Doctoral Degrees (Agricultural Economics)

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Economic analysis of supermarkets as a marketing channel choice for fresh produce smallholder farmers in Eswatini.
(2020) Dlamini-Mazibuko, Bongiwe Porrie.; Ferrer, Stuart Richard Douglas.; Ortmann, Gerald Friedel.
The growth of supermarkets in Eswatini has been dominated by South African supermarket chains that typically have access to established procurement channels from South Africa. Whilst some supermarkets do procure some fresh produce from local farmers, others exclusively procure from South Africa. This facilitation of market access for imported fresh produce in Eswatini – a threat for local farmers - differentiates this study from previous research on the impacts of supermarkets on farmers in developing countries. In particular, supermarket requirements imposed on producers in conjunction with competition from imports has important implications for local farmers’ direct access to these markets, the types of fresh produce procured, and the relationships formed, which therefore, impact on farm incomes of smallholder farmers in Eswatini. Therefore, the primary objectives of the study are to show the procurement system of vegetables in Eswatini as a complex system; analyse the nature of the farmer-buyer relationships; determine the factors affecting the choice of marketing outlets; and estimate the impact of supermarket participation on income of smallholders in Eswatini. The study focused on the procurement of fresh produce, namely cabbages, spinach and lettuce from Hhohho and Manzini, where the majority of supermarkets in Eswatini are located. A combination of sampling methods has been used in the study. A random sampling method was used to select a sample of 110 smallholder farmers supplying vegetables to traditional markets and NAMBoard, (a parastatal that, amongst other functions, assists farmers with production, processing, storage, transportation, distribution of their produce and the sale of scheduled products) and about 60 smallholders were supplying supermarkets. Informants from the vegetable supply chain were purposely selected with the view of being directly and indirectly, involved in the chain. The thesis is structured as four research papers that address the above-stated objectives. The first research paper examines the procurement system of vegetables in Eswatini as a complex system using the Theme Network Analysis (TNA). TNA allows for the identification of linkages of key themes associated with the procurement of vegetables by formal markets and other pertinent themes that can be further investigated for solutions to the system. In the second paper, factor analysis and discriminant analysis were used to determine farmer-buyer relationships between informal and formal marketing channels based on relationship satisfaction, trust and commitment. Results from the discriminant analysis revealed that there is a statistical significant difference between formal and informal marketing channels, and those farmers supplying formal markets perceived levels of satisfaction, trust, and commitment better than for informal markets. The third research paper involved the application of the Multivariate Probit (MVP) model to estimate the factors influencing the choice of marketing outlet selection strategies. The marketing outlets observed were supermarkets, NAMBoard and traditional markets, and the results showed that these outlets were substitutes. This implies that when it comes to marketing outlet selection, farmers would select one outlet over the other based on economic and practical factors; if the conditions for supplying one market outlet are inaccessible for smallholders, another market will be selected. The selection decision is influenced by risk attitude, assets ownership, institutional variables, transaction costs and market attributes. Lastly, the fourth paper involved the application of the Endogenous Switching Regression model to determine the factors influencing participation in supermarkets and the effect participation has on income of suppliers. The results revealed structural differences between farmers supplying supermarkets and traditional markets, particularly with respect to the size of the farm and off-farm income. The result also revealed that smallholders supplying supermarkets earned a relatively higher income than those supplying traditional participants. The main conclusions of the study are as follows: the characteristics of supermarkets and farmers, as well as the nature of the product, add to the complexity of the procurement system. The TNA enhanced the understanding of the identified issues contributing to the complex procurement systems; hence, strategies for improvement can be investigated. The key challenges identified were inconsistent supply of produce, lack of finance, and transport, high procurement requirements and high transaction costs. The social responsibility approach that supermarkets use for smallholders is attributed to these procurement challenges, which means that buying from local smallholders is not one of the business strategies for retailers. Therefore, policy regulations set to limit imports and encourage domestic procurement while developing smallholders to be able meet procurement requirements are necessary. The introduction of such policies may reduce imports, which are regarded as a threat to local farmers. Secondly, the nature of the buyer-seller relationships between the marketing channels is discrete, which is characterised by flexibility and lack of commitment between farmers and the buyers. The factors affecting the choice of marketing outlets and the effect on supermarket participation are crucial for the sustainable growth of smallholder vegetable farmers in Eswatini. The farmers’ risk preference, different assets owned, institutional factors, and the duration the marketing outlet takes to make payment for produce influence supermarket channel selection decisions. The implications of these results (factors) provide empirical guidelines necessary for farmers when selecting marketing channels. Policies aimed at the commercialization of smallholder farmers involving the establishment of institutions and the acquisitions of assets such as the provision of education (skills training), improved market information, extension services, mobile phone, transportation and farm size to produce marketable surplus are critical for the improvement of supermarket participation leading to improvement of farmers’ income. The study, therefore, recommends a coordinated and comprehensive supply chain approach, which will enhance a broader understanding of the vegetable marketing system and the achievement of a mutually beneficial relationship that will enhance smallholder farmers’ access to markets and further improve their household welfare from income earned from participating in these markets.
Evaluation of institutional integration, farmer participation and performance in smallholder irrigation schemes in KwaZulu-Natal Province, South Africa.
(2020) Phali, Lerato Eunice.; Mudhara, Maxwell.; Ferrer, Stuart Richard Douglas.; Makombe, Godswill.
Smallholder irrigation schemes (SIS) are pivotal in sustaining livelihoods and creating employment in rural communities of South Africa. The South African govern ment has made efforts to rehabilitate and revitalize such schemes; however, current realities of poor scheme performance, low farmer participation and dilapidated infrastructure raise questions about providing the irrigation improvements. SIS beneficiaries are usually low-income farmers faced with various production constraints, whose success rests on the schemes’ institutional environments. The government adopted the Irrigation Management Transfer to foster collective responsibility and rule compliance and to improve the performance and to decentralize the management of SIS. However, in many cases, the lack of awareness of formal institutions and stakeholder involvement hinders the effective management of the schemes. Given the shortcomings of the SIS, this study evaluates institutional integration, farmer participation and SIS’ water-user performance. The study's specific objectives were to assess the institutional integration in the SIS governance in KwaZulu-Natal (KZN) Province, South Africa; to assess the determinants of the household-level perceptions of scheme governance; to evaluate the determinants of farmer’s participation in the management of SIS and lastly; to estimate water-use performance in SIS The study adopted qualitative and quantitative techniques to address the objectives. Data were collected from 341 households across four SIS in KZN. Focus group discussions and key informant interviews were held to obtain more information on scheme governance. The chosen schemes have different features such as institutional arrangements, farmer composition, and production challenges, and are representative of the average SIS in South Africa. The study evaluated the horizontal and vertical institutional integration of water governance in SIS Stakeholder interactions in the schemes were assessed through Exploratory Social Network Analysis to identify, categorize, and investigate stakeholder challenges. The Management Transition Framework, an interdisciplinary framework for evaluating water systems, management processes and multi-level governance regimes, was adopted to analyse institutional integration. Considering that good governance is a prerequisite for the effective management of common-use resources, the determinants of perceptions of governance were evaluated using the multiple regression model. Principal Components Analysis, Structural Equation Modelling, and multiple regression were used to generate participation in management indices, evaluate the relationship between management constructs and evaluate the determinants of water-users’ participation in SIS management, respectively. Furthermore, the study assessed the performance of water-users across the four SIS, given their different institutional arrangements. Technical Efficiency was used as a proxy for water-user performance and was measured using Cobb-Douglas and Trans-log production functions. A Stochastic Meta-Frontier Analysis (SMFA) method was employed to measure the overall efficiency of water-users across schemes and determine technical gap ratios. In assessing institutional integration in SIS governance, the study found that information asymmetries hindered horizontal integration. Simultaneously, the fiscal and capacity challenges, low accountability, and transparency amongst stakeholders led to the lack of vertical integration. The results indicate a lack of integration in SIS governance. Empirical results show that farmers that are satisfied with the informal institutions, being the rules and norms set locally to govern the scheme farmers, value the involvement of the traditional authorities in scheme management, including their contribution in rule enforcement. Age, agricultural training, water adequacy, participation in scheme activities, psychological capital and land tenure have a positive effect on perceptions of governance. The study found that irrigators who participated in the regulation and control of SIS also participate in information sharing activities. Furthermore, participation in SIS management is composed of four management constructs that have different determinants. The study found that governance perceptions, land tenure security, credit access, and co-operative membership are determinants of participation in the management of SIS. In evaluating water-user performance, the SMFA results yielded an overall average meta-efficiency of 0.85, which is relatively high. The efficiency model results showed that perceptions of governance, farmer psychological capital, land tenure security, credit access, co-operative membership, and gender significantly affect water-users’ performance. The study recommended the need for stakeholders to understand existing institutions and their roles, i.e., The Department of Agriculture, Fisheries and Forestry, Department of Water and Sanitation, extension officers. Synergies and improved coordination among institutions are prerequisites for effective governance. Additionally, transparency and accountability should be improved to attain vertical integration. Awareness of formal institutions and stakeholder involvement should be encouraged to foster farmer participation in SIS management. Improved stakeholder engagement and inclusion of informal institutions in policy formulation can achieve integration and better water management in the schemes. Farmers should receive and participate in agricultural and irrigation training to increase their participation in irrigation scheme management, which can foster the sustainable use of water. Interventions should strengthen institutions and focus on the empowerment of farmers through relevant training, land tenure security, and credit access. Furthermore, improved water supply adequacy and its availability for use in the schemes should enhance its productivity.
An ex ante assessment of the farm-level impacts of further developing sugarcane biorefineries in the South African context.
(2022) Mafunga, Wadzanai Penelope.; Ferrer, Stuart Richard Douglas.; Stark, Annegret.
The gross sugar production in South Africa (SA) tends to exceed the quantity demanded locally. Surplus sugar is sold in the global market at prices that are typically below the cost of sugar production in SA. This amongst other factors has threatened the long-term sustainability for sugarcane production and the industry is seeking for solutions. Expanding the product portfolio is one method and the South African Sugarcane Value Chain Master Plan to 2030 (which was signed in 2020) could aid the process as it has a special focus on feasible and attractive sugarcane-based biorefinery products opportunities, both locally and internationally. A biorefinery scenario challenges the current cane payment system which does not explicitly include payment for fibre, non-sucrose and other fermentable sugars in the event that these become necessary feedstock for biorefineries. In addition, the total proceeds shared between growers and millers are only for local and export sugar and molasses sales, after deduction of the industry’s administration costs. This needs careful reconsideration once sugarcane biobased biorefinery products form part of the product portfolio. The main objective of this study was to conduct an ex ante analysis of the impact of sugarcane biorefinery establishment on farm-level and mill biorefinery investment decisions. A literature review including but not limited to a description of the division of proceeds and the cane payment system in South Africa and other countries involved in sugarcane biorefining as well as an outline of ex ante assessment studies in biorefining, was conducted. Literature findings showed that, despite increased feasibility studies in biorefining, studies that link product price interactions, demand and supply of sugarcane and its by-products in South Africa to the farm and mill level impacts of further developing sugarcane biorefineries are lacking. Additionally, the review demonstrates that there are strong economies of size in biorefinery investments and the economic viability of a biorefinery depends on availability of sufficient reasonably priced feedstock delivered to the mill, or providing incentives to growers to supply the biorefinery with sufficient feedstock. Cane payment systems and division of proceeds scenarios were also identified as influencing the biorefinery investment and grower decisions. Although there are many biorefinery products that can be produced from sugarcane, a limited sub-set of these were considered in this study to demonstrate the concept of further developing sugarcane biorefineries in South Africa. The selection of biorefinery products was, in part, informed by data availability. In particular, technoeconomic and feasibility studies carried out in South Africa informed the choice of which biorefinery products to include in this study. Lysine from syrup, bio-ethanol from clear juice and bio-methanol as well as electricity which both could be produced from bagasse were the biorefinery products that were assessed in this study. A partial equilibrium analysis was conducted by compiling and merging three mathematical linear programming representative farm models of a ‘typical’ sugarcane farm for the Eston Cane Supply area, as well as a linear programming model of a representative mill with options to invest in the production of various products (referred to as the biorefinery appended to the mill (BAM) throughout the study). The three farm representative models were constructed with the inclusion of a high fibre variety of cane, energy cane. Demand for molasses, sucrose and sugarcane fibre by the biorefinery appended to the sugar mill was derived from the domestic and export market demands for methanol, ethanol, lysine and co-generation of electricity. The model was verified using the white-box validation method which involves establishing whether model components accurately represent real world components through inspecting output reports. It was then optimised using a scenario which maximises the total revenue for the partnership of Eston cane growers and the miller for the purposes of division of proceeds. Sensitivity analyses for the different biorefinery product pricing scenarios show that with the current status quo in the SA sugar industry, there is no motivation for the growers to adopt energy cane and the millers to produce any biorefinery products. Moreover, a pseudo-supply curve for the Eston Central region show that without energy cane a price of R1 500 per ton of bagasse over and above payment for sucrose and molasses increases the quantity of fibre supplied by less than 5%. By contrast, in a scenario with energy cane, a price of an average of R445 per ton of bagasse gives rise to a 60% increase in the quantity of fibre supplied. Other notable observations as the fibre price increases include, planting more land under cane as macadamia production declines and an evident shift in sugarcane cultivar selection. There is a direct relationship between fibre supplied by the growers and bagasse produced in the mill in this study. Market prices for each of the biorefinery products had to be inflated for biorefinery production to begin. At market prices of R12 000, R20 000, R40 000 per ton the mill produces 18 000, 45 000 and 65 000 tons of methanol, ethanol and lysine respectively. Other mill decisions that were adjusted as bagasse prices altered are a switch to the use of a more efficient boiler at a bagasse price of R140. This results in the availability of over 20 000 Megawatt hours (MWh) of surplus electricity annually for sale to the national grid at a price of R344/ MWh (an average price based on the highest and lowest indexed tariffs for bioenergy produced in the Renewable Energy IPP Procurement Programme (REIPPPP)). The optimal solution indicates that the greatest revenue is realised in a scenario that includes lysine, electricity, sugar and molasses with all the sugar produced in all scenarios sold locally. Currently in SA, some sugar is exported and the biorefinery product market prices are below R10 000 per ton except lysine which sells at approximately R20 000 per ton. Cogeneration of electricity for sale to the national grid seems to be the likely viable option as it does not involve huge investment costs and also makes use of bagasse which has currently no other use in the mill except burning it for fuel. Viability of a sugarcane biorefinery is dependent on a number of factors that include feedstock supply and the right biorefinery product market prices which make biorefinery production feasible. In this study, for the products considered, it is clear that diversification is possible only when market prices are much higher than the prevailing prices. This suggests that biorefinery establishment will require some sort of government protection for example subsidies to ensure feasibility of production for the products used in this study. Maximisation of total proceeds requires creation of the right price incentives so that the growers supply the optimal quantities and cultivars of cane to the mill. This has implications for the pricing of cane and the final division of proceeds from sugarcane production, milling and bio-refinery operations. While it is possible to resuscitate the industry, establishing sugarcane biorefineries requires systems thinking that calls for stakeholders to look at the whole supply chain in totality as the decisions of one affect the other.
Risk preferences and soil conservation decisions of South African commercial sugarcane farmers.
(1999) Ferrer, Stuart Richard Douglas.; Nieuwoudt, Wilhelmus Liberté.
In this study commercial sugarcane farmers' risk preferences are measured and tested, amongst other factors, as determinants of their soil conservation decisions. Motivation for this research stems from ongoing erosion on South African commercial farms, including sugarcane farms; recognition that agricultural economists have a poor understanding of factors affecting soil conservation; and because little positive economic research has been conducted linking risk preferences to environmental choice. This research also affords the opportunity to investigate both theoretically and empirically the effect of the range of the data on the Arrow-Pratt absolute risk aversion coefficient (AP); and to investigate factors affecting farmers' risk preference. Both of these are important topics for research. The proposed conceptual model views farmers' soil conservation decisions in a system analogous to a demand system from which a probabilistic choice model of the adoption of soil conservation practices is developed. This model relates adoption of soil conservation technologies to the demand for soil conservation using derived demand theory. Consequently, soil conservation decisions are analysed in terms of both achieved soil conservation efficiency and farmers' choices of soil conservation measures. This conceptual model further advances previous research in that it provides a sound economic base for the analysis and it accounts for intra-farm variations in soil conservation decisions. It is demonstrated that AP's must be adjusted for the range as well as the scale of the data for comparison of risk preferences across different risk situations. Although Raskin and Cochran's (1986) theorems adjust AP's for the scale of the data and are widely used in agricultural economic research, they only adjust correctly for the range of the data under special circumstances. It is demonstrated that in previous agricultural economic research AP's have been incorrectly adjusted for the range of the data and that the effect of the range on AP's has been often incorrectly interpreted as a wealth affect. It appears that informing agricultural economists of the sensitivity of AP's to the range of the data is important. An approach is proposed for adjusting AP's for both the scale and the range of the data. Fifty three commercial sugarcane farmers from KwaZulu-Natal were surveyed by personal interview during May and June 1996 to elicit farmers' risk preferences and information on their soil conservation decisions. Arrow-Pratt absolute risk aversion coefficients are elicited using a direct elicitation of utility approach. Two farmers refused to participate in lottery games for religious or moral reasons. Of the remainder 57.2 percent were risk averse, 29.6 percent risk neutral and 13.2 percent risk preferring. On average they were risk averse although risk preferences vary significantly amongst individuals. Regression analysis indicates that on average sugarcane farmers are averse to a possible loss in wealth relative to initial wealth and they exhibit increasing absolute risk aversion although at a decreasing rate with increasing gamble range. Technological information is used to assess KwaZulu-Natal commercial sugarcane farmers' intra-plot (panel) soil conservation relative to requirements of the Conservation of Natural Resources Act of 1983. Findings indicate that farmers consider enforcement of the Act to be unlikely and that 28 percent of farmers surveyed do not meet adequate intra-panel soil conservation standards. This partially reflects that a large proportion of farmers have not yet completed implementing their soil conservation plans. Nonetheless, policy makers should examine factors impeding adequate enforcement of the 1983 Act. Multiple regression and principal component analysis techniques are used to analyse farmers' soil conservation decisions. Decisions are analysed in terms of achieved intra-field soil conservation adoption and soil conservation effort, and farmers' choices of soil conservation measures. Measurements of soil conservation efficiency are defined to be objective, be suitable for relative analysis, and reflect intensiveness of adoption. Extensiveness of adoption is captured by eliciting information for more than one field per farm. Achieved goodness of fit statistics are good compared to previous similar studies and indicate that intra-farm variations in soil conservation contain important information explaining soil conservation decisions. Findings generally support the conceptual exposition that the demand for soil conservation technologies is derived primarily from the demand for soil conservation. However, the demand for fire insurance does affect adoption of strip cropping, and hence soil conservation decisions. Results indicate that although risk and risk preferences are not significant determinants of the quantity of soil conservation demanded by sugarcane farmers, they are significant determinants of their soil conservation decisions. Firstly, the rate at which more risk averse farmers tend to undertake extensive restructuring of sugarcane field layouts tends to be relatively slow. This verifies the hypothesis that risk averse farmers value an option to postpone capital intensive, irreversible investments. Secondly, relatively risk averse farmers are more likely to adopt strip cropping programmes. This finding is attributed to their aversion to income risk and not risk of excessive soil loss. The hypothesis that risk averse farmers adopt soil conservation practices to reduce risk of serious erosion is not supported. It is concluded that farmers' abilities to assess soil conservation efficiency is poor, especially with respect to the partial contribution of conservation structures to achieved soil conservation efficiency; while farmers tend to implement soil conservation on steeper slopes first; and perceive minimum tillage and strip cropping programmes to be imperfectly compatible. Adoption of minimum tillage, trash mulching and strip cropping are primarily constrained by physical climatic, field and soil characteristics and to a lesser extent by farmers' management time and technical abilities. Implementation of improved soil conservation structures is constrained by financial constraints. Amongst other factors, education and use of extension information sources and adoption of land use plans are positively related to both conservation adoption and effort. Soil conservation policies must make farmers more aware of soil erosion. This is best achieved through provision of specific technical information, especially land use plans.
Rural livelihoods in south-eastern Zimbabwe : the impact of HIV/AIDS on the use and management of non-timber forestry products.
(2010) Mutenje, Munyaradzi Junia.; Ortmann, Gerald Friedel.; Ferrer, Stuart Richard Douglas.
Non-timber forest products (NTFPs) constitute an important source of livelihood for most poor rural households and communities in Zimbabwe. NTFPs also serve as a vital livelihood safety net in times of hardship. An important feature of this dependence is that almost all NTFPs are deemed to have ‘public good’ characteristics, with no exclusive property rights. Consequently, extraction is often intense and exhaustive because of lack of alternative income sources, unreliable productivity and weak enforcement of institutional arrangements governing NTFPs use. In recent years, with HIV/AIDS rampant in Zimbabwe, there are indications of a rapid increase in the extraction of NTFPs, mostly from common property resources. Appropriate natural resources policies need to be based on comprehensive research, yet to date scant attention has been paid to understanding the role of NTFPs in mitigating the predicaments of HIV/AIDS-affected households in Zimbabwe. The main objective of this study was to determine the types of and need for natural resource management interventions to help ensure the sustainability of local responses to HIV/AIDS. The research focused on five communities of Sengwe Communal in the Chiredzi district, Zimbabwe. Multistage cluster sampling was used to select ten villages and households for the survey. Two villages from each community, representing the most and the least affected by epidemic were selected for each community using stratified random sampling. A cluster analysis was used to improve understanding of the challenges of rural livelihoods and how households diversify their livelihood strategies to cope with the various constraints. Five dominant groups based on their livelihood diversification patterns were identified : (1) smallholders/unskilled workers; (2) subsistence smallholder/non-timber forestry products harvesters; (3) crop production and non-timber forestry products extraction integrators; (4) commercial smallholders with regular off-farm employment; and (5) specialised commercial livestock producers. Multinomial logit model results showed that the level of education of the household head, the value of physical assets, cattle numbers and income, remittances, NTFPs income and economic shocks were the main determinants of these livelihood choices. Empirical evidence also revealed that households that were statistically significantly affected by HIV/AIDS economic shocks practised ‘distress-push’ diversification by extracting NTFPs. These results suggest that policy makers need to advise rural households on how to improve their risk management capacities and move from geographically untargeted investments in livelihood assets to a more integrated approach adapted to the asset base of individual households. Using panel data from 200 households in 2008 and 2009, regression models revealed that NTFPs extraction is an important ex-post coping mechanism for many HIV/AIDS-afflicted households. The results also revealed that the main determinants of livelihood strategy choices were differences in asset endowment, especially education, land and livestock and the impact of the shock. Asset constraints compelled diversification into lower-return activities such as NTFPs extraction. Findings from a comparative analysis of HIV/AIDS-afflicted and non-afflicted households showed that HIV/AIDS-afflicted households were relatively young, with relatively few physical and livestock assets. A fixed-effect Tobit model indicated a positive significant relationship between HIV staging and quantity of NTFPs extracted. The relatively young, poorly educated households with low household coping capacity in terms of livestock value relied more on the natural insurance of forests in buffering HIV/AIDS economic shocks. These results have important policy implications for development planners, conservationists and non-governmental organisations working in the region. There is a need for programmes that reduce pressure on forest resources, and improved access to education and health care, thus helping the poor to cope with the HIV/AIDS economic crisis. This study also examined the extent to which forest degradation is driven by existing common property management regimes, resource and user characteristics, ecological knowledge and marketing structure. A Principal Component Analysis indicated that the existence of agreed-upon rules governing usage (including costs of usage), enforcement of these rules, sanctions for rule violations that are proportional to the severity of rule violation, social homogeneity, and strong beliefs in ancestral spirits were the most important attributes determining effectiveness of local institutions in the management of Common Pool Resources (CPRs). Empirical results from an ordinary least regression analysis showed that resource scarcity, market integration index, and infrastructural development lead to greater forest resource degradation, while livestock income, high ecological knowledge, older households, and effective local institutional management of the commons reduce forest resource degradation. The results suggest that there is a need for adaptive local management systems that enhance ecological knowledge of users and regulates market structure to favour long-term livelihood securities of these forest-fringe communities.

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