Browsing by Author "Ferrer, Stuart Richard Douglas."

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Analysis and prediction of chemical treatment cost of potable water in the Upper and Middle Vaal water management areas.
(2009) Gebremedhin, Samuel Kahsai.; Ferrer, Stuart Richard Douglas.; Graham, Mark.
This study is a component of a research project on the economic costs of eutrophication in the Vaal River system. Its objective is to investigate the relationship between raw water quality and the chemical costs of producing potable water at two water treatment plants: Zuikerbosch Station #2 (owned by Rand Water) in the Upper Vaal Water Management Area (UVWMA), and Balkfontein (owned by Sedibeng Water) in the Middle Vaal Water Management Area (MVWMA). Time series data on raw water quality and chemical dosages used to treat raw water were obtained for Zuikerbosch Station #2 (hereafter referred to as Zuikerbosch) for the period November 2004 – October 2006 and for Balkfontein for the period January 2004 to December 2006. Descriptive statistics reveal that raw water in the Vaal River is of a poorer quality at Balkfontein compared to that at Zuikerbosch. Furthermore, the actual real chemical water treatment costs (measured in 2006 ZAR) averaged R89.90 per megalitre at Zuikerbosch and R126.31 at Balkfontein, indicating that the chemical water treatment costs of producing potable water tend to increase as raw water quality declines. Collinearity among water quality (WQ) variables at both water treatment plants was analysed using Principal Component Analysis (PCA). The dimensions of water quality identified in the analysis are similar to those reported in Pieterse and van Vuuren’s (1997) study of the Vaal River. For both water treatment plants, Ordinary Least Squares (OLS) regression was used to identify the relationship between real chemical costs of water treatment and the dimensions of water quality identified through the respective Principal Components Analyses. The estimated regression models account for over 50.2% and 34.7% of variation in real chemical water treatment costs at Zuikerbosch and Balkfontein, respectively. The coefficient estimated for PC1 at Zuikerbosch is statistically significant at the 1% level of probability with high negative loadings of total alkalinity and turbidity. Increases in the levels of total alkalinity and turbidity in raw water treated at Zuikerbosch is negatively related to the chemical costs of water treatment. An increased total alkalinity level was found to reduce the chemical costs of treating potable water. PC2 is statistically the most important variable in the estimated explanatory model for Balkfontein. The estimated regression coefficient for PC2 is statistically significant at the 5% level of probability. The estimated relationship between chemical water treatment costs and PC2 shows that there is a positive relationship between the raw water temperature and chemical water treatment costs. However, increases in the levels of chlorophyll and pH in raw water treated at Balkfontein is negatively related to the chemical costs of water treatment. Total hardness, magnesium, calcium, sulphate, conductivity, and chloride, being the highest positive loadings in PC1, relate negatively to the chemical cost of treating water. For predictive rather than explanatory purposes, a partial adjustment regression model was estimated for each of the two water treatment plants. Using this model, real chemical water treatment costs were specified as a function of real chemical water treatment costs in the previous time period, and of raw water quality variables in the current period. The R2 statistics for the two regression models were 61.4% using the data for Zuikerbosch and 59.9% using the data for Balkfontein, suggesting that both models have reasonable levels of predictive power. The chemical cost of water treatment for Zuikerbosch and Balkfontein are predicted at R96.25 and R90.74 per megalitre per day respectively. If raw water nitrate in the UVWMA increases by 1% per megalitre a day while other factors remain constant, chemical water treatment costs at Zuikerbosch can be expected to increase by 0.297% per megalitre and the cost accompanied this change is (R0.285*1998ML*365days) R207,841.95 provided that Zuikerbosch treats an average of 1998 megalitres per day. Likewise, if Zuikerbosch maintains its daily average operating capacity and is able to maintain an optimal level of total alkalinity in UVWMA, the estimated saving on chemical water treatment cost will be R150.063.78 per annum. At Balkfontein, chemical water treatment cost is expected to increase on average by 0.346% per megalitre per day for a 1% per megalitre per day increase in the level of chlorophyll-a, and the cost accompanied this change is R41,128.20 per annum. The prediction also shows a 2.077% per megalitre per day increase chemical water treatment cost for a 1% increase in turbidity and this accompanied with a chemical water treatment cost of R 249,003 per annum, provided that Balkfontein operates at its full capacity (i.e., 360 megalitres per day).
Competitiveness analysis of the South African avocado value chain.
(2022) Zwane, Sibonelo.; Ferrer, Stuart Richard Douglas.
The economic sustainability of the South African avocado industry is highly dependent on its trading performance, with approximately 50-55% of its total production consistently being exported since the 1990s. About 95% of the avocados in South Africa are exported to the EU, the UK, and Russia markets. The South African avocado industry faces potential intense competition from Peru, Mexico Spain, Israel, and Kenya, in these markets. Due to the significant contributions in terms of economic returns the supplying of avocados to the export markets has on this industry and the GDP of the country, and also considering the higher levels of competition this industry has been experiencing from its global rivals, there is a greater need to transport this commodity with fewer rejections, and less inefficiencies and damages to the fruit quality. In 2018, the South African avocado export industry was ranked number nine worldwide, contributing to 1,7% of the total avocado exports in the global markets. By 2020, the industry experienced a major decline which resulted in it falling to number 12. It has been noted that South African exports are increasing, but its share of the world market is decreasing. This is because exports from other countries, primarily South and Central America, including Peru, Colombia, and Mexico, have grown at a greater rate. For example, between 2012 and 2017, South African avocado export volumes grew only by 3% per annum while major competitors such as Mexico and Peru grew by 8% and 15%, respectively. Many factors could be contributing to this phenomenon, and one of the most significant factors could be the competitiveness of the South African avocado value chain. A review of the literature identified a significant gap in the local research when it comes to the understanding of the structure, actors, processes and the flow of avocados in the South African avocado value chain, the competitiveness of the South African avocado value chain, and the factors which are influencing the competitiveness of the South African avocado value chain. Moreover, it also identified that competitive analyses of value chains can provide information and strategies for agribusiness managers to improve value chain competitiveness. This study will try to close this gap by providing a detailed competitiveness analysis of the South African avocado value chain in order to have a better understanding of the state of competitiveness of this value chain. The general objective of this study was to conduct a detailed competitiveness analysis of the South African avocado value chain in order to recommend strategic actions that the value chain participants could use to improve the competitiveness of this value chain, especially in relation to export markets. More specifically, the objectives are to identify the key players involved in the value chain, identify factors which are negatively affecting the competitiveness of this chain, and analyse this information to provide an improved understanding of the business trends, challenges, and transport and logistic processes of this industry. To achieve the main objective of this study, a 7-steps-6-analyses analytical framework was designed and used to provide a much-detailed competitiveness analysis of the South African avocado value chain. Analyses one and two served as an inquiry part of this study were knowledge regarding the structure of the South African avocado value chain, the number and the type of actors in this value chain, flow of avocados, processes within this value chain, relationships between actors in this value chain and how these relationships are developed and maintained, and the factors which are responsible for the inefficiencies within this value chain were identified by these analyses. Analysis two also had a quantitative part, were some of the relationships that actors have within and outside this value chain were quantified using the concept of Social Network Analysis in order to determine how these relationships influence the functioning as well as the competitiveness of some of the actors in the South African avocado value chain. Analyses three, four, five and six were analyses that analysed different components/parts of the South African avocado value chain in order to understand the competitiveness state of the overall value chain and recommend strategies to improve it. The final step (seventh step) involved a critical analysis of all the findings from the six analyses in order to provide the state of competitiveness for the South African avocado value chain. Moreover, during this step that is where the strategic actions to alleviate the constraints/factors negatively affecting the competitiveness of this value chain were developed. The overall findings of this study suggested that the South African avocado value chain is struggling to keep up with competition from its global competitors, mainly Peru, Mexico and Kenya. Moreover, this study was able to conclude that the cause of this was the overall continuous decline in the competitive advantage which is being experienced by this value chain. The overall finding also suggested that this decline in competitiveness is as a result of a number of factors. These factors include supply of nursery trees, relatively lower yields than other competing origins around the world, higher transportation costs, port inefficiencies, low supply of skilled labour, one major export destination, lack of value chain collaborations, higher input costs, increased plantation of avocados by global rivals, and government policies. This study gave rise to 13 strategic actions that could be used by the most important players in the South African avocado value chain, such as agribusiness managers, producers, exporters, seaports and SAAGA in order to improve the competitiveness of this value chain. Some of those strategies include collaborations between different types of value chain actors, understanding of the value chain relationships and systems, attracting and training of new skilled workforce, development of late varieties, economic research, and access to new markets. Keywords: Avocado, Competitiveness, Export markets, Global rivals, Strategic action, Value chain
A demand analysis of farm labour employment in the South Coast and Midlands commercial sugarcane farming by labour categories : implications of the sectoral determination.
(2016) Pilusa, Tshepo R.; Ferrer, Stuart Richard Douglas.; Darroch, Mark Andrew Gower.
The objective of this study is to investigate the impact of changes to the regulatory environme nt governing farm labour employment since the mid-1990s on wages and employment of farm workers in the South African sugar industry. This study may be differentiated from previous research on the topic, e.g., Conradie (2005), Sparrow et al. (2008), Murray and van Walbeek (2008), Bhorat et al. (2012), and Stanwix (2013) in so far as the impacts on wages and employment are investigated for four categories of farm workers (namely, drivers, seasonal cane harvesting staff, permanently employed elementary farm workers, and casual labour); whereas previous studies have analysed the impacts on aggregate employment. The distinc t ion is important because not all categories of farm workers historically earned wages less than the real minimum wage rate and because the wage elasticities of demand for labour in sugarcane farming are expected to vary by labour category and by sugarcane producing region. Whilst it is well established that the wage elasticity of demand for farm labour in commercial farming in South Africa is relatively price elastic in the long run (Sparrow et al., 2008; Bhorat et al., 2012), no published research has determined the wage elasticities of demand for farm labour in sugarcane farming in South Africa, per se. The time series data on wages and employment of farm workers in sugarcane production by large scale growers (LSGs) from 1978 to 2012 based on Labour Utilisation and Cost Survey (LUCS) were obtained from the South African Cane Growers Association (SACGA). Analysis of the data verifies expectations that the introduction of regulations on wage structure and computation through the Sectoral Determination (SD) for the Farm Worker Sector in 2003 is associated with an increase in real average cash wages and a reduction in the average real absolute value of non-pecuniary benefits (e.g., on-farm accommodation and rations) received by workers in sugarcane farming. Furthermore, the increase in cash-wages outweighed the reduction of non-pecuniary benefits, on average composite wages. Implementation of the SD is also associated with an increase in standardisation of wages for relatively unskilled seasonal and permanent farm employees, which is in line with an intended objective of the SD to standardise the farm wage. Whilst real average wages of workers in sugarcane farming increased by about 70% from 1978 to 2012, employment in sugarcane farming, measured as Full-Time Equivalents (FTEs) Worker, declined by about 36% during the same period, which gives rise to a simple elastic ity computation of -0.51 (Δemployment/Δwage = -0.36/0.7), without accounting for changes in factors other than the wage. In order to account for other factors affecting the supply of and demand for the various categories of farm workers in sugarcane production, econometric techniques were used to estimate the relationships between real farm wages and employme nt in sugarcane farming, and in turn, the wage elasticity of the demand for each category of labour for the industry as a whole and for two particular sugarcane producing regions, the South Coast and Midlands of KwaZulu-Natal (due to the topography of the two regions, sugarcane production on the South Coast is relatively more labour intensive than in the Midlands). High levels of multicollinearity in the data precluded satisfactory estimation of supply and demand functions for farm labour using 2SLS regression techniques. Instead, the Principal Component Analysis (PCA) extraction procedure proposed by Chatterjee and Price (1977) was used to estimate the supply and demand functions separately. Whilst the statistical fit of the estimated farm labour supply (demand) functions was relatively poor and satisfied, respectively, the theoretical fit of the estimated supply of and demand for labour functions was satisfactory. After accounting for changes in the area under sugarcane, the price per ton of sugarcane, price index of chemicals and labour-related policy implications, estimates of the wage elasticities of demand for the various categories of farm labour, regions and aggregate sugarcane production by LSGs ranged between -0.028 and -0.488 in the short-run, and between -0.041 and -0.647 in the long-run. This finding that the demand for farm labour in sugarcane production is relatively inelastic is consistent with observations that, by and large, sugarcane production methods remained relatively unchanged in the industry and each of the two regions for the 1978-2012 period. The results further indicate that farmers adjust employment in response to a wage change within a period of three years. Over-and-above the impact of changes in the policy on wages, the changes in policy are associated with a further reduction in aggregate employme nt of an estimated 4119 FTEs and 5768 FTEs in sugarcane production by LSGs in the short- and long-run, respectively. Other things being equal, considering employment levels in 1978 and 1994, LSGs reduced employment in sugarcane farming by 6.82% and 17.1% in the short- and long-run, respectively. This impact may be ascribed to regulation induced changes in non-wage costs of employment, such as transactions costs and perceived risk. The results further verify that chemicals application is a strong substitute for labour in sugarcane production (especially in the Midlands region), and that employment of farm workers in sugarcane production is positively related to the price of sugarcane and the extent of area planted to sugarcane. Bearing in mind the increases in the real minimum wage of farm workers post 2012, a revision of the current labour legislation to reduce some of the non-wage costs of employing farm workers is recommended to help preserve employment, especially of relatively unskilled workers in sugarcane farming. Activities that increase (reduce) the price received by farmers for sugarcane will have a positive (negative) impact on farm labour employment, both through the price effect, as well as an increase in the area under sugarcane. Finally, considering the trend of declining farm employment, programmes to improve education and training of former farm workers and other people in rural areas are important to improve their prospects of finding employment in non-farm sectors. Furthermore, more research on compliance issues is recommended to improve the effectiveness of compliance on the labour markets that are covered by the SD.
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.
The economic impact of a sugar-sweetened beverages tax in South Africa.
(2021) Mvelase, Lungani Mzwandile.; Darroch, Mark Andrew Gower.; Ferrer, Stuart Richard Douglas.
The newly implemented Health Promotion Levy (HPL) in South Africa (SA) imposes a tax on Sugar-Sweetened Beverages (SSBs) containing more than four grams of sugar per 100ml. The HPL is legislated in terms of Chapter VB of the Custom and Excise Act No. 91 of 1964, on SSBs manufactured in SA or imported into South Africa. There is a disagreement between the proponents of the tax (government) and opponents of the tax (beverage and sugar industry). The proponents of the tax contend that the SSBs tax will reduce obesity and boost SA’s economic growth by reducing government spending on prevention and treatment of obesity-related non communicable diseases (NCDs). The opponents of the tax, on the other hand, contend that the tax will be detrimental to the growth of the SA’s economy by reducing the beverage and sugar industry returns, which will, in turn, lead to labour disemployment. There are relatively fewer published empirical studies to date in South Africa that have examined the economic impact of the SSB tax. Most of the published empirical literature to date has focused more on the health impact of the SSB tax. Furthermore, there’s no empirical study that has examined the impact of the SSBs tax on the South African sugar industry. Given this background, this study aims to investigate the economic impact of the SSBs on the South African sugar industry. This is achieved by (1) assessing the impact of the SSB tax on the quantity of sugar demanded in the domestic sugar market, and (2) determining the impact of the SSBs tax on the revenue earned by the South African sugar industry from local sugar sales and Recoverable Value (RV) price received by sugarcane growers’. The analysis used time-series data for the period 1977-2019 and involved the use of the simultaneous equations regression method (Three Stage Least Square regression (3SLS)) and the Vector Error Correction Model (VECM). To deal with challenges associated with time-series data, several diagnostic tests were employed. In addition, the direction of causality between domestic sugar demand and supply variables was examined using a Wald test for Granger’s causality. Furthermore, a Johansen’s Cointegration test was used to check the presence of long-run relationships between domestic sugar demand and supply variables. The static demand and supply model (3SLS regression) results revealed that variables such as the real domestic price of sugar, previous period sugar consumption, and consumers’ real disposable income influence the domestic sugar demand in South Africa. Whereas variables such as the real domestic price of sugar, technological changes, and the real price of sugarcane in the previous period influence the domestic sugar supply in South Africa. From the 3SLS regression model, the own-price elasticity estimates of domestic demand and supply for sugar in South Africa were estimated to be -2.652, and 0.838, respectively. Implying that the domestic demand for sugar in South Africa is relatively more responsive to own-price changes, whereas the domestic supply of sugar is relatively less responsive to own-price changes. From the VECM, the short-run own-price elasticity estimates of domestic sugar demand and supply were estimated to be -0.301 and 0.762, respectively. Implying that in the short run both domestic sugar demand and supply are relatively less responsive to domestic sugar price changes. In addition, the long-run own-price elasticity estimates were estimated to be -2.243 and 1.809, respectively for the domestic sugar demand and supply equations. This implies that in the long run both domestic demand and supply for sugar in South Africa are relatively more responsive to domestic sugar price changes. This is because over time the South African sugar producers are likely to discover more alternative products to produce or develop close substitute in consumption that contains less sucrose sugar. Similarly, domestic sugar consumers are likely to discover more sugar substitutes in the long run. Based on the 3SLS model's own-price elasticity estimate of domestic sugar demand (-2.265), the quantity of sugar demanded by domestic consumers of sugar was estimated to have decreased by 184 169 tons, causing a revenue loss of about R1.68 billion in the domestic sugar market. Based on the VECM short-run own-price elasticity estimate of domestic sugar demand (-0.301), the quantity of sugar demanded in the domestic sugar market was estimated to have decreased by 209 01 tons, leading to a domestic sugar revenue loss of about R190 million. Lastly, using the longrun own-price elasticity estimates of the domestic sugar demand (-2.243), the quantity of sugar demanded in the domestic sugar market was estimated to have decreased by 154 917 tons, leading to a domestic sugar revenue loss of about R1.41 billion. Furthermore, by applying the sugar industry division of proceeds formula, the RV price received by sugarcane growers’ during the 2019/20 season was estimated to be lower by 9.167% when compared to the RV price that growers could have received if there was no SSBs tax. Given the negative impact of the SSBs tax on the South African sugar industry’s financial position, the study recommended the South African sugar industry to invest more on other alternative income streams, i.e., expand the production of biofuels using sugarcane as a feedstock. In this regard the study recommended the South African government to support the South African sugar industry stakeholders with legislation that will allow them to generate revenue from expanding the production of biofuels, electricity co-generation, and biochemical feedstock, amongst others. For instance, provides legislations that are necessary to promote the use of ethanol-blended petroleum and legislations necessary to enable sugar mills to sell electricity from co-generation. Keywords: Health Promotion Levy (HPL), South African Sugar Industry, Three-Stage Least Square (3SLS), Two-Stage Least Squares (2SLS), Vector Error Correction Model (VECM), Sugar tax.
The economic impact of adult mortality and morbidity on smallholder farm households in Malawi.
(2011) Simwaka, Kisukyabo.; Harris, Geoffrey Thomas.; Ferrer, Stuart Richard Douglas.
This thesis comprises three essays on “The Economic impact of adult mortality and morbidity on smallholder farm households in Malawi.” The first essay estimates the levels of technical efficiency of AIDS-affected and non-affected smallholder farm households, and examines the technical efficiency differentials. The study uses time-varying and timeinvariant inefficiency models of production. The results show that among both female and male headed households, for both affected and non-affected households, fertilizer and seeds are the only variables that contribute significantly towards technical efficiency. The mean efficiency levels of affected and non-affected households are statistically not different. The second essay examines the maize production differentials between AIDS-affected and nonaffected farm households using the difference in difference estimation method. The results show that, for both affected and non-affected households, the mean maize production levels are higher during 2006/07 compared to 2004/05 However, the difference between the mean maize production levels of affected and non-affected households over the 2004/05 and 2006/07 period is not statistically significant. The third essay examines the coping strategies used by households facing food security problems. The results from the multinomial logistic model show that during 2004/05 and 2006/07, the most dominant coping strategy used by both AIDS-affected and non-affected households facing food security problems, is buying food from market. This is followed by casual labour, obtaining food from relatives and friends, eating unripe maize before harvest, and irrigation farming. The results from logistic discriminant analysis function indicate that, for all households, ordinary coping strategies are dominant among food-insecure households with a total score of close to 80 percent, much higher than survival strategies at around 20 percent during 2004/05.
Economic impacts of land fragmentation in Butare, southern Rwanda.
(2002) Bizimana, Claude.; Nieuwoudt, Wilhelmus Liberté.; Ferrer, Stuart Richard Douglas.
Butare, where this study was conducted, exhibits one of the highest population densities in Rwanda. Agriculture is the dominant economic sector and provides employment for more than 90 per cent of the working population. As a direct result of population growth, most peasants have small fields (mean of 2.4 hectares per household) and land fragmentation is common. The purpose of this research is to examine the effect of land fragmentation on economic efficiency. This study is based on data collected during 2001 from 200 households in Rusatira and Muyira districts using a standardized questionnaire. Regression analysis shows that area operated is primarily determined by the population-land ratio, non-agricultural employment opportunities, ownership certainty and adequate information through agricultural training. Results from a block-recursive regression analysis indicate that the level of net farm income per hectare, which indirectly reflects greater economic efficiency, is determined by area operated, use of farm information, field extension staff visits, formal education of a farm operator, and the fragmentation of land holdings. Economies of size, whereby large farms reduce their average costs are evident in the data. The results obtained using ridge regression, used to overcome the multicollinearity problem, support the findings of two stage least squares. Better educated farm operators with large and unfragmented farm units, with access to farm information and in regular contact with field extension staff can be expected to generate higher net farm income per hectare and much higher returns to management - a fixed resource. Factors influencing technology adoption by Rwandan coffee farmers, assessed according to extent of adoption of soil testing and use of fertilizer, are also investigated in this study. Twenty per cent of farmers surveyed have adopted both practices, however, forty-nine per cent have adopted neither practice. A chi-square test showed a strong association between the two practices, implying that a farmer who tests soils on his farm is also likely to use fertilizer. Results support expectations that farmers who adopt more recommended technologies and farming practices are more productive and more efficient producers of coffee. A discriminant analysis identified land fragmentation, availability of wealth and liquidity, and education of the principal farm decision-maker as the most important factors influencing the adoption of recommended and appropriate farming practices on coffee farms, followed by gender of farm operator, and farm information acquired by farmers. It is concluded that transformation of Rwandan agriculture requires policies that (a) remove obstacles to the development of an efficient land market in order to reduce land fragmentation and to transfer land to more efficient farmers; (b) improve rural education, strongly associated with off-farm job opportunities, implying that improving education will improve labour mobility from agriculture; (c) improve liquidity and farmers' access to relevant information; (d) strengthen extension facilities to individual farmers; (e) reduce gender discrimination in order to improve farmers' abilities; and (t) promote adoption of recommended farming practices.
Enhancing competitiveness of wine through empowerment labels : a case study of wine prices and consumer preferences at two wine retail outlets in the KwaZulu-Natal Midlands.
(2011) Namoobe, Belvin.; Ferrer, Stuart Richard Douglas.
South Africa’s history of the disempowerment of black people (Africans, Coloureds, Indians, and Chinese), presented the post apartheid government after 1994 with problems of policy formulation around empowerment of the previously disadvantaged groups (PDGs). In the wine industry, one possible way of addressing inequality in the access to economic resources and racially skewed land redistribution is through empowerment labelling of wine. Empowerment labelling of wine may promote competitiveness of wine businesses owned by the PDGs. This will help to address inequality problems in the sector. Skinner (2007) demonstrated that empowerment labelling can benefit South African wine firms in international wine markets because empowerment and Fairtrade labelled wines benefit from import preference in most European Union (EU) countries. This study investigates one possible way in which empowerment labelling may benefit wine firms on the domestic markets for wine. Several wine brands with empowerment attributes are currently traded in domestic wine retail markets in South Africa. Very few of these wine brands are broad-based black economic empowerment (BBEE) brands. If South African wine consumers value black economic empowerment in the wine industry, empowerment attribute labelling may be used to identify empowerment products, and thereby promote the competitiveness of Black Economic Empowered wine businesses. This study sets out to quantify South African wine consumers’ willingness to pay (if any) for empowerment labelled wines. Data for the study were collected in 2007 and 2008. Two methods were used for this purpose using two case studies in the KwaZulu-Natal Midlands. The first method used a revealed preference technique to determine whether a price premium exists on the current wine prices or not. Using the hedonic price analysis technique, linear and log-linear hedonic price functions for wine for two wine retail outlets in the KwaZulu-Natal Midlands were used to estimate the price premium paid for empowerment attributes in this domestic wine retail market. Explanatory variables which were found to influence wine prices were Platter’s Wine Guide quality rating, Reputation of the winery, and BBEE. Tests on the statistical fit of the models using the Park Test and residual scatter plots indicated that the log-linear model had better data fit. These two models could not be compared using the more traditional R squared and F-statistics as they had different dependent variables. The second method used a stated preference technique to estimate wine consumers’ willingness to pay for empowerment attributes of wine in the Kwazulu-Natal Midlands. Personal interview surveys of consumers at a wine cellar were conducted. The monetary value of these consumers’ willingness to pay was quantified using conjoint analysis and the conditional logistic model. Although the revealed preference techniques for consumer willingness to pay for empowerment labels showed that a negative price premium exists for these wine attributes, the stated preference technique revealed a positive willingness to pay for empowerment attributes. The monetary values could not provide the actual willingness to pay as they tended to be close to the hypothetical price of wine used in the questionnaire. This might be attributable to the prices used in the questionnaire not capturing the average actual wine prices for this specific wine retail outlet. Therefore, the monetary values were used as indicators of the ordering of attribute importance by the consumers. The results also indicated that an information gap between consumers and producers may exist. This implies that, provided that consumers are made aware of these attributes, there may be potential for wine producers to earn a price premium on empowerment attributes. Further research is required to determine whether South African wine consumers (a) value empowerment attributes (using stated preference techniques), and (b) are aware of wine brands that have empowerment attributes. The results of this study would aid government in formulating policies that promote the competitiveness of empowerment attributes such as giving machinery or inputs procurement rebates to wineries that are broad-based empowerment compliant, and in so doing, improve the economic position of previously disadvantaged groups.
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.
An ex ante impact assessment of the farm level impacts of genetically modified (GM) sugarcane to contain insect resistant (IR) and herbicide tolerant (HT) genes in the Eston sugarcane supply region of KwaZulu-Natal, South Africa.
(2019) Mthimkhulu, Celumusa Bhekithemba.; Ferrer, Stuart Richard Douglas.
Notwithstanding public contention about GM crops, commonly defined as crops for which the genes have been engineered by inserting genes from other organisms such as bacteria or animals into their DNAs, there is a general consensus in the agricultural economics literature that adoption of GM crops has generally benefitted the farm sector through increased yields, reduced use of agrochemicals and profit gains for farmers. The South African sugar industry is a high-quality competitive producer of sugar. Nonetheless, it is under financial stress, which has been partly attributed to increased prevalence of various pests, notably eldana and cynodon grass. Genetic modification of sugarcane has been advocated as a strategy to partially counter these threats. The South African Sugar Research Institute (SASRI) is currently developing an insect resistant (IR) and herbicide tolerant (HT) genetically modified (GM) sugarcane cultivar that is suited to coastal production regions. Some sugarcane cultivars suitable for production in coastal areas are also suited to commercial production in the inland regions where eldana and cynodon are also prevalent (e.g. the Eston cane supply region). This study investigates the socio-economic impacts of GM sugarcane in the Eston cane supply area in KwaZulu-Natal, assuming that the GM sugarcane cultivar is suitable for commercialization in the Eston area. In the Eston area, large-scale and smallholder growers produce 95% and 5% of sugarcane, respectively. Large scale farmers in the region were aggregated into three representative farms to account for climatic variation within the area. A fourth represents smallholder growers in the region. Data for representative farm models were collected through focus group discussions with SASRI experts and commercial farmers. In this study, GM sugarcane is modified on the N52 cultivar because it fits the desired traits (high yields, and resistance to diseases and drought tolerance) of GM cane. Microsoft Excel was used to compile enterprise budgets of GM cane and conventional cane to compute their gross margins. Furthermore, Linear Programming (LP) farm planning models were compiled for each representative farm to determine the likelihood of GM cane adoption and the risks associated with the technology. The baseline scenario, “without” GM cane was compared with the GM cane scenario to analyze impact on farm decisions, ceteris paribus. In addition, focus group discussions with smallholders were held to gauge their demand for GM cultivars of sugarcane. Results show that GM cane will be adopted on all four representative farms. Large scale farmers will save up to 29%, 75% and 49,3% on weed control at planting, ratoon management and on eldana control per hectare per annum, respectively. Farmers will also achieve up to a 34.5% share change in gross margin per ha per annum. The LP output shows that GM cane will perform well even in poorer soils: steep and marginal poor soils. Farmers and farm workers will also benefit from GM through sustainable farming and environmental conservation because less agrochemicals such as imazapyr will be used to control pests. Furthermore, higher yields on GM cultivars are expected to increase employment because ratoon management and harvesting will require more labours owing to higher yields. Keywords: ex ante, eldana, cynodon, genetically modified, insect resistant, herbicide tolerant, linear programming
An ex-ante assessment of the socio-economic impacts of genetically modified sugarcane in the ILembe district of KwaZulu-Natal.
(2021) Ntuli, Zamandlela Nokwethaba.; Ferrer, Stuart Richard Douglas.
The increasing prevalence of the stalk borer, Eldana saccharina Walker (eldana), and creeping grass weed, Cynodon dactylon (cynodon), in sugarcane growing regions of South Africa have caused costs associated with control of pests and diseases in sugarcane production to increase. This has contributed to a decline in the relative profitability of sugarcane farming, which has contributed to a decline in the area planted to sugarcane. The South African Sugar Research Institute (SASRI) is currently considering developing an insect-resistant (IR) and herbicide-tolerant (HT) genetically modified (GM) sugarcane cultivar to address these challenges. This GM cultivar is specifically intended to be suited to production in coastal regions of KwaZulu-Natal. The expected socio-economic impacts of introducing GM cultivars are an essential component of SASRI’s decision. A review of literature on the topic indicates that the adoption of GM crops, since the early 1990s, has generally had positive socioeconomic impacts. Farmers benefited through energy and environmentally friendly chemical control, reduced chemical cost, and improved human health owing to less handling of chemicals. However, no cultivars of GM sugarcane have yet been commercialised globally, and limited research has been done on the impact of GM perennial crops. This study, therefore, aims to fill this knowledge gap. Because the development and roll-out of a GM cultivar will take approximately ten years, this research is an ex-ante study. The study was conducted in the North Coast region of KwaZulu-Natal, where eldana and cynodon are most prevalent. Commercial sugarcane farms were aggregated into two representative farms, based on different climatic conditions, cane cutting cycles, yields, and soil types. Data were collected through focus group discussions with SASRI experts and commercial farmers. Microsoft Excel was used to compile enterprise budgets of GM sugarcane and conventional sugarcane under different cutting cycles to determine the profitability of the different sugarcane cultivars. An analysis of cultivar gross margins shows that the hypothetical GM sugarcane harvested on an 18-month cutting cycle is relatively more profitable than conventional sugarcane harvested on either a 14 to 16-month cutting, or an 18-month cutting cycle on sandy and loam soils in both the Coastal and Hinterland regions of the North coast. On clay soils in coastal areas, the N59 cultivar harvested on an 18-month cutting cycle had marginally higher gross margin than the hypothetical GM cultivar. Mathematical Linear Programming farm models that account for risk using Baumol’s E-L criterion, variability in farmland resources, and SASRI’s recommendations against planting one variety of sugarcane in more than 33% of the total area under sugarcane on a farm, amongst other factors, were then compiled for each of the two representative farms. The models were verified by their ability to closely simulate observed land-use decisions on the representative farms for a current scenario. Having verified the models, the likely change in land use decisions due to GM sugarcane was investigated by re-running the models for a scenario in which a hypothetical GM sugarcane cultivar is available, ceteris paribus. The current scenario was used as a baseline due to uncertainty about a likely scenario ten years from now when a GM sugarcane cultivar is expected to become available. The impacts of GM sugarcane were assessed by comparing yields, gross margins, farmer’s production decisions, chemical applications, and employment across the two scenarios. Results of the study are that farmers that adopt GM sugarcane cultivars are likely to benefit through savings in pest and weed chemical control and improved sugarcane yield and quality. Furthermore, the reduction in chemical requirement has indirect benefits such as less handling of chemicals leading to improved health and safety of farmers, increased management time, and less on-field traffic reducing soil compaction, which increases soil stress, increasing the prevalence of eldana. Based on the findings, it is recommended that information and communication of GM sugarcane be shared along the supply chain for it to be successfully produced and commercialised. Additionally, the decision on the sugarcane cultivar that will be commercialised in the first stage is crucial for the successful adoption of GM cultivars. Furthermore, training of smallholder farmers is recommended to improve the likely impacts of GM sugarcane. Keywords: cynodon, eldana, genetically modified, herbicide-tolerant, insect-resistant, linear programming farm model, Sugarcane
Factors affecting participation in livestock lease agreements : a study of dorper sheep and jersey cattle farmers in South Africa.
(2007) Rodewald, Dieter Wilhelm.; Ferrer, Stuart Richard Douglas.
This dissertation investigates the hypotheses that high transaction costs contribute to relatively low participation rates in livestock leasing in South Africa; and that specific contractual characteristics contribute to minimising total transaction costs of livestock leasing contracts in South African commercial agriculture. Many emerging livestock farming businesses may value the option of leasing-in livestock. Likewise, many established livestock farming businesses are currently undergoing expansion (especially dairy farms) and may also value the option of leasing-in livestock. A reduction in transaction costs and an improvement in efficiency of the livestock lease market could prove beneficial for emerging/expanding livestock farms. Likewise, investors, who anticipate competitive rates of return from investments in livestock, may value the option of owning and leasing-out livestock to suitable farm businesses. Transaction costs in livestock rental contracts include costs of information about contracts, costs of monitoring and enforcing contracts, costs of finding party members to contract with, the costs of risk of an agreement being terminated due to exogenous factors such as land claims, the risk of incomplete contracts and the costs of risk bought about by adverse selection and moral hazard. The magnitude of transaction costs incurred by participants of a livestock leasing contract are a function of how costs and risks are shared between the lessee and lessor, the inclusion of specific contractual clauses, the type of leasing contract, the relationship between party members and additional contractual characteristics. A census postal survey of two populations of livestock farmers, namely members of the Jersey Breeders' Societies of South Africa, was conducted during April and May 2007 to collect data on farmers' perceptions of and their participation in livestock rental contracting agreements. Elicited data was analysed using a multinomial discriminant analysis to identify factors that discriminate between non-participants of the livestock leasing market, lessees of livestock and lessors of livestock. Ordinary least squares regression was used to identify preferred characteristics of livestock lease contracts. Results of the first analysis suggest that a livestock leasing market does exist in South Africa; however, the market is characterised by high transaction costs. Non-participation in livestock leasing markets amongst survey respondents is partially attributable to the high perceived costs of obtaining market information and establishing and enforcing livestock lease agreements. Findings of the second analysis show that survey respondents, on average, showed a preference for formal agreements, leasing commercial animals for shorter periods and keeping detailed inventories. It is concluded that providing livestock farmers with information about important characteristics of successful livestock lease agreements may reduce transaction costs, and thus reduce market inefficiency in the market.
Factors affecting the demand for labour in large-scale sugarcane farming in three regions of KwaZulu-Natal, 1984-2008.
(2013) Goga, Adhil Mahmood.; Ortmann, Gerald Friedel.; Ferrer, Stuart Richard Douglas.; Darroch, Mark Andrew Gower.
Many authors have cited the relatively high unemployment rate as the most severe economic problem facing South Africa today. At the same time, government institutions claim that the agricultural sector can help solve the high unemployment rate, as this sector has the potential to create employment for a large number of unemployed South Africans. These institutions do not elaborate on how the sector will provide so many jobs. Published empirical studies on the South African (SA) agricultural sector have recommended ways in which policy-makers may achieve their goals of creating employment. However, most studies on labour considered the entire agricultural sector, whereas this study focuses on a sub-sector, namely the SA sugarcane sector. The study aims to analyse the potential of the sugarcane SA sector to create employment by estimating long- and short-run price (wage) elasticities of labour demand for large-scale sugarcane farms on the South Coast, in the Midlands and in Tugela/Zululand during 1984/1985-2008/2009. Using panel data, two models are estimated by Ordinary Least Squares (OLS), Model 1 capturing labour use intensity and using “labour units employed per 1000 tonnes of cane cut” as the dependent variable, while Model 2 captures the total labour units demanded by large-scale sugarcane farmers. Only Model 2 is estimated using simultaneous equations as past studies indicate that labour use intensity may be analysed using single-equation models. For Model 1, the estimates of the long-run wage elasticities compared to the short-run wage elasticities are similar and around -0.5, -0.17 and -0.33 for the South Coast, Midlands and Tugela/Zululand regions, respectively. The wage elasticity estimates for Model 2 in the short-run were -0.34, -0.24 and -0.17 and in the long run -0.61, -0.42 and -0.30 for the South Coast, Midlands and Tugela/Zululand, respectively. The two econometric techniques (OLS and 3SLS) yielded similar wage elasticities. Results suggest that all labour demand estimates were wage inelastic, with the South Coast having a relatively greater response of labour demand to wage rate changes than the other two regions. Inelastic demand estimates for labour in all three regions may be due to the perennial, long-term nature of sugarcane and farmers taking time to decide how to respond to changes (hikes) in the price of labour. The decline in the demand for labour by large-scale sugarcane farmers due to an increase in real wage rates raises questions about the appropriateness of labour laws and minimum wage iii legislation that have increased the real cost of farm labour in the large-scale sugarcane sector of KZN. In order to reverse the rising farm labour unemployment trend in South Africa, the study recommends that policy-makers could rather adopt more flexible labour market regulations (for example, those relating to the hiring and dismissal of workers) that would reduce real labour costs and encourage local farmers to employ more labour on sugarcane farms. Furthermore, the land under sugarcane proved to be an important determinant of the demand for labour by large-scale sugarcane farmers and hence policies regarding land reform need to be revised and implemented more proficiently. Future research could focus on the skill-level of those workers who are affected the most following an increase in minimum wages and possible reasons why the KZN sugar industry is losing land to other land uses.
Feasible indicators for monitoring the performance of equity-share schemes in South African agriculture.
(2004) Gray, Bernadine Claire.; Lyne, Michael Charles.; Ferrer, Stuart Richard Douglas.
This study aims to develop a robust methodology for measuring the performance of equity-share schemes in South African agriculture. Equity-share schemes are privately owned farming operations that are generally restructured as companies with the original owner and the farmworkers as shareholders. Several studies have investigated various aspects of the performance of these schemes but no single study has yet measured their performance using a comprehensive and objective set of criteria. Four categories of criteria are proposed: poverty alleviation; empowerment and participation; institutional arrangements and governance; and financial performance. This study does not aim to assess the performance of existing equity-share schemes rather a methodology for the four criteria based on empirical evidence gathered in 2004 from a land reform project in the Midlands of KwaZulu-Natal and seven established equity-share schemes in the Western Cape. Poverty alleviation is measured using a transition matrix of households grouped by four different symptoms of poverty: current income, wealth, health and a principal component index of housing quality based on building materials, access to safe drinking water and adequate sanitation. Eight. categories of indicators are recommended for empowerment and participation: control and ownership; skills transfer; understanding of the structure of the scheme; information; outcomes; trust; outreach; and participation. A scorecard applying norms based on empirical evidence gathered at equity-share schemes in the Western Cape is used to assess the indicators. A scorecard approach is also applied to institutional arrangements and governance, which are measured using three categories of indicators: accountability, transparency and property rights. Recognised indicators ;of financial performance are applied to balance sheet and income statement data provided by four of the seven equity-share schemes in the Western Cape. This analysis highlights problems with several of the conventional ratios used to measure the profitability, solvency and growth of recently restructured farming enterprises whose 'empowerment' status attracts exceptionally high levels of debt capital to finance long-term investments. To avoid these problems it is recommended that, for equity-share schemes, profitability should be measured by the return on assets or dividend return; solvency by the debt/asset ratio; liquidity by cash flow projections; growth by changes in the (estimated) real. value of shares; and workers' total returns by changes in the sum of the real wage bill, capital gains, dividends, interest and other benefits accruing to workers in aggregate. The proposed performance measures are relevant, manageable in number and have feasible norms based on empirical evidence. These indicators and their norms need to be tested on a wider scale and over time. Further research should be undertaken to estimate weights for the empowerment and institutional indicators.
The impact of outsourced extension services on the performance of smallholder farmers in Msinga, KwaZulu-Natal, South Africa.
(2018) Majokweni, Zipo-zihle Pilela.; Baiyegunhi, Lloyd James Segun.; Ferrer, Stuart Richard Douglas.
Smallholder farmers are considered the potential drivers of growth and poverty eradication in Africa. Agricultural extension services play a vital role in linking farmers to information, adoption of new technologies, access to markets and so on. In recent years, there has been a shift from purely public extension to a more pluralistic approach, with the private sector providing extension services in specific project areas. The aim of this study was to assess the impact of outsourced extension services on the performance of smallholder farmers in Msinga, KwaZulu-Natal. The study also sought to estimate the indirect impact of outsourced extension services by investigating the presence of positive externalities among the sampled farmers. A random sampling technique was used to sample 300 smallholder farmers in the study area. Descriptive statistics were used to compare the differences between farmers who are beneficiaries of Lima Rural Development Foundation extension services and those who are non-beneficiaries. Factors such as years of farming experience, years of formal schooling, the amount of labour available to a household, livestock value, ownership of an irrigation tool and access to credit influenced participation in Lima extension services. The Propensity Score Matching (PSM) method was employed to estimate the impact of the outsourced extension services provided by Lima Rural Development Foundation on the farmers’ performance, measured by farm income per smallholder farmer. Various estimators, namely the Kernel, nearest neighbour and stratification, were used to ensure the robustness of the obtained results. Also, a Rosenbaum bounds sensitivity analysis test (rbounds) was done to test the data’s level of sensitivity to unobserved heterogeneity. The results of the econometric model indicated that outsourced extension services have a positive impact on smallholder farmers’ performance. Private extension services have a positive and significant impact on household crop income, net crop income and the inputs and services purchased. When compared to farmers who were not beneficiaries of Lima extension services, Lima beneficiaries received R3000 and R2600 more for total crop and net crop income per year respectively. Further analysis showed an evidence of positive externalities of outsourced extensions, due to farmer-to-farmer interactions and contact. Farmers who had received help or advice from a Lima beneficiary appeared to have an income that was an average R2 400 higher than the income of non-Lima beneficiaries. The results suggest that private extension services play a crucial role in improving the performance of smallholder farmers, and highlight the need for improved access to inputs and markets. The study recommends that the involvement of the private sector in smallholder support programmes is encouraged and sustained. Furthermore, the formation of structures such as co-operatives that encourage farmer interactions should be promoted and should be farmer led and farmer driven.
An institutional analysis of South Africa's new cooperative act : evidence from selected case studies in KwaZulu-Natal.
(2010) Nganwa, Peace.; Ferrer, Stuart Richard Douglas.; Lyne, Michael Charles.
Cooperatives are a means through which farmers may gain economic power by reducing unit transaction costs associated with production, marketing and distribution of products. In South Africa, cooperatives are promoted as a means of advancing economic development in rural areas through empowerment, development of income generating activities, improvement of human resource capacity, and increased savings and investment. The new Cooperatives Act 14 of 2005 was enacted in August 2005 to promote the role of cooperatives as organisations for pro-poor development in South Africa and to increase their chance of survival in the economy. This study uses a New Institutional Economics (NIE) framework to analyse the Cooperatives Act and its worth as a vehicle for promoting pro-poor development. A hypothetical cooperative, predicated by the new Act, was analysed using the NIE to identify institutional problems likely to constrain the collective efforts of small producers. A case study approach was then used to analyse three production cooperatives in KwaZulu-Natal that were registered post August 2005 and still operational in 2008. Interviews were conducted with individual members, directors and project managers (where applicable) between May and July 2008. Open-ended questions provided the flexibility needed to explore the institutional roots of problems identified by respondents. Free-rider, horizon, portfolio, control and influence problems were identified in the case studies. These problems, which stem from ill-defined voting and benefit rights, resulted in low equity investment, low investment in long term assets, a preference for current cash flows rather than future investment, and social conflict – all of which constrained the competitiveness and growth prospects of the cooperatives studied. In an attempt to mitigate these problems, two of the cooperatives shed their poorest members, a solution which is not consistent with the objective of pro-poor economic development. Additionally, two cooperatives opted to create their own rules to reward investors with capital gains - an institutional arrangement that is not permitted by the new Act. It is concluded that the new Act should be amended to give cooperatives greater flexibility in their institutional arrangements. In particular, cooperatives should be allowed to issue tradable equity shares that offer benefits proportional to shareholding. If these tradable equity shares carry voting rights and are offered to non-patron investors, aggregate voting rights conferred on these non-patron investors should be capped to prevent loss of control by patron members. It is further recommended that the same level of start-up support should be made available to all producer groups that formally register their business, regardless of the business model chosen, and that member empowerment should be an essential requirement for registration and public funding. Keywords: Agricultural Cooperatives, Cooperatives Act, New Institutional Economics, Case Study
Investments in ecological infrastructure: an assessment of the expected costs and benefits of rehabilitation of the Mthinzima Wetland in KwaZulu-Natal.
(2018) Buthelezi, Nothando Sharon.; Ferrer, Stuart Richard Douglas.; Browne, Michelle.
The uMgeni River is an important water resource in KwaZulu-Natal. It is, however, one of the major systems identified as having water that may pose a serious health risk to users of its (untreated) water. Increasing pollution in the upper catchment, supplying the Midmar Dam has been attributed to sewage effluent due to inadequate sewage infrastructure, expanding agricultural lands and household waste from Mpophomeni Township. The Mthinzima River flows adjacent to the settlement where it joins a tributary that flows through Mpophomeni settlement (a 6000-unit settlement that was developed in the 1960s), after which it flows under the district road (R617), through a degraded wetland system (The Mthinzima wetland) and into Midmar Dam. The Mpophomeni township development was poorly planned and should not have been situated near a strategic water resource, because it posed threats to the water resource. Two interventions were proposed to reduce the pollution flowing from the Mpophomeni Township into Midmar Dam: a new Waste Water Treatment Works (WWTW) would be built in conjunction with rehabilitation of ecological infrastructure. The rehabilitation of ecological infrastructure would primarily entail wetland rehabilitation. Ecological infrastructure has value that is important for human well-being. However, the key incentive challenge is the public dimension of the value. Often studies that aim to value investments in ecological infrastructure give total economic value of the ecological infrastructure instead of the change in total economic value attributable to the investment. The purpose of this study was to investigate the incremental change in supply of services from the wetland post rehabilitation, considering the demand, supply and opportunities for those wetland services. The new conceptual framework introduced in this study considered the potential of ecological infrastructure to supply its services, the opportunity (activities or circumstances that make it possible for the wetland to be used) afforded to the ecological infrastructure to supply its services and the demand for ecological services. It also examines the impacts of investments (or disinvestments) in ecological infrastructure and/ or engineering infrastructure on the value of ecological infrastructure. Economic Cost-benefit analysis (CBA) was used for this analysis, it is widely applied as an appraisal technique particularly for use as an input into public decision-making processes. CBA both helps inform decision-makers and helps hold them accountable for their decisions. The cost benefit analysis technique was used to evaluate whether investments in ecological infrastructure bring about a worthwhile change in ecosystem services. The study was limited by data shortages and used the replacement cost technique (one mega litre waste water treatment works) to value the incremental change in wetland services post rehabilitation. The net present value results of the CBA were all positive, the estimated net present value for change in wetland services post rehabilitation over the period of 20 years was found to be between R7 086 573 and R11 935 240 using different discount rates. The net present value of the wetland rehabilitation investment showed an increasing pattern as the wastewater treatment plants maintenance costs were assumed to be a higher percentage of the wastewater treatment plant. Therefore, the study concluded that investments in ecological infrastructure in the form of the Mthinzima wetland rehabilitation was worthwhile as the investment yielded net positive marginal results post rehabilitation. The results of CBA do not govern the choice of investment especially as data availability was limited, rather it is a useful tool to test the robustness of a project to alternative assumptions concerning the magnitude of costs and benefits, and the various social demands with respect to the return on invested capital. Based on this the results of the CBA, the study concluded that investing in wetland rehabilitation of the Mthinzima wetland is robust.
Kwanalu commercial farmers' perceptions of and management responses to the HIV/AIDS pandemic.
(2008) Gray, Lyndon Robert.; Ortmann, Gerald Friedel.; Ferrer, Stuart Richard Douglas.
In South Africa commercial agriculture employs approximately 8.5% of the national workforce. Therefore, information about commercial farmers’ perceptions of and management responses to the HIV/AIDS pandemic are likely to be of interest to policy makers and non-governmental organisations (NGOs) in the health sector, as well as practitioners in rural development and commercial agriculture. HIV/AIDS affects businesses such as commercial farms by decreasing productivity, increasing costs and therefore decreasing overall profitability. Farm business’ responses to the challenges posed by HIV/AIDS may advantage or disadvantage farm workers. For example, farm workers are highly vulnerable to burden-shifting activities (practices which reduce the cost of HIV/AIDS to the employer, such as the outsourcing of low-skilled jobs). However, farm businesses may also play a substantial role (e.g., by providing formal adult education or access to clinics) in addressing the HIV/AIDS epidemic in rural commercial farming areas of KwaZulu-Natal and in South Africa generally. This study presents an analysis of KwaZulu-Natal commercial farmers’ perceptions of and management responses to the HIV/AIDS pandemic. This analysis identifies the farm, business and personal characteristics of the various respondents. It is important to know this information because it assists in understanding why commercial farmers are responding as they are, which will in turn assist in future HIV/AIDS policy planning. The analysis is based on a postal census survey of Kwanalu (KwaZulu-Natal Agricultural Union) commercial farmer members in April and May 2007. Results suggest that, on average, Kwanalu members are highly concerned about the impact of HIV/AIDS on their businesses. A majority of respondents perceived HIV/AIDS to negatively affect the current and future profitability of farming, increase labour absenteeism and staff turnover rates, and reduce labour productivity. An analysis of variance (ANOVA) of the data shows that respondents’ management responses to the HIV/AIDS pandemic varied by farm size and enterprise type, but include paying higher than average wage rates to attract and retain healthy and productive workers, multi-skilling staff to provide back-up skills, and mechanisation to defer costs of HIV/AIDS. Respondents tended to believe that effective HIV/AIDS treatment and prevention programmes require an integrated approach between government, employers and employees. Two response indexes were calculated: (1) ranking by adopters only (only those who use a certain response are included) and (2) ranking by all respondents (a response is not used by a respondent automatically scores zero). The response indexes showed that resource-intensive HIV/AIDS services such as provision of antiretrovirals (ARVs) and nutritional supplements are ranked high by actual adopters, but relatively low overall (as only a small proportion of respondents are adopting these strategies) in the ranking by all respondents. Burden-shifting practices (e.g. mechanisation) are ranked relatively high in both rankings, indicating that respondents rate them as important in managing HIV/AIDS, and that many respondents are utilising them. Relatively inexpensive HIV/AIDS services (e.g. informal communication) are ranked low by actual adopters but high on the overall index as many respondents are using them (but doubt their effectiveness). A linear regression analysis was conducted on principal components from the response indexes to identify characteristics of “high” and “low” responders and of those who utilise burden shifting activities or HIV/AIDS services. The characteristics of “high” responders are that they perceive HIV/AIDS to impact on costs; they employ a high proportion of skilled labour; and they have high turnovers and high debt servicing obligations. Responders who employ large amounts of labour (particularly permanent labour); who perceive HIV/AIDS as the responsibility of the employer; who are older and more experienced; and who have a relatively high debt: asset ratio tend to use HIV/AIDS services to manage the impacts of HIV/AIDS. Many respondents already play an important but inexpensive role in HIV/AIDS prevention and treatment through encouraging voluntary HIV testing and providing staff with information and transport to clinics. Policy makers should take this into consideration when formulating HIV/AIDS policies to combat the pandemic.
Labelling to promote broad-based Black economic empowerment in South Africa : a case study of the Thandi empowerment label.
(2007) Skinner, Cliff.; Lyne, Michael Charles.; Ferrer, Stuart Richard Douglas.
Broad-based black economic empowerment (BBEE) is a policy objective in South Africa. Farmworker equity-share schemes (FWES) satisfy several of the empowerment goals specified by the proposed AgriBEE Scorecard. Information about the costs and benefits of subscribing to an empowerment label will help managers to make more informed decisions about empowerment and could therefore promote BBEE. The Thandi label is an initiative to market fruit and wines originating from FWES and farms operated by previously disadvantaged farmers. A case study of the Thandi label was undertaken to determine whether or not the accredited empowerment attribute adds value to Thandi products. An exploratory-explanatory case study was adopted basing questions largely on the theoretical propositions of asymmetric information, the benefits of product labelling and the preconditions for a successful label. Primary data were collected via in-depth interviews with managers of Capespan, The Company of Wine People and empowerment farms participating in the Thandi label. The study made use of in-depth interviews with key informants to investigate issues considered (on theoretical grounds) to be critical in establishing a successful label. Responses were subsequently tabulated and compared, where relevant, across respondents in order to check for consensus views. Results indicate that the Thandi label had not succeeded in differentiating fruit, whereas the Thandi wine label had increased sales revenue and was covering accreditation costs incurred by farms as well as the recurring costs of maintaining and marketing the label. Thandi fruit had not grown its share of the domestic or export markets and did not command a price premium, Capespan subsequently discontinued the Thandi fruit label. Thandi wine, on the other hand, had grown its export market and consumers were prepared to pay a premium for Thandi wine products. The data indicate that empowerment attributes were useful in finding shelf space for products, but that quality is essential to grow market share and to earn price premiums. In short, accredited empowerment attributes can add value to quality products sold to discerning consumers who lack information about empowerment and quality attributes at the point of sale. Empowerment labels must include quality attributes. Government should at least absorb some of the transaction costs confronting producers and marketing agencies in negotiating standards for farms and firms participating in generic empowerment labels. It could also offer auditing services to local accreditation agencies to improve their credibility. Further research estimating consumers' willingness-to-pay for products branded with empowerment labels is necessary to estimate the size of premiums that different products may command.