Small Business

Israel's Kibbutzim Shift From Red to Green


As they drift away from socialism, the collectives are launching eco-conscious businesses

Members of Kibbutz Ketura, a collective farm in Israel's Arava Desert, share meals under the fluorescent lights of a spartan dining hall. The kibbutz's leaders earn the same pay as the laundry folders: nothing, other than occasional dividends and monthly allowances. Anyone who wants a new air-conditioner to make it through the infernal desert summer has to sign up on a waiting list. Yet Ketura's commitment to socialism hasn't stopped it from forming a partnership with German industrial giant Siemens (SI).

Siemens last August paid $15 million for a 40% stake in Arava Power, a company affiliated with the kibbutz that hopes to start generating solar power this year. "The partnership works well for both sides," says Eliezer Tokman, chief of Siemens Israel. "The guys at Arava are the entrepreneurs. They initiate projects and deal with regulation, and we design, build, and maintain the projects."

Like Ketura, many kibbutzim are moving into environmental businesses. Since the 1980s, when soaring interest rates and skyrocketing inflation brought many of the agrarian collectives close to bankruptcy, they have branched out from farming. As they morph into a more pragmatic form of egalitarianism, they typically maintain a keen awareness of the environment. "Tapping the sun's energy is only natural given our geographical location and the general inclination of the kibbutz's members for ecological pursuits," says Yosef I. Abramowitz, a student activist turned green entrepreneur who in 2006 founded Arava with Ketura members.

On June 22, Arava announced contracts with three Bedouin families to put solar installations with 20 megawatts of potential output on their land in the Negev Desert, near the Red Sea. That project will be funded with up to $80 million in loans from the Overseas Private Investment Corp. (OPIC), a U.S. government agency. Arava is trying to raise at least $500 million more to install photovoltaic arrays at 15 kibbutzim. The company aims to build capacity of 1,000 MW, roughly 10 percent of Israel's current energy needs. "We're never going to be Rockefellers," Roy Kagan, manager of Ketura's businesses, says between phone calls and text messages. "But we are still very competitive and profit-oriented."

For some kibbutzim, the green roots go deep. At Kibbutz Dalia, there's a dilapidated blacksmith shop where a handful of members in 1941 started making water meters. They rightly believed the meters would help settlers conserve water on arid land in what was then known as Palestine—and, they hoped, supplement their meager proceeds from farming the rocky terrain near the port city of Haifa. Today, the original building stands in the shadow of a factory churning out millions of meters annually that are used as far away as Britain and the U.S. Total sales are about $100 million annually. Clean technology and green energy projects "just come as a natural direction for kibbutzniks," says David Zakai, export manager at Arad Group, the Dalia-owned company that makes the meters.

Kibbutz Hatzerim, in the Negev Desert, owns Netafim, one of the world's largest makers of smart irrigation systems, with annual sales of over $500 million. The company started in 1965, when the kibbutzniks teamed up with an engineer who discovered that a slow and balanced supply of water led to improved plant growth. Kibbutz Sde Eliyahu, founded in 1938 by German immigrants, was an early convert to organic farming. In 1992 the kibbutz founded Bio-Bee Biological Systems, which sells bees for crop pollination and insects that eat other bugs to reduce the use of chemical pesticides.

The kibbutzim often cooperate on green projects. Water-meter maker Arad is a joint venture between Dalia and a neighboring kibbutz. Ketura is part of a cluster of a dozen desert kibbutzim involved in green projects, including solar energy, waste-water recycling, and an educational program to teach alternative building and organic gardening techniques. A water filtration business affiliated with Kibbutz Beit Zera, on the shores of the Sea of Galilee, in January was bought by a similar outfit owned by the nearby Kibbutz Amiad.

Like Ketura, with its Siemens and OPIC partnerships, more kibbutzim are bringing in foreigners as they pursue green businesses. Kibbutz Na'an, between Tel Aviv and Jerusalem, sold half its stake in Na'an Dan Irrigation to India's Jain Irrigation Systems for $35 million. Chromagen, owned by Kibbutz Sha'ar Ha'amakim, sells some $50 million in solar water heaters annually and controls about 25 percent of the Israeli solar-water heating market. In April, Chromagen agreed to cooperate with Milwaukee-based A.O. Smith (AOS) to start offering its products to Americans. "The partnership will allow us to target the U.S. market, which has barely been penetrated," says Amit Shvartz, vice-president of marketing at Chromagen. "It's a good feeling knowing that we are not only feeding mouths and trying to increase revenues, but we are also selling something that is eco-friendly."

The bottom line: As kibbutzniks adopt a more pragmatic socialism, many have launched thriving green technology and clean energy businesses.

Wainer is a reporter for Bloomberg News.

Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus