Kibbutzim - The transition from agronomy to an industrial economy


The Kibbutz Industries Association represents, assists and promotes kibbutz industry, which is the main economic infrastructure of the kibbutzim. The Kibbutz Industries Association, which was established in 1962, is the umbrella organization representing more than 250 industrial enterprises in kibbutzim, collective moshavim and regional enterprises, which are located across the country, mostly in the peripheral areas

(Courtesy Kibbutz Industries Association Website)


Many of Israel's kibbutzim have become industrial or hitech powerhouses, with numerous kibbutzim and by extension, their members, becoming extremely wealthy, very much at odds with the objectives of the socialist kibbutz founding fathers. The Cambridge University dictionary describes a kibbutz as “a farm in Israel where profits and duties are shared and all work is considered equally important”, which says it all in a few words. The current reality is a very different story.


Bilu and the first kibbutzim


Bilu Founder Israel Belkind


The idea of establishing collective agricultural settlements in Palestine (Israel), which came to be known as kibbutzim, was born out of the violent anti-Jewish pogroms which took place in the Russian Empire during the period 1881 to 1884. Zionist activist Israel Belkind, who had been born in Minsk, Belarus, in 1861, founded the Bilu movement in 1882 with the aim of establishing agricultural settlements in Palestine to provide a new home away from the Russian Empire, where Jews could be safe while also fulfilling the 2,000 year old Jewish dream of a “Return to Zion”. This was some 15 years before the popularisation of the Zionist Movement with the publication of the book “Altneuland” by Theodor Herzl, which added a new impetus to the efforts of Belkind and Bilu. Belkind and his group founded agricultural colonies, beginning with Rishon L’Tzion in 1882, followed by Gedera 2 years later. The first kibbutz, Degania Alef, also a Bilu project, was on the other hand a communal agricultural settlement founded in 1910 on the twin legs of Zionism and socialism.


While some kibbutzim still retain elements of the founding principles, they have also become caught up in the modern trend of Israel being the innovation and start up nation. The second generation of kibbutzniks have been able to move away from the traditional labour intensive agricultural activities and shift into the industrial and economic worlds of manufacturing and hitech. Listing the myriad achievements and financial successes of all the kibbutzim that have become successful entrepreneurial entities would fill the pages of a very thick book, so I have selected just 5 kibbutzim for this blog, that have made their mark globally, while bringing unimagined wealth to the kibbutzim. Kibbutz Sde Eliyahu is a great success story which I wrote about recently, so it will not be included in the fabulous five.


Kibbutz Yizreel and Maytronics


Kibbutz Yizreel overlooking the Jezreel Valley


Topping the list is Kibbutz Yizreel in the Jezreel Valley, which was founded on 20 August 1948, by a group of demobilised Palmach soldiers, with the kibbutz later becoming home to a group of Habonim members from South Africa, Australia and New Zealand who made Aliyah in 1958. They were later joined by further Habonim groups from South Africa in 1962 and in the early 1970’s. The financial woes that beset Israel in the 1980’s left Kibbutz Yizreel in dire financial straits, in common with many other kibbutzim. While agriculture remained the core activity on the kibbutz, the move to industrialisation began with a venture into the world of electronics and the development of a numerical controls systems manufacturing plant.


Dolphin Pool Cleaners and Maytronics


Maytronics technician assembling a Dolphin Pool Cleaner on Kibbutz Yizreel


During 1982 South African born Peter Rasch invented a robotic swimming pool cleaner working in concert with Kibbutz Yizreel, and the Dolphin Robotic Pool Cleaner was born. The kibbutz established a manufacturing plant under the name of Maytronics, which is today listed on the Tel Aviv Stock Exchange, while there are now also subsidiary companies in the United States, France and Australia. During February 2012 the kibbutz received an offer of ₪180 million for its entire 67% holding in Maytronics, valuing the company at ₪300 million. Following an acrimonious meeting of the kibbutz members, the offer was rejected, despite a substantial minority of members voting for the acceptance of the offer. The upshot is that the kibbutz later sold 10% of the company in 2017 for ₪235 million and recently sold a further 3% for ₪150 million, while still retaining 54%n of a company that is now valued at three billion shekels. Maytronics is now listed on the Tel Aviv 35 Index as one of the 35 most valuable companies in Israel. Not bad from its small beginnings on the kibbutz.


According to the Israel Business News Site, Globes, Kibbutz Yizreel is moving forward from being a highly successful industrial entity, by using its wealth to invest in or purchase other companies. Globes recently reported that Yizreel, in partnership with neighbouring Kibbutz Ein Harod (Ichud), had purchased electronics company, Netzer Precision Motion Sensors Ltd. for ₪45 million. This kibbutz is certain to be in the news more often in the future, as it grows financially.


Kibbutz Sdot Yam and Caesarstone


Kibbutz Sdot Yam


Sdot Yam is located a short distance south of Caesarea on the Mediterranean coast. The city of Caesarea was established by Herod the Great, some 2,000 years ago, as the administrative centre of the Roman Province of Judea. Sdot Yam started life in 1936, originally situated just north of Haifa, a strategic siting selected by David Ben Gurion to allow for the clandestine disembarkation of Jewsih immigrants to Mandate Palestine, who were considered as illegals in the eyes of the British Administration. Ostensibly established as a fishing village, Sdot Yam was a vital cog in the Palmach machinery for smuggling “illegal” immigrants into Palestine. The Kibbutz was moved to its present location during 1940, again for strategic reasons, with "illegal" passengers from at least 4 Aliyah Bet ships disembarking off the Sdot Yam beach. The kibbutz also served as the headquarters of the PalYam, the Haganah Naval Force.


Refugee passengers disembarking from an Aliyah Bet ship at Sdot Yam


Caesarstone


Besides quality kitchen and bathroom countertops, Caesarstone also produces a range of culinary art , using various colours of quartzite.


While the kibbutz members originally depended on fishing and agriculture to exist, and indeed did so for many years, they founded a company called Caesarstone in 1987, to design and manufacture quartz countertops primarily for kitchen and bathroom applications, although the countertops have also been applied to many other uses. Quartz is a clear crystalline compound, known chemically as silicone dioxide, although it appears in nature in various colours owing to impurities in the crystals. Rose quartz, agate, onyx, jasper and tiger's eye are among the popular quartz crystals that are used in jewelry manufacture and for other decorative purposes.


The manufacturing process for the countertops involves the grinding of quartz aggregate with the resultant granular quartz then being mixed with polymer resins to solidify the aggregate, with different colour pigments added to achieve the desired colours. The resultant solidified mass is then machined and engineered to achieve the correct thickness, smooth finish and desired shape. Caesarstone countertops are composed of more than 90% natural quartz once they have been through the entire manufacturing process.


While Caesarstone countertops are widely used in kitchens and bathrooms throughout Israel, impressive inroads have been made into the luxury residential market in the United States. Caesarstone's sales are in excess of ₪1.5 billion, although the company was sold for $260 million in 2014, making Sdot Yam one of the wealthier kibbutzim in Israel. The company is still based on the kibbutz and with 1500 employees, making it an important element of the local economy.


Kibbutz Ramat Yohanan and Palram


Entrance to Kibbutz Ramat Yohanan


Ramat Yohanan, about 20 kms. due west of Haifa, came into existence in 1931 on a tract of land that had been purchased from a Lebanese family as early as 1925. The kibbutz was originally named Yohanan Smuts, in honour of the famed South African statesman and military leader, Jan Smuts, although the Smuts part was soon dropped. The original settlers were made up of a mix of newly arrived olim (immigrants) from the United States and a group who had made aliyah from Galicia (Poland) several years earlier and undergone agricultural training in Palestine. Kibbutz members initially earned an income by working as foresters in the nearby JNF forests, while slowly establishing the growth of various crops, which included the planting of citrus and lychee orchards. Dairy farming has become an important part of the kibbutz economy, but the crowning glory was the establishment of the Palram factory on the kibbutz in 1963, shortly after the birth of the Kibbutz Industries Association. Kibbutz Ramat Yohanan was one of the very first kibbutzim to look beyond agriculture to industrial development, and after a bit of history. we'll return to that important transition in a short while.


Battle of Ramat Yohanan


Kibbutz members as Haganah soldiers, before the Battle of Ramat Yohanan


Ramat Yohanan was attacked by the 500 strong Druze Brigade of Kaukji’s Arab Liberation Army during the the 1948 Arab Israeli War , with the kibbutz, which also served as an Haganah training base, becoming the scene of a significant battle between the kibbutz defenders and the Druze attackers. The outnumbered and outgunned defenders mounted an heroic and successful defence , which resulted in the withdrawal of the enemy soldiers. The final result of the battle was that the Druze soldiers deserted from Kaukji’s army, throwing their lot in with the Haganah, and subsequently with the Israel Defence Forces. This allegiance has lasted ever since the Independence of Israel, with Druze men joining the IDF as volunteers, many of them serving in the regular army and achieving high military ranks. Two of the highest ranking Druze officers are Brigadier Generals Ghassan Alian, Golani Brigade Commander, and Imad Fares who commanded the Givati Brigade, becoming the first non-Jewish officer to command an IDF Brigade.


Palram


Hothouse built with Palram products


Fifty seven years after its founding, Palram is still based on Ramat Yohanan, although the company has a huge global outreach, with branches or subsidiaries in the United States, South Africa, France, Russia, Mexico, Australia, Britain, India, Germany and China, and I might well have missed one or two which I am not aware of. Products manufactured by Palram include various types of plastic panels for use in architecture, manufacturing and the construction of greenhouses. Many of the clear polycarbonate panels seen in the noise reducing walls along Israel’s highways are produced by Palram, and are indeed used in many other countries for similar purposes. The company also produces products suitable for the armaments industry such as shock, fire and bullet resistant polycarbonate panels for use in aircraft, armoured and other military vehicles, as well as in the private security industry globally. Palram is also a major supplier of the sliding roof panels used in many sports stadia.


Forbes magazine listed Kibbutz Ramat Yohanan in 2014 as having a a net worth of $200 million, making it the 6th wealthiest kibbutz in Israel. Recent results (2019) reflect Palram as having revenue of 1.54 billion with a net income of 110.31 million and a market capitalisation of 751 million. The first 6 months of 2020 showed revenue increasing by 12% to ₪865 million while half year profits came in at ₪101 million. Ramat Yohanan is certainly one of the industrialised jewels in Israel's kibbutz kingdom.


Kibbutz Hatzerim and Netafim


Kibbutz Hatzerim


Kibbutz Hatzerim, located in the Negev Desert, about 10 kms. west of Beersheva, was established on night of 5 and 6 October 1946 which coincided with Yom Kippur, with 6 October destined to become a significant date in Israel’s history after the surprise Arab attack on Yom Kippur 1973. Hatzerim was one of 11 kibbutzim established overnight on Yom Kippur to ensure a Jewish presence across the Negev, following the publication on 31 July 1946 of the Morrison-Grady plan for the partition of Palestine. This was a joint Anglo-American plan which excluded the Negev from a future Jewish State, going so far as to suggest the prohibition of any such proposal. The Jewish National Fund, the Jewish Agency, the Haganah and Mekorot, the National Water Carrier, worked in concert to successfully implement the plan, with the 11 proposed kibbutzim all established in the Negev on that Yom KIppur night.


The first residents of Kibbutz Hatzerim were members of the scout movement, who were soon joined by a group of young eastern European Jews who had arrived in Palestine as members of the group known as the Tehran Children, refugees of the German onslaught on Poland during the initial stages of the Second World War. The Tehran Children had been given agricultural training in anticipation of their being settled on one of Israel’s kibbutzim. The kibbutz faced immense problems from the very beginning, with the soil being very salty and unsuitable for agriculture, although methods of desalinating the soil were used and small tracts of land slowly became available for the planting of crops. The arid conditions and shortage of water meant that all crops grown depend totally on irrigation from the sparse water resources. Polish born engineer and inventor Simcha Blass, one of the founders of Mekorot, had discovered several years earlier that drip irrigation could be used in order to maximise the benefits of each drop of water used for the crops.


Netafim


Netafim Motto


Between 1960 and 1965 Blass worked on a system that would automate the principle of drip irrigation and once perfected, selected Kibbutz Hatzerim to apply and test his system. The efficiency and excellent results prompted the Kibbutz to enter into a partnership with Blass to manufacture and market the technique which he had developed. The name chosen for the company was Netafim, founded in 1965, and in the words of the company “ the struggle (to grow crops in the desert) taught us how to combine precision irrigation, agronomic expertise and relentless innovation to help farmers grow more of any crop, in any climate, with less.” That statement is very descriptive of the business ethos of Netafim, and the success achieved by the company and as a result, the kibbutz, which is legendary as a pioneer of innovative irrigation systems.


Netafim currently has 33 subsidiaries and 17 manufacturing plants worldwide, in diverse countries such as South Africa, Australia, the United States, India and China to mention just a few. Wherever there is crop growing and agricultural activity that needs irrigation, you will be sure to fund Netafim. The majority shareholding of 80% in Netafim was recently purchased by the Mexican company, Mexichem, for $1.5 billion. With Kibbutz Hatzerim retaining a 20% share, worth around $400 million. The company has a 30% share of the global market and is the world's second largest manufacturer and supplier of irrigation equipment and technology. Netafim recently announced that it had concluded an $85 million agreement to supply its expertise and equipment to 66 villages and 35,000 farmers on an area of 50,000 hectares in the state of Karnataka in India. The total value of this important contract is expected to exceed $100 million during the next two to three years. The future of Kibbutz Hatzerim and its members is no doubt assured for many years to come.


Kibbutz Shamir and Shamir Optical


Kibbutz Shamir Park


Kibbutz Shamir in the North Galilee region, some 10 kms east of Kiryat Shmona, was established in 1944 by a group consisting mainly of young Romanian immigrants, many of whom had made Aliyah as early as 1935 and were well trained in agricultural production. The kibbutz members were from the socialist Hashomer Hatzair Movement and were later joined by like minded olim from Poland. Following the armistice agreement with Syria, signed on 20 July 1949 ending Israel’s 1948/49 war with Syria, the armistice line with Syria was demarcated a few hundred metres east of Kibbutz Shamir, making it very vulnerable to attacks from Syrian forces based on the western areas of the Golan Heights, which all fell in Syrian territory.

Together with most other settlements in the Northern Galilee, the kibbutz suffered sporadic artillery attacks launched from Syria, a situation which continued until the 6 Day War of 1967, during which Israel captured a large portion of the Golan Heights. The most significant attack occurred on 3 December 1958 when the kibbutz and surrounding area came under heavy artillery fire which caused severe damage to buildings on the kibbutz, although thankfully, there were no casualties. While the kibbutz was safe from attacks from the east after the 6 Day war, a new source of danger emerged when Lebanese based Arab terrorists on the northern border crossed into Israel and infiltrated the kibbutz. Two female members of the kibbutz, one of them pregnant, were shot and killed in the initial attack while a young female volunteer from New Zealand was killed when the terrorists opened fire at random targets. Kibbutz security forces became involved in a gun battle with the terrorist during which all 4 infiltrators were killed. A note was found on one of the terrorists which read "We love to die, as you love to live”, a credo which sadly still seems to hold much sway in the Palestinian mind.


Shamir Optics


Shamir Optics Head office on Kibbutz Shamir


Kibbutz Shamir was approached by an American company, KMS Industries in early 1970 to enter into a joint venture for the manufacture of lenses for spectacles on the kibbutz. KMS also undertook to purchase the entire production of the proposed lens manufacturer for the first two years. The company was established in 1972, initially specialising in the manufacture of bifocal lenses for spectacles, with the total production earmarked for export to the United States. The manufacture of multifocal lenses commenced a few years later and by 1979 total annual sales reached $500,000, becoming a significant contributor to Israel’s economy.


The first foreign subsidiary, Shamir USA, was established in 1984, while a new company, Shamir Insight Inc. was established in 1999 to supply unpolished lenses to the US market. Shamir Optics entered into a partnership with Eyal Optics for the manufacture of plastic lenses, soon becoming a leading manufacturer. The company entered the European market in 2002, forging a partnership with German lens company Altra Optic, to purchase an optics manufacturing company in Portugal. The next significant step for Shamir Optics was its listing on Nasdaq, becoming the first kibbutz based industry to be listed on this significant global stock market.


The company now has subsidiaries in 22 countries, the most important of which are in Japan, New Zealand , Singapore , Italy , France and Canada, with all these subsidiaries running production laboratories for lenses of various types.


Shamir Optics delisted in 2011 and is currently jointly owned by Kibbutz Shamir and Essilor International, following a merger which valued Shamir Optics at approximately $250 million. The company reported sales in excess $250 million for 2017, mainly in the European and United States markets. Shamir Optics is a dynamic company and an important player in the global lens market, which augurs well for the future of Kibbutz Shamir and its members.



I have detailed only 5 kibbutzim, but there are many, many more that have made the transition to an industrial based economy with great success. Among those are Kibbutz Kfar Masaryk, home to the Ducart Packaging Company, Kibbutz Givat Oz and its Aromor Flavors and Fragrances factory, while 50% of 2011 startup Algalo, based on Kibbutz Ein Hamifratz near Akko, was sold for $88 million in 2014. The success of so many kibbutzim in moving over from agriculture to many types of diversified industries is very much in keeping with Israel’s dual reputation as being the Innovation as well as the Start Up Nation.




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