200, PPECB, SIZA.
Decreased Input Costs
Incubators decrease the production costs of incubatee SMME’s and ensure efficient use of natural
resources.
Shared Technology & Equipment: Centralised mechanization within the incubation context provides
the key equipment necessary to unlock modern production processes that will realise better quality
produce and conserve resources. In order to meet the industry standard, each incubatee is given access
to farm implements, tractors, spray pumps, soil preparation equipment, etc. New and modern
technologies including farm management software, computer-based farm monitoring (e.g. soil probes),
and Normalised Difference Indication (NDVI) mapping will keep agri-business functions modernised
and ensure efficient resource use, i.e. water-smart technologies. Logistical needs can be shared amongst
incubatees which will significantly reduce production and input costs for all incubatees.
Collective Labour: Where labour is required the incubatee has access to collectively shared labourer
pool, which aims to provide year-round work opportunities for agricultural labourers with businesses
that they are familiar with. The labour force will receive the same opportunities for training to ensure
a skilled labour force and build a foundation for future incubatees.
Legal compliance
Each incubatee is provided support for the multitude of legislation that exists, which includes business
and labour laws, tax and environmental compliance. This includes the institutional support functions

10
whereby the Incubators registers new businesses on behalf of incubatees, and also arranges tax
compliance, auditors’ reports, contracts, etc.
Sustainability practices
Sustainability in agriculture encompassed the triple bottom line of people, planet and profit. The
Incubator functions to instil this principle in all incubatees to ensure long-term and sustainable farming
enterprises, which do not damage future generations’ capacity to maintain a similar livelihood. For
‘people’, a strong focus is put on the importance and personal development of all incubatees and their
employees, recognising their strengths and values that contribute to the success of the Incubator. Social
groups, like Farmers Associations and Fire Protection Associations, are encouraged to include both
incubatees and other farmers or ag-business owners.
For ‘planet’, the natural environments in which the farming and processing are done are evaluated and
contextual best practices are implemented to fulfil conservation agriculture goals. This includes
decreasing pollution, supporting pollinators, conserving water, soil health, soil erosion control and
renewable clean energy production. Standardised practices for all potential crops, animal production
and agro-processing have been developed and perfected by commercial growers and businesses over
decades. These standard practices are included in manuals and trainings provided to incubatee SMME’s,
similar to that of franchise business models. The adherence to these production protocols and
management of production systems are crucial to achieve maximum economic success, within the
legislative requirements of the sector. As the business environment varies between crop types and
systems, adaptive management forms a key part of the MABI Model.
For ‘profit’, the business ecosystem created and maintained by the Incubator aims to support wealth
creation for incubatees until such time that they have successfully developed their business to function
on its own.
Key Stakeholders & functions
All participating MABI stakeholders are key to its efficient functioning and to achieve the stated aims.
Key stakeholders include incubatees (agricultural SMME’s), Incubator staff and members, independent
expert trainers and agricultural production specialists, funders and investors, and varying South Africa
government departments.
Incubatee – a land reform beneficiary or black-owned small-scale/subsistence farmers or agri-business
owner (this could include a family), with privately-owned or leased land, with an interest in receiving
support in managing an agricultural business in primary production or agro-processing. It is crucial for
this entity to undergo proactive development, as it is an important factor in incubatee growth.
Incubator – a private for-profit business (with various shareholders) that provides the majority of key
administrative, organisational and structural support to incubatees to establish and run an agricultural
business. Similar to a traditional agricultural co-op but different in the level of support and development
that is central to its functioning (commercial farmers can become Incubators). Functions cover
institutional support, finance admin, human resource, production admin, marketing, logistics and
technical support (detailed in Table 3). These functions are specifically designed to support incubatees
and create a low-risk environment for them to learn and make mistakes without dire consequences. It
fully administrates budgets where funds can only be spent in line with the development objectives of
incubatee SMME’s. It provides and organises sharing of equipment, through rental, for use by all
incubatees. Its most crucial function is the collective marketing of incubatee produce and negotiations
sales contracts for favourable prices.

11
Trainers– agricultural production specialists from various fields and industries. They can be individual
service providers or employees of the Incubator. They provide training on business management,
production plans, and farm management. Coaching is provided by business specialists to assist
Incubatees to properly manage their agricultural business in line with best practices.
Production specialists – contracted by the Incubator, researchers or industry professionals that visit
Incubator farmers/farms on a rotational basis to provide technical support and advice. this can include,
but is not limited to, plant and animal production specialists, environmental practitioners, agricultural
engineers, etc.
Funder - provide capital funding with shareholding in the Incubator.
Government Departments – the South African Department of Agriculture, Rural Development and Land
Reform (DARDLR), Department of Trade and Industry and Competition, Department of of Public
Works, Department of Environmental Affairs, Department of Water and Sanitation collaborate with
MABI’s to ensure business success.
The MABI model functions between incubatees, knowledge specialists, funders and land, all crucial
aspects for early-stage agricultural SMME’s in South Africa (Figure 2).
Figure 2: South African agricultural sector business environment for the MABI Model.
Source: Authors deductions
Discussion
This Incubator Model speaks to the South African government’s development interests on economic
growth, job creation, transformation, and rural development (these are also outlined in the National
Development Plan, published in 2012). The government can play a subtle, yet strategic role through the
MABI Model approach, in terms of economic transformation and integration of pioneer farmers and
communal agricultural lands into supported production, particularly for BBEEE supplier base
transformation and raw material and product supply increase. The focus on key segments within the
agricultural sector will generate volumes of production, which business leaders of market segments will
find hard to resist, or risk losing market share through new competitors entering the markets, ensuring
investment. Considering rural development, enterprise development and job creation via Incubators

12
have proven to be more cost effective than attracting existing businesses to rural communities (Hackett
and Dilts, 2004).
The value of the MABI lies in the tailored solutions designed to address the most difficult challenges
faced by agricultural businesses (Ndabeni, 2008). These solutions include business plan development,
training, access to capital funding and over-draft facilities for year-long cash flow, labour, legal
compliance, sustainable practices, fair profit sharing and investment attractiveness. These factors
support incubatees and create a low-risk environment where they can focus on their business
development and training. Business viability significantly increases when launched in a supportive,
low-risk environment (Hackett and Dilts, 2004).
The MABI Model can be used to develop, in a singular fashion, specifically targeted industries which
needs expansion, i.e. industry expansion and development support. This would include a focus on
products that have a higher demand (consumption) than supply (production) in South Africa. In this
way, the availability of land can be directly linked to the supply/demand of products. For example, dry
beans, of which South Africa imports 80 000 tonnes per year (Greyling, 2015). This opportunity
translates into a 50 000-hectare MABI Model opportunity for the geographical areas where dry beans
can be produced (e.g. Freestate and Kwa-Zulu Natal). Another such opportunity is in the pork industry,
where 6% of annual consumption is imported per annum (BFAP, 2020).
A more unique development opportunity for the MABI Model is presented in the rose oil industry
(supplying the cosmetics industry) in the Free State, where the capital city of Bloemfontein is poetically
known as the ‘City of Roses’. Looking at established rose oil industries, such as in Bulgaria, that
employs 65,000 people while producing 5000 hectares of Rosa damascena roses (Kovacheva et al.,
2010). The incubation of such an Industry for the Greater Mangaung region can lead to it not only
creating a vibrant industry, but even so far as to become the Cosmetics Capital of Africa.
In terms of agricultural export, the MABI Model can be used to unlock additional processing capacity
from large-scale agro-processors. For example, the Eastern Cape pineapple industry sits with an 100
000-ton capacity processing plant that is not at full capacity and can expand (personal communication
with Pierre Tilney, Summerpride Foods).
Acknowledgement must be given to the great role of family businesses. According to FABASA (Family
Business Association of South Africa), globally, there are 570 million commercial farms of which 500
million are family operated. FABASA and AgriSA project that 80% of all registered businesses
operated in South Africa are family operated and 90% of all commercial farms are family operated
(Visser and Chiloane-Tsoka, 2014). This indicates that more consideration should be given to family-
run agri-businesses, as well as to communal agricultural units in former homelands regions of South
Africa, where the MABI Model would contribute to wealth creation for families and communities
(Habbershon and Pistrui, 2002). The training and business experience would encourage inter-
generational wealth-building.
Limitations to the MABI Model include:
• Natural resources availability – The size of the supply chain to be created by the incubator is
limited by the natural resource availability. This in turn limits the amount of SMME’s that
have an opportunity to be sustainable.
• The size of the contracted supply chain – The market and its contracted size is a limiting
factor.
• Behaviour of the entrepreneurs – Unwillingness to operate within the guidelines leads to poor
product quality, timeline challenges and potential budget constraints due to budget over runs.
• Time to market – The ideal Incubator will require SMME’s to be able to generate incomes
within a short period of time if they have no other income or existing production lines.

13
Conclusion
We present a modified agricultural Business Incubator (MABI) as an enterprise development model to
support black-owned agri-businesses, i.e. agricultural SMME’s and land reform beneficiaries, to
contribute to the sector’s discussions on activating policy measures to address equitable agricultural
industry share for black-owned businesses and stimulate sustainable agricultural development in South
Africa. The MABI model is tailored to address the distinct challenges faced by agricultural SMME
businesses in the current economic environment, and pro-actively supports business skills development
of the beneficiaries to ensure long-term success and economic self-sufficiency.
Acknowledgements
This article was based on conceptual ideas, developed from implementing incubator models, and
secondary data. The Ethics and Leadership Institute (Pty.) Ltd. has trialled and implemented various
forms of agricultural incubators in South Africa, funded by private companies and various parastatal
organisations, e.g. the Jobs Fund and Industrial Development Corporation of SA.
References
Al-Mashari, M., Al-Mudimigh, A. and Zairi, M., 2003. Enterprise resource planning: A taxonomy of
critical factors. European journal of operational research, 146(2), pp.352-364.
Aliber, M. and Hall, R., 2012. Support for smallholder farmers in South Africa: Challenges of scale
and strategy. Development Southern Africa, 29(4), pp.548-562.
BFAP (Bureau for Food and Agricultural Policy), 2020. South Africa's food production &
consumption baseline. https://covid19.ivis.africa/food-security/production-consumption. Accessed 1
Aug 2020.
Bruynis, C.L., Goldsmith, P.D., Hahn, D.E. and Taylor, W.J., 2000. Key success factors for emerging
agricultural marketing cooperatives. Journal of Cooperatives, 16(1142-2016-92757), pp.14-24.
Cao, Q., Gedajlovic, E. and Zhang, H., 2009. Unpacking organizational ambidexterity: Dimensions,
contingencies, and synergistic effects. Organization Science, 20(4), pp.781-796.
DAFF, 2015. A Profile of The South African Pineapple Market Value Chain.
http://www.nda.agric.za/doaDev/sideMenu/Marketing/Annual%20Publications/Commodity%20Profil
es/FRUITS%20AND%20VEGETABLES/Pineapple%20market%20value%20chain%20profile%2020
15.pdf
Department of Agriculture, Land Reform and Rural Development. 2020. Abstract of Agricultural
Statistics: Pretoria.
Gillis, W. and Castrogiovanni, G.J., 2012. The franchising business model: an entrepreneurial growth
alternative. International Entrepreneurship and Management Journal, 8(1), pp.75-98.
Grain SA, 2019. Know the value of dry beans. https://www.grainsa.co.za/know-the-value-of-dry-
beans
Greyling, J., 2015. A look at the contribution of the agricultural sector in South Africa. Grain South
Africa.
Habbershon, T.G. and Pistrui, J., 2002. Enterprising families domain: Family‐influenced ownership
groups in pursuit of transgenerational wealth. Family Business Review, 15(3), pp.223-237.

14
Hackett, S.M. and Dilts, D.M., 2004. A systematic review of business incubation research. The
Journal of Technology Transfer, 29(1), pp.55-82.
infoDev, 2013. Training Module on Agribusiness Incubation. infoDev, a World Bank Group Program.
https://www.infodev.org/articles/training-module-agribusiness-incubation (accessed 20 October
2020).
Kovacheva, N., Rusanov, K. and Atanassov, I., 2010. Industrial cultivation of oil bearing rose and
rose oil production in Bulgaria during 21st century, directions and challenges. Biotechnology &
Biotechnological Equipment, 24(2), pp.1793-1798.
Lowder, S.K., Skoet, J. and Raney, T., 2016. The number, size, and distribution of farms, smallholder
farms, and family farms worldwide. World Development, 87, pp.16-29.
Mabaya, E., Tihany K., Karaan, M.,Van Rooyen,J., 2011. Case Studies of Emerging Farmers
MacLeod, N.D., McDonald, C.K. and Van Oudtshoorn, F.P., 2008. Challenges for emerging livestock
farmers in Limpopo province, South Africa. African Journal of Range and Forage Science, 25(2),
pp.71-77.
Mahlati, V., Hall, R., Karaan, M., Kriek, D., Mabasa, B., Moagi, T., Ngcobo, T., Ngcukaitobi, T.,
Serfontein, N., and Sihlobo, W., 2019. Final Report of the Presidential Advisory Panel on Land
Reform and Agriculture. The Presidency, South Africa.
https://www.gov.za/sites/default/files/gcis_document/201907/panelreportlandreform_1.pdf
McElwee, G., 2006. The enterprising farmer: a review of entrepreneurship in agriculture. Journal of
the Royal Agricultural Society of England, 167(9).
Mian, S., Lamine, W. and Fayolle, A., 2016. Technology Business Incubation: An overview of the
state of knowledge. Technovation, 50, pp.1-12.
Michael, S.C., 2000. Investments to create bargaining power: The case of franchising. Strategic
Management Journal, 21(4), pp.497-514.
Mukwarami, S., Mukwarami, J. and Tengeh, R.K., 2020. Local economic development and small
business failure: the case of a local municipality in South Africa. International Journal of Business
and Globalisation, 25(4), pp.489-502.
NAMC, 2019. Status Report on Statutory Measures Implemented in terms of the Marketing of
Agricultural Products Act (Act N .47 of 1996), Pretoria: National Agricultural Marketing Council
(NAMC).
National Planning Commission, 2011. National Development Plan Vision for 2030 Our Future-make
it work. National Planning Commission, Pretoria. ISBN 978-0-621-41180-5.
https://www.gov.za/sites/default/files/gcis_document/201409/ndp-2030-our-future-make-it-workr.pdf
(accessed 30 August 2020).
Ndabeni, L.L., 2008. The contribution of business incubators and technology stations to small
enterprise development in South Africa. Development Southern Africa, 25(3), pp.259-268.
Pauwels, C., Clarysse, B., Wright, M. and Van Hove, J., 2016. Understanding a new generation
incubation model: The accelerator. Technovation, 50, pp.13-24.
Reay, T., Pearson, A.W. and Gibb Dyer, W., 2013. Advising family enterprise: Examining the role of
family firm advisors. Family Business Review 26(3):209-214. DOI: 10.1177/0894486513494277.
Robinson, D.F., 2008. The development and diffusion of business incubation capabilities in five
emerging markets in South America. Networks Financial Institute Working Paper, (2008-WP), p.08.

15
Sihlobo, W. & Ntombela, S. 2020. Reviewing Structural Constraints to Development of South
Africa’s Agricultural Sector: Pretoria. National Agricultural Marketing Council (Unpublished
briefing paper).Smith, P.A., 2001. Action learning and reflective practice in project environments that
are related to leadership development. Management Learning, 32(1), pp.31-48.
https://doi.org/10.1177/1350507601321003.
Tortia, E.C., Valentinov, V.L. and Iliopoulos, C., 2013. Agricultural cooperatives. Journal of
Entrepreneurial and Organizational Diversity, 2(1), pp.23-36. DOI: 10.5947/jeod.2013.002.
Visser, T. and Chiloane-Tsoka, E., 2014. An exploration into family business and SMEs in South
Africa. Problems and Perspectives in Management, 12(4), pp.427-432.
Von Loeper, W., Musango, J., Brent, A. and Drimie, S., 2016. Analysing challenges facing
smallholder farmers and conservation agriculture in South Africa: A system dynamics
approach. South African Journal of Economic and Management Sciences, 19(5), pp.747-773.
Webb, J., 2008. Brief Overview of the global incubator industry. infoDev, a Worldbank Group
Program, U.S.A. https://www.infodev.org/infodev-files/resource/InfodevDocuments_498.pdf
(accessed 30 August 2020).
Winther, E.A., Overton, M. and C. Heron, 2013. The Farm Incubator Toolkit: Growing the Next
Generation of Farmers. New Entry Sustainable Farming Project, U.S.A.