Doctoral Degrees (Agricultural Economics)

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Appropriate institutional and contractual arrangements for the marketing of organic crops produced by members of the Ezemvelo Farmers' Organisation in KwaZulu-Natal.
(2010) Gadzikwa, Lawrence.; Lyne, Michael Charles.; Hendriks, Sheryl Lee.
The Ezemvelo Farmers’ Organisation (EFO) is a certified organic smallholder group in KwaZulu-Natal province (South Africa) that exists as an institution to improve smallholder access to niche markets by reducing unit production and transaction costs. The study is motivated by the need to understand drivers of collective action, prevalence of internal group free-riding, and the impact of contract terms on contract performance. These three theoretical concepts are pertinent in understanding organisational and institutional issues affecting the performance of smallholder organic farming groups and in formulating policies to promote the performance of such groups. The study relies on the theoretical foundations of collective action, free-riding and contracts found within the realm of New Institutional Economics (NIE). These theories, though separate, are in fact related in certain respects. Collective action in smallholder groups, apart from being a function of a plethora of socio-economic factors, including transaction costs, could be constrained by free-riding within the group, which in turn could be influenced by flawed contractual arrangements. This study of collective action focuses on 200 farmers drawn from a sample survey of 49 non-EFO members, and a census survey of 103 partially certified and 48 fully certified EFO members. A ‘collective action’ model investigates the impact of perceived benefits and savings on production and transaction costs attributed to collective action by drawing comparisons between EFO members and non-members using a multinomial logit model. The study of free-riding uses data from 151 members of the EFO to construct an index of free-riding within the group using principal components analysis (PCA). A ‘contract model’, which also focuses on EFO members only, attempts to measure the impact of verbal contract provisions on contract performance in addition to evaluating the determinants of preferred contract terms using a combination of PCA, Ordinary Least Squares (OLS) regression, and logit models. Results indicate that continued participation in EFO is not influenced by the age or gender of the farmer, but positively influenced by growth in the net benefits of participation, and negatively by an increase in the size of the household’s cropland or on-farm earnings. With respect to production and transaction costs, the results suggest that EFO has reduced fully certified members’ concerns that crops would be damaged by livestock or constrained by inadequate technical information. However, this is not the case for other problems such as price uncertainty in conventional markets, a lack of affordable operating inputs, a lack of affordable transport, and a lack of communications infrastructure. The index of free-riding behaviour constructed using principal components analysis suggests that free-riding poses a serious threat to EFO’s collective marketing efforts. Ordinary Least Squares regression analysis of the index scores shows that members who are male, poorly educated, partially certified, aware of loopholes in the grading system, and who do not trust the buyer are more likely to free-ride. Benefits accruing to EFO members are limited and there is substantial confusion among members about the terms of EFO’s verbal contract with the pack house that purchases their organic produce. Ordinary Least Squares regression analysis of the impact that perceived contractual terms have on quantities delivered to the pack house yielded interesting findings. Perceptions that delivery calls are made by the buyer, that grading procedures are flawed and that prices are not jointly established were found to reduce quantities delivered to the pack house, after controlling for differences in farm and farmer characteristics. Logit models estimated to identify the determinants of preferred contract clauses indicate that farmers with higher levels of formal education and farm income, and lower levels of experience, favour a written contract over a verbal contract. Similarly, farmers with higher levels of formal education and lower levels of family farm labour favour a contract denominated by area rather than weight. It is concluded that EFO should recruit households that rely on farming for income and which are land constrained. EFO is more likely to survive if it continues to secure fully subsidised information, transport, fencing, and certification services for its members, and if it improves the benefits of participating by synchronising harvest and delivery dates, negotiating price discounts for organic inputs, and by maintaining an office with telephone, fax and postal services. In the longer-term, EFO should address institutionalised free-riding by issuing tradable ownership rights. In the short-term, EFO must engage with the pack house (buyer) to remove flaws in the grading process that conceal the origin of low quality produce. Transparent and mediated negotiations leading to an incentive compliant contract with the buyer may also help to build trust and reduce free-riding within EFO. It is also recommended that the terms of EFO’s contract with the pack house should be revised so that; (a) delivery calls can be made by either the pack house or by EFO during specified periods and with reasonable notice, and (b) grading procedures are fully transparent and ensure traceability so that losses caused by poor quality can be internalised to members who deliver inferior produce. In addition, it is important that prices be negotiated at the beginning of each season and that the contractual parties have recourse to pre-agreed facilitators and an arbitrator to resolve disputes on price and quality. A written contract is recommended to support these more complex terms, with the proviso that the contract is explained to current and prospective members, and that growers are fully informed of their rights and obligations.
Determinants of herd productivity in Botswana : a focus on land tenure and land policy.
(2006) Mahabile, Meck.; Lyne, Michael Charles.; Panin, Anthony.
This study attempts to identify factors responsible for determining differences in the productivity of cattle managed by communal and private livestock farmers in the southern region of Botswana during 1999/2000. It is hypothesised that herd productivity and investment in southern Botswana are higher on private ranches than on open access communal grazing land. This study is important because livestock, especially cattle, contribute significantly to the livelihood of farmers in Botswana. Cattle are a major source of meat, milk and draught power, and provide a store of wealth that protects against inflation and which can easily be converted into cash. Cattle production is also an important source of employment in the rural economy of Botswana. Furthermore, the export of beef is a major source of foreign exchange earnings, and cattle account for 80 percent of agriculture's contribution to Botswana's gross domestic product. A stratified random sample survey of communal and private livestock farmers was conducted in the southern region of Botswana from August 1999 to May 2000 with the assistance of four enumerators. The sample survey data were used to compute descriptive statistics and to estimate the parameters of a block recursive regression model. The model postulated relationships between agricultural credit, investment in fixed improvement, investment in operating inputs and herd productivity. Some of the equations are estimated with Ordinary Least Squares (OLS) and some with Two-Stage Least Squares (2SLS) to account for likely correlation between endogenous explanatory variables and the error term. Descriptive statistics show that levels of investment and herd productivity are higher on private farms than on open-access communal grazing. Private farmers are also better educated, more liquid, and have larger herd sizes, but do not differ from their communal counterparts in terms of age, gender, race or household size. The regression results show that (a) respondents with secure tenure and larger herds use more agricultural credit than those who rely on open access communal grazing land to raise cattle; (b) secure land tenure, higher levels of liquidity and use of long-term credit promote investment in fixed improvements to land; (c) liquidity from short-term credit and wage remittances supports expenditure on operating inputs; and (d) herd productivity increases with greater investment in fixed improvement and operating inputs. Herd productivity is therefore positively (but indirectly) influenced by secure land tenure. It can therefore be inferred that government should (a) uphold private property rights to land where they already exists; (b) privatise open access grazing to individual owner operators where this is politically, socially, and economically feasible; and (c) where privatisation to individuals is not feasible, government should encourage users to convert the grazing into common property by subsidising the costs of defining user groups and the boundaries of their resources, and enforcing rules limiting individual use of common property. This first-step in a gradual shift towards more secure tenure should be followed by the conversion of user groups to non-user groups organized along the lines of investor-owned firms where members exchange use rights for benefit and voting rights in a joint venture managed by an expert.
Improving access of low-income people to formal financial services : evidence from four microfinance organisations in KwaZulu-Natal.
(2003) Kuhn, Manfred Edmund.; Darroch, Mark Andrew Gower.; Ortmann, Gerald Friedel.
The first aim of this research was to examine the current financial technologies, outreach and fmancial viability over time (from 1997 to 2002) of four MFOs providing agricultural, microbusiness and consumption credit in KwaZulu-Natal (KZN), South Africa (SA). Understanding the limitations and advantages of these financial technologies could facilitate institutional reform to improve access by low-income people to viable formal financial services in KZN. The second aim of this study was to estimate factors that affect the credit rationing decision and applicant loan default at the MFO providing consumption credit (MFOI), and the factors affecting default on medium-term agribusiness loans provided by MF02 which was one of the agricultural MFOs. These analyses were intended to help to improve client selection procedures and to reduce loan default rates at these MFOs. Study results show that institutions that finance specifically agricultural activities could improve the quality of their services by providing better access to branches and reducing loan approval times through improved screening and administrative procedures. Making financial services (consumption and production loans) available to both non-agricultural and agricultural sectors would also help to reduce portfolio risks resulting from the covariant incomes of small farmers. Savings mobilisation should also be considered, although institutions need to develop appropriate capacity to handle savings before mobilising deposits. The study shows too that the rural poor in SA have the capacity to save (for example, the average number of active savings accounts held by individuals at MF02 rose to 474 052 in 2002). Study results also suggest that the provision of both savings and loan services helps an institution to reduce borrower transaction costs in accessing financial services and means that savings can serve as a form of collateral and borrower information for lenders. Lenders need to charge interest rates that reflect the true cost of lending in order to cover costs, given that small loans to the rural poor in SA are risky and costly to administer. Charging a suitable interest rate, however, is not a sufficient condition for achieving financial self-sustainability. Reducing high arrears through stricter loan contract enforcement will also promote the financial self-sustainability of MFOs in SA. Moveable assets, such as vehicles and equipment, were not effective sources of collateral due to the high costs of attaching these assets in rural parts of KZN. Cessions on sugarcane crops were often constrained by flaws in collection mechanisms, where borrowers could deliver sugarcane to sugar mills on non-borrower quota numbers. Secure and transferable property rights were important preconditions if land was to have value as collateral. Collateral substitutes such as joint liability mechanisms were less effective when lending to large farmer groups (30 - 60 members) compared with small groups (4 - 6 individuals) of micro-entrepreneurs operating in urban areas in SA. Costly legal action to recover debts further undermined borrower accountability for loan repayment and thus did not discourage morally hazardous activities. Reputational capital was an integral part of the financial technology successfully used by MFO1, and could be more effectively developed by agricultural lenders in SA if they strictly enforce the policy of denying borrowers access to future funds if they default on previous loans. Based on data over the period 1998 to 1999, less contactable borrowers that were employed in sectors with a high likelihood of retrenchments, with higher debt-to-income ratios and with more defaults and payment profile arrears, were more likely to be credit-rationed by MFO1 staff. Applicant contactability was another key part of MF01's monitoring intensive financial technology, but constrains MFO1 from broadening its financial services to small businesses if these are not easily contactable. Credit bureau information on previous loan default was critical in this microfinance market where it is difficult to obtain formal collateral. The policy implication is that lenders need to share default information and credit bureaus need to correctly capture this information. Borrowers with higher debt commitments, previous loan defaults, who were less contactable and who worked in sectors where employment was less secure, were more likely to default at MFO1. Low-income borrowers had lower levels of liquidity that reduced their ability to repay debt. The influence of contactability in loan repayment highlights the trade-off between monitoring-intensive and collateral-intensive technologies. Although MFO1 used reputational capital as a collateral substitute, the imperfect nature of this collateral type necessitated intensive client monitoring. Lender MFO1 also needed a well-diversified portfolio across employment sectors to reduce the impact of systemic income risks. The impact of previous credit history on loan repayment suggests again that this information can be an effective collateral substitute if information is shared between lenders, and the rule of not granting credit to defaulters is strictly enforced. Based on data over the period 1993 to 1994, borrowers with smaller loans (lower asset bases and smaller businesses), lower own equity contributions, engaged in contract ploughing and cartage or broiler production ventures, with lower liquidity and with no previous borrowing experience, were more likely to default of MF02's medium-term agricultural loans. Larger borrowers had well-diversified asset bases that enabled them to better withstand negative income shocks and reduced the need to divert funds for loan repayment to current consumption. Improved liquidity generated from other sources of income (such as wage remittances and other business ventures) also improved loan repayment ability. Lenders thus need to focus on all sources of income, not just on the income generated by the investment project for which finance is provided, in assessing client repayment capacity. Ploughing contractors probably need closer monitoring to ensure that equipment is properly maintained and that sufficient income can be generated from the business to repay loans. These contractors could also be encouraged to diversify into contract transport activities that provide more regular income. Given the increased competition and periodic outbreak of disease in the chicken industry when the study was conducted, borrowers should be encouraged to diversify to reduce price risk. Increasing the owner's equity stake in the investment, while a second-best option, may be a suitable alternative where collateral is ineffective in enforcing loan contracts. Borrowers that had an established record with the lender tended to repay their loans, again highlighting the importance of reputation in a borrower-lender relationship.
Rural livelihoods in south-eastern Zimbabwe : the impact of HIV/AIDS on the use and management of non-timber forestry products.
(2010) Mutenje, Munyaradzi Junia.; Ortmann, Gerald Friedel.; Ferrer, Stuart Richard Douglas.
Non-timber forest products (NTFPs) constitute an important source of livelihood for most poor rural households and communities in Zimbabwe. NTFPs also serve as a vital livelihood safety net in times of hardship. An important feature of this dependence is that almost all NTFPs are deemed to have ‘public good’ characteristics, with no exclusive property rights. Consequently, extraction is often intense and exhaustive because of lack of alternative income sources, unreliable productivity and weak enforcement of institutional arrangements governing NTFPs use. In recent years, with HIV/AIDS rampant in Zimbabwe, there are indications of a rapid increase in the extraction of NTFPs, mostly from common property resources. Appropriate natural resources policies need to be based on comprehensive research, yet to date scant attention has been paid to understanding the role of NTFPs in mitigating the predicaments of HIV/AIDS-affected households in Zimbabwe. The main objective of this study was to determine the types of and need for natural resource management interventions to help ensure the sustainability of local responses to HIV/AIDS. The research focused on five communities of Sengwe Communal in the Chiredzi district, Zimbabwe. Multistage cluster sampling was used to select ten villages and households for the survey. Two villages from each community, representing the most and the least affected by epidemic were selected for each community using stratified random sampling. A cluster analysis was used to improve understanding of the challenges of rural livelihoods and how households diversify their livelihood strategies to cope with the various constraints. Five dominant groups based on their livelihood diversification patterns were identified : (1) smallholders/unskilled workers; (2) subsistence smallholder/non-timber forestry products harvesters; (3) crop production and non-timber forestry products extraction integrators; (4) commercial smallholders with regular off-farm employment; and (5) specialised commercial livestock producers. Multinomial logit model results showed that the level of education of the household head, the value of physical assets, cattle numbers and income, remittances, NTFPs income and economic shocks were the main determinants of these livelihood choices. Empirical evidence also revealed that households that were statistically significantly affected by HIV/AIDS economic shocks practised ‘distress-push’ diversification by extracting NTFPs. These results suggest that policy makers need to advise rural households on how to improve their risk management capacities and move from geographically untargeted investments in livelihood assets to a more integrated approach adapted to the asset base of individual households. Using panel data from 200 households in 2008 and 2009, regression models revealed that NTFPs extraction is an important ex-post coping mechanism for many HIV/AIDS-afflicted households. The results also revealed that the main determinants of livelihood strategy choices were differences in asset endowment, especially education, land and livestock and the impact of the shock. Asset constraints compelled diversification into lower-return activities such as NTFPs extraction. Findings from a comparative analysis of HIV/AIDS-afflicted and non-afflicted households showed that HIV/AIDS-afflicted households were relatively young, with relatively few physical and livestock assets. A fixed-effect Tobit model indicated a positive significant relationship between HIV staging and quantity of NTFPs extracted. The relatively young, poorly educated households with low household coping capacity in terms of livestock value relied more on the natural insurance of forests in buffering HIV/AIDS economic shocks. These results have important policy implications for development planners, conservationists and non-governmental organisations working in the region. There is a need for programmes that reduce pressure on forest resources, and improved access to education and health care, thus helping the poor to cope with the HIV/AIDS economic crisis. This study also examined the extent to which forest degradation is driven by existing common property management regimes, resource and user characteristics, ecological knowledge and marketing structure. A Principal Component Analysis indicated that the existence of agreed-upon rules governing usage (including costs of usage), enforcement of these rules, sanctions for rule violations that are proportional to the severity of rule violation, social homogeneity, and strong beliefs in ancestral spirits were the most important attributes determining effectiveness of local institutions in the management of Common Pool Resources (CPRs). Empirical results from an ordinary least regression analysis showed that resource scarcity, market integration index, and infrastructural development lead to greater forest resource degradation, while livestock income, high ecological knowledge, older households, and effective local institutional management of the commons reduce forest resource degradation. The results suggest that there is a need for adaptive local management systems that enhance ecological knowledge of users and regulates market structure to favour long-term livelihood securities of these forest-fringe communities.
The institutional economics of cultivated mushrooms in Swaziland : a study on value chains, transaction costs and collective action.
(2013) Mabuza, Majola Lawrence.; Ortmann, Gerald Friedel.; Wale, Edilegnaw Zegeye.
This study focuses on commercial mushroom production, a relatively new economic activity in Swaziland that seeks to assist rural-based small-scale farmers to diversify and improve their economic independence and livelihoods. The mushroom programme is in line with the National Development Strategy, which, among its major objectives, aims to address povertyrelated challenges through the promotion of non-conventional high-value agricultural commodities that have not been explored by local farmers despite having a relatively high consumer demand in local and international markets. In attempting to provide an impetus to the mushroom industry, the Swaziland government currently offers free training in mushroom production, extension services, high quality spawn at a very nominal fee, and free substrate bags. Considering the geographical suitability and the magnitude of investment made towards the mushroom development programme, there is a need to understand why many farmers are not participating in the industry, and why Swaziland still imports more than 95 percent of locally consumed cultivated mushrooms. There has also been no research so far on the challenges and opportunities in producing, value adding, and marketing of mushrooms in Swaziland. This study was, therefore, an attempt to address these knowledge gaps. It also provided an opportunity to draw relevant policy and management implications to inform future strategies in the industry. The specific objectives of the study were to: (i) identify and examine the factors that influence households’ decisions to participate in mushroom production; (ii) study the underlying mushroom production and market access constraints; (iii) examine the effects of transaction cost factors that influence mushroom producers’ market channel choice decisions and the quantity of mushrooms sold in selected channels; and (iv) study the effects of organisational form on producers’ participation in collective responsibilities. Using cross-sectional data gathered from mushroom producers and non-producers, the results of the Two-Stage Conditional Maximum Likelihood and Two-Stage Probit Least Squares estimation methods revealed that farmers’ decisions to participate in the mushroom enterprise are mainly influenced by institutional factors. Farmers who have undergone training in basic oyster mushroom production, are located in close proximity to input and output markets, and have positive perceptions towards mushrooms, are likely to participate in the mushroom industry. The development of positive perceptions towards mushrooms is predominantly influenced by the knowledge gained on their nutritional and therapeutical properties. The value chain approach was used to identify the underlying factors constraining mushroom production and producers’ participation in mainstream markets. Among the important findings, the study showed that producers’ plans to expand production capacities are hampered by the difficulty to access key inputs and services, which are centralised and fully controlled by the government. Generally, local farmers produce below capacity in relatively small low-cost structures, which are also not well equipped. As a result, farmers apply very primitive management methods that eventually affect their productivity. These constraints are partly responsible for the extremely low locally produced volumes and inconsistent market supply, prompting local mushroom traders to rely on imports. Other constraints relate to the lack of diversification as farmers currently produce only the oyster mushroom, yet consumers are mostly interested in the button mushroom, which is favoured for its appearance and taste. Currently, no cultivated mushrooms are exported from Swaziland and producers have not yet engaged in any form of mushroom processing. Instead, from what they harvest, it was found that about six to 10 percent is consumed at household level and the remainder sold through four channels identified as: (i) the farm gate; (ii) retail market (supermarkets); (iii) middlemen; and (iv) food services industry (restaurants/hotels). Among the four channels, the retail market and farm gate were, respectively, identified as the most preferred. Between the two, the retail market offers a comparatively higher producer price and a relatively more dependable market. Cragg’s regression results revealed that producers who are likely to supply the retail market are those who manage a relatively large number of spawn impregnated bags, have a high labour endowment, own cold storage facilities, and are affiliated to mushroom producing groups. However, the difficulty in accessing market information and lack of bargaining power significantly constrains other producers’ plans to supply the retail market; hence, they end up selling through less remunerative channels, such as the farm gate. Producers’ decisions on the quantity of mushrooms supplied through the retail market are significantly affected by the difficulty in accessing transport and uncertainty about meeting the retailers’ quality requirements. Over 90 percent of mushroom producers in Swaziland currently participate in the industry through farmer groups. These groups are predominantly organised in two forms, depicted as model A and B, respectively. In model A, besides establishing their own by-laws, members produce mushrooms in one growing house where they share the costs and benefits of all preproduction, production and marketing activities. In model B, members also establish their own by-laws and share all pre-production activities. However, instead of producing under one roof, each member manages his/her own growing house and members are at liberty to make their own marketing arrangements independently. The results of the Propensity Score Matching method indicated that producers affiliated to model B groups have significantly higher levels of cooperation, which is evidenced in making joint decisions and performing shared manual activities. Participation in such groups also improves producers’ knowledge of the enterprise, and reduces the likelihood of internal free-riding. The overall results of the study point to the need to strengthen farmer training in mushroom production and value-addition. In attempting to improve producers’ access to key inputs and services, it is recommended that the government should relinquish its position (to the private sector) as the only provider of these services, allowing public institutions to assume a monitoring role. Producers’ competitiveness and sustainable participation in the mushroom value chain can be enhanced by institutionalising and strengthening collective action, which can possibly enable them to achieve economies of scale benefits in the input and product markets, and improve their bargaining position. As indicated in the empirical chapters, market availability for mushrooms is not a challenge in Swaziland. However, the lack of a market information system, expert assistance in agribusiness management, poor value chain governance, and lack of vertical coordination, predispose producers to high marketing and transaction costs such that they end up selling through less remunerative marketing channels.
Expenditure elasticities and growth linkages for rural households in two study areas of KwaZulu-Natal.
(2002) Hendriks, Sheryl Lee.; Lyne, Michael Charles.
Expenditure patterns were investigated to determine the potential impact of a widespread income shock on household expenditure and to estimate the potential for growth linkages to spur agriculture-led growth in two communal areas of KwaZulu-Natal. Expenditure data were collected from 99 sample households at the rural areas of Swayimana and Umzumbe during 1997. District and wealth group expenditure analyses for commodity groups suggested expenditure elasticities of close to unity for food. Low expenditure elasticities were found for staple foods. Expenditure elasticities for meat, meat products, and poultry were close to unity, while horticultural products showed the greatest potential for demand growth within the food category. Of the statistically significant commodity categories, expenditure elasticities for durables, housing, and transport were more than double those estimated for the aggregate food category. There was little difference in the response of wealthier households (the top expenditure decile) and that of poorer households. However, wealthier households have a greater propensity for increased expenditure on transport, while poorer households show a greater propensity for increased expenditure on housing and durables. District and wealth group expenditure analyses for tradable versus non-tradable farm and non-farm goods and services suggest a less than proportional increase in the demand for tradable farm commodities, and a more than proportional increase in demand for non-tradable farm commodities, following a one percent increase in household expenditure. Expenditure on non-farm tradables (imported consumer durables) showed the greatest potential for demand growth, with expenditure elasticities ranging from 1.75 to 2.59. A one Rand increase in household income is predicted to add an additional 28 cents (multiplier of 1.28) to the local economy. However, even relatively weak growth linkages could lead to much needed new income and , employment opportunities within the local farm and non-farm sectors if the constraints inhibiting agriculture, and hence broad-based growth in rural incomes are alleviated. Agriculture-led growth in South Africa requires public investment in both physical and institutional infrastructure to reduce transaction costs and risks in all markets, encouraging greater participation by local entrepreneurs and private sector investors. In addition, the roles, functions and services offered by extension agents should be extended to promote collective marketing, facilitate land rental contracts, provide training, and technical and business support for farm and non-farm entrepreneurs.
Rural economic growth and small-scale poultry production : the economic and technical constraints.
(2002) Wynne, Adrian Theodor.; Gous, Robert Mervyn.; Lyne, Michael Charles.
Small-scale commercial poultry enterprises are often used in development projects to (a) improve food self-sufficiency, and (b) to generate income. The analysis of survey data gathered from the rural areas of KwaZulu-Natal shows that the majority of small-scale poultry producers come from previously disadvantaged communities and have significantly lower enterprise growth rates than larger producers. Principal Component Analysis is used to determine underlying "dimensions" of the main technical poultry production parameters, which with the aid of a t-test indicate that management practices and equipment use are significantly different for small-scale and larger producers but that feed utilisation and disease reduction practices are similar. The results of a block-recursive regression analysis indicate that enterprise growth rate is constrained by poor access to credit, high transaction costs and unreliable local markets. Using growth linkage concepts it was found that smallscale poultry enterprises have the potential to initiate economic growth by drawing under-utilised resources such as labour into production when their products are "exported". The impact of the subsequent multiplier effect is strongest in the nontradable, non-agricultural sector. To enhance this multiplier through increased rural economic growth government policies should focus on reducing transaction costs by improving education and physical infrastructure, sponsoring training and assisting with mentoring services. Facilitating the development of appropriate business institutions capable of managing co-owned resources is particularly important as well as legal and fmancial management instruction. Economic growth also requires a stable, equitable and well-adapted institutional environment where the potential threat of a functional and affordable conflict resolution mechanism is crucial to discourage opportunistic behaviour. Many disputes associated with poultry production in KwaZulu-Natal currently remain unresolved because legal court action is prohibitively expensive and legal uncertainty arises where informal tribal authorities administer conflicts. Setting up small-claims courts is one option of correcting these inefficiencies; the desired effect would be to strengthen property rights, reduce transaction costs and promote economic growth. Poultry has established itself as an appropriate vehicle to stimulate economic growth in rural KwaZulu-Natal and its impact is expected to be greater if growth constraints are alleviated for a large number of small enterprises rather than encouraging a few larger enterprises to grow bigger.
Agricultural bilateral trade agreements between South Africa and the European Union : implications for the South African fresh orange industry.
(2000) Gay, Stephan Hubertus.; Nieuwoudt, Wilhelmus Liberté.
During October 1999 South Africa and the European Union (EU) signed the "Agreement on Trade, Development and Co-operation". This agreement includes a Free Trade Agreement (FTA) which will lead to a free trade area between both partners. The framework for a FTA is set by the World Trade Organization (WTO). This study focuses on the effects of the FTA on the South African fresh orange industry. Fresh oranges account for approximately ten percent of South African agricultural exports. On the other hand, South Africa is the second largest external supplier to the EU and dominates the EU off-season. Fresh oranges are only included in the FTA from June until September and tariffs are reduced by approximately three percent in this time which is the peak South African export season. A trade simulation model was developed using the programme STELLA to analyse the effects of the FTA on the South African fresh orange industry. The trade simulation model consists of seven sub-models for production according to region and cultivar; a local market model, an export market model and an exchange rate model. The production models run on an annual basis whereas the other sub-models run on a monthly basis to capture the seasonality in fresh orange trade. The simulation period lasts from 1997 until 2011, hence fifteen years. The production models use gross margins according to the age of the orchard. The annual production is divided into monthly production on the basis of industry information. The South African demand function in the local market model uses the consumption per person, the export price and trend as independent variables. A trend variable is included to cater for the change in consumer preferences, especially, the move from oranges towards easy-peelers. On the EU market, prices are seen as external variables, except for the months July until October when the South African market share exceeds 50 percent. During these months an import demand flexibility is derived on the basis of the South African market share. The exchange rate model derives from the purchasing power parity between the South African Rand and the Euro. Simulation model results indicate that the FTA is beneficial for South African producers while South African consumers may also benefit. Further producers are expected to benefit from a slight increase in real free-on-board prices and a slight increase in total production. South African consumers are expected to benefit from a simulated decrease in real local prices due to the predicted increase in production. The effects on the EU market are simulated to be even smaller. A slight increase in EU prices is simulated during South Africa's peak export season which is the EU off-season. Results for regional production areas in South Africa show that during the simulation period the area under Valencias increases strongly whereas the area under Navels decreases. A comparison with a scenario without any EU tariffs was carried out to estimate the total distortion effect of EU protection on the South African market. Both South African consumers and producers benefit in the scenario without EU tariffs. The results of the simulation indicate that the total effect of EU tariffs is relatively small. Predicted total South African orange production increases by 14.8 percent over the simulation period compared to 9.1 percent in the scenario without any preferential treatment. The difference in other results is even smaller. The FTA reverts only parts of the distortion effect of EU protection. There are still some further possibilities to reduce the effects of EU protection on the South African fresh orange industry.
Risk preferences and soil conservation decisions of South African commercial sugarcane farmers.
(1999) Ferrer, Stuart Richard Douglas.; Nieuwoudt, Wilhelmus Liberté.
In this study commercial sugarcane farmers' risk preferences are measured and tested, amongst other factors, as determinants of their soil conservation decisions. Motivation for this research stems from ongoing erosion on South African commercial farms, including sugarcane farms; recognition that agricultural economists have a poor understanding of factors affecting soil conservation; and because little positive economic research has been conducted linking risk preferences to environmental choice. This research also affords the opportunity to investigate both theoretically and empirically the effect of the range of the data on the Arrow-Pratt absolute risk aversion coefficient (AP); and to investigate factors affecting farmers' risk preference. Both of these are important topics for research. The proposed conceptual model views farmers' soil conservation decisions in a system analogous to a demand system from which a probabilistic choice model of the adoption of soil conservation practices is developed. This model relates adoption of soil conservation technologies to the demand for soil conservation using derived demand theory. Consequently, soil conservation decisions are analysed in terms of both achieved soil conservation efficiency and farmers' choices of soil conservation measures. This conceptual model further advances previous research in that it provides a sound economic base for the analysis and it accounts for intra-farm variations in soil conservation decisions. It is demonstrated that AP's must be adjusted for the range as well as the scale of the data for comparison of risk preferences across different risk situations. Although Raskin and Cochran's (1986) theorems adjust AP's for the scale of the data and are widely used in agricultural economic research, they only adjust correctly for the range of the data under special circumstances. It is demonstrated that in previous agricultural economic research AP's have been incorrectly adjusted for the range of the data and that the effect of the range on AP's has been often incorrectly interpreted as a wealth affect. It appears that informing agricultural economists of the sensitivity of AP's to the range of the data is important. An approach is proposed for adjusting AP's for both the scale and the range of the data. Fifty three commercial sugarcane farmers from KwaZulu-Natal were surveyed by personal interview during May and June 1996 to elicit farmers' risk preferences and information on their soil conservation decisions. Arrow-Pratt absolute risk aversion coefficients are elicited using a direct elicitation of utility approach. Two farmers refused to participate in lottery games for religious or moral reasons. Of the remainder 57.2 percent were risk averse, 29.6 percent risk neutral and 13.2 percent risk preferring. On average they were risk averse although risk preferences vary significantly amongst individuals. Regression analysis indicates that on average sugarcane farmers are averse to a possible loss in wealth relative to initial wealth and they exhibit increasing absolute risk aversion although at a decreasing rate with increasing gamble range. Technological information is used to assess KwaZulu-Natal commercial sugarcane farmers' intra-plot (panel) soil conservation relative to requirements of the Conservation of Natural Resources Act of 1983. Findings indicate that farmers consider enforcement of the Act to be unlikely and that 28 percent of farmers surveyed do not meet adequate intra-panel soil conservation standards. This partially reflects that a large proportion of farmers have not yet completed implementing their soil conservation plans. Nonetheless, policy makers should examine factors impeding adequate enforcement of the 1983 Act. Multiple regression and principal component analysis techniques are used to analyse farmers' soil conservation decisions. Decisions are analysed in terms of achieved intra-field soil conservation adoption and soil conservation effort, and farmers' choices of soil conservation measures. Measurements of soil conservation efficiency are defined to be objective, be suitable for relative analysis, and reflect intensiveness of adoption. Extensiveness of adoption is captured by eliciting information for more than one field per farm. Achieved goodness of fit statistics are good compared to previous similar studies and indicate that intra-farm variations in soil conservation contain important information explaining soil conservation decisions. Findings generally support the conceptual exposition that the demand for soil conservation technologies is derived primarily from the demand for soil conservation. However, the demand for fire insurance does affect adoption of strip cropping, and hence soil conservation decisions. Results indicate that although risk and risk preferences are not significant determinants of the quantity of soil conservation demanded by sugarcane farmers, they are significant determinants of their soil conservation decisions. Firstly, the rate at which more risk averse farmers tend to undertake extensive restructuring of sugarcane field layouts tends to be relatively slow. This verifies the hypothesis that risk averse farmers value an option to postpone capital intensive, irreversible investments. Secondly, relatively risk averse farmers are more likely to adopt strip cropping programmes. This finding is attributed to their aversion to income risk and not risk of excessive soil loss. The hypothesis that risk averse farmers adopt soil conservation practices to reduce risk of serious erosion is not supported. It is concluded that farmers' abilities to assess soil conservation efficiency is poor, especially with respect to the partial contribution of conservation structures to achieved soil conservation efficiency; while farmers tend to implement soil conservation on steeper slopes first; and perceive minimum tillage and strip cropping programmes to be imperfectly compatible. Adoption of minimum tillage, trash mulching and strip cropping are primarily constrained by physical climatic, field and soil characteristics and to a lesser extent by farmers' management time and technical abilities. Implementation of improved soil conservation structures is constrained by financial constraints. Amongst other factors, education and use of extension information sources and adoption of land use plans are positively related to both conservation adoption and effort. Soil conservation policies must make farmers more aware of soil erosion. This is best achieved through provision of specific technical information, especially land use plans.
Enhancing the contribution of small-scale growers in the sugar industry.
(1999) Sokhela, Mbuyiselwa Patrick.; Breen, Charles Mackie.
In the South African Sugar Industry, small-scale sugar cane growers outnumber large-scale growers by more than 10:1. They farm approximately 33% of the total area planted to sugar cane, but produce approximately 10% of sugarcane reaching the mills. Special institutional and support services have been developed to promote the interests of small-scale growers. This study assessed the effectiveness of small-scale grower development as perceived by the Mill Cane Committees (MCCs) who represent the Black small-scale grower organisations. The study focussed on the MCCs. Information from members of these committees was gathered by way of questionnaires, group discussions and key informant interviews with support services representatives. Findings were contextualised in an historical perspective which indicated social, economic and political marginalisation, which has had profound consequences. Some of the more important findings were: 1. Small-scale growers were neglected, marginalised and isolated in the Sugar Industry until 1973, and were excluded from using support services available to other growers until 1983. 2. The organisational structures of small-scale growers are ineffective. 3. Small-scale growers had a low level of trust in the support services offered by the Sugar Industry to support their operations. 4. Interaction between the Mill Cane Committees, the local farmers' associations, the local grower councils, and service providers, mainly small-scale cane contractors and extension services, were considered poor. 5. Support services were not directed by small-scale growers' needs. 6. Training programmes, whilst beneficial to small-scale growers, were shown to be too technical and narrow. They concentrated too strongly on elements of sugar cane production and not sufficiently on the people and their operations. 7. Small-scale growers perceived cooperatives as a means of empowerment. Without significant increase in profitability (better sugar cane and more of it), this was shown to be questionable as cooperatives are unlikely to be self sustaining. 8. Small-scale growers did not understand the interrelationships between the aims of the Sugar Industry and their own operations. The mills aim to make profits from sugar cane and the South African Cane Growers' Association wishes to maintain a good political image to protect import tariffs, whereas small-scale growers want more emphasis on support systems and community development. Small-scale growers must realize that the Sugar Industry is not responsible for providing improved education and training and support services neither for sugar production nor for activities outside of the Sugar Industry. The Sugar Industry may choose to assist small-scale growers if it believes that by doing so it will increase its own profitability and improve its political image. Small-scale growers should control their destiny and be committed to self management of small-scale grower development in the long term. This may be achieved by developing effective organisational structures, proper interaction with support service providers and less dependency on the Sugar Industry. The findings of this research are considered to be relevant to most if not all developing countries, because sugar cane production requires a mill, the mill requires assured sugar cane supply; this is most efficiently supported by estates and large-scale growers. Small-scale growers remain a convenient "top up" when sugar cane is in short supply and an inconvenient and expensive burden when sugar cane is not required.
An evaluation of the South African sugar industry's small cane growers' financial aid fund.
(1996) Bates, Richard Frank.; Nieuwoudt, Wilhelmus Liberté.
The research is an evaluative case study of the South African Sugar Industry's Small Cane Growers' Financial Aid Fund (FAF). FAF has been operating since 1973 and has advanced 59 597 loans amounting to R175 million to small scale sugar cane growers located in KwaZulu-Natal, Eastern Cape and Mpumalanga provinces of South Africa. FAF, which has been the principal supplier of credit to small scale growers over the period, also operates a savings facility. Small scale grower development in South Africa has been driven by prevailing economic conditions in the sugar industry and its need to meet expanding markets. Small scale grower sugar cane production expanded rapidly from 1973 to 1985 whereafter it has shown a decline. FAF was found to be an important element in facilitating the expansion. An analysis of FAF's financial records indicated that it is subject to policy and procedures not aligned to sustainability. Loans to small scale growers from FAF were advanced at subsidised rates of interest. Calculation of a subsidy dependence index showed that, for FAF to be sustainable, interest rates in the order of 34% need to be charged. The viability of small scale growers themselves is an important aspect of the provision of credit. An analysis of small scale grower production costs for the period 1988 to 1996 indicated low margins per unit of production. Inefficiencies in weed control, fertilization and contracting were identified as important factors contributing to poor performance. Cashflow models using different methods of production and productivity indicated that small scale grower margins can be increased. Farm systems research is proposed to address improved economic performance. There have been two divergent approaches to small scale grower development in the South African sugar industry. The first was a highly directed or managed approach while the second relied on provision of agricultural extension and training to enable small scale growers to develop. The underlying philosophies of these approaches were contrasted with findings indicating that a great amount of dissatisfaction, misunderstanding and mistrust are evidenced in the highly directed/managed approach. Linear discriminant analysis indicated that growers using loans were more likely to have used mill contractual services, have produced sugar cane for a greater number of seasons and have larger areas planted to sugar cane than growers who did not use loans. It was also shown that small scale growers using mill contractual services appeared to use a greater number loans, produced sugar cane for a greater number of seasons, had larger areas planted to sugar cane but exhibited lower yields per hectare and had higher loan default rates, than small scale growers not using mill contractual services. The provision of credit enabled expansion of the small scale grower sector to take place. However, in terms of individual circumstances of small scale growers, those utilising FAF loans and those utilising services of mill contracting companies did not appear to have been as successful as those growers who developed independently of credit and managed development procedures. Overall it is found that FAF' s original and revised objectives have not been met. It is noted that objectives of sugar mills to increase sugar cane supplies have been achieved. In concluding it is recommended that FAF be restructured to broaden access to finance by small scale growers, to mobilise savings and attain sustainability of institutions providing required financial services.
Marketing constraints faced by communal farmers in KwaZulu-Natal, South Africa : a case study of transaction costs.
(2002) Matungul, Maliem Pierre.; Ortmann, Gerald Friedel.; Lyne, Michael Charles.
Farmers engaged in small-scale agriculture in Africa generally have limited access to factors of production, credit and information. Empirical studies throughout the African continent have shown the extent to which high transaction costs constrain or prevent access to information and markets, especially for small-scale farmers. Despite these constraints, farmers in two communal areas of KwaZulu-Natal (Impendle and Swayimana) have managed to produce food for both own consumption and marketing. This study draws heavily on the New Institutional Economics, and particularly Transaction Cost Economics, which have demonstrated the important role of transaction costs in constraining economic activity, and of institutions developed to lower these costs. Transaction costs are the costs of exchange, including costs of information, negotiation, monitoring, coordination and enforcement of contracts. These costs can be implicit or explicit. The main objective of the study is to assess marketing constraints faced by communal farmers in the Impendle and Swayimana regions of KwaZulu-Natal, South Africa. Data were drawn from random sample of 120 household heads in each of the regions. In Swayimana, data were collected in January and February 1999 whereas the survey in Impendle was undertaken in April and May 1999. The empirical analysis attempts to identify factors determining the quality and number of marketing channels used (i.e. depth in marketing methods), which in turn affect the level of income generated from crop sales by small-scale farmers in the two study areas. The identification of such factors might support initiatives to create a more viable small-scale farming sector in the communal areas of KwaZulu-Natal. A block-recursive model was formulated and estimated using ordinary least squares (OLS) and two-stage least squares (2SLS). Empirical analysis of the OLS equation suggested that transaction cost variables are important in explaining the choice of, and depth in, marketing methods. Results of the combined samples indicate that cooperation with neighbouring commercial farmers, and the interaction of distance and ownership of a vehicle were the most important factors in the choice of marketing methods. Other factors such as the age of household head, having a formal bank account and the area of allocated arable land, also significantly and positively influenced the depth of marketing methods. At a regional level, the same equation revealed that while COOP was the most important factor in Swayimana, DISTRA and ACC were the main determinants in Impendle. The 2SLS regression analysis indicated that greater depth in marketing methods, which reflects lower transaction costs faced by growers, has a strong and positive impact on the level of crop income generated; i.e. the lower the transaction costs faced, the greater is the depth in marketing methods, and the higher the level of crop income. The results imply that formal marketing channels are associated with low transaction costs and higher levels of crop income. The area of cultivated arable land and income from non-agricultural activities were the other two important determinants of crop income. It is concluded that accessibility to formal market outlets is limited by considerable farm-to-market distance, poor infrastructure (roads, telecommunications), and inadequate transportation. Recommendations give due consideration to the development of a better physical and institutional infrastructure which would effectively link these production areas to market centres and improve market knowledge by providing relevant market information and farming skills.
Farm size and economic efficiency in sugar cane production in KwaZulu-Natal.
(1996) Mbowa, Swaibu.; Nieuwoudt, Wilhelmus Liberté.
There is a dilemma in South African agriculture in the choice of an agrarian system that will achieve the dual goals of growth and equity. Uncertainty prevails about the viability of very small farms, and how the country's extremely limited and fragile agricultural resources can be utilized in an efficient and productive manner. In this study efficiencies in resource utilization on small and large sugar cane farms are examined, and information is provided on the implications that might hold for the reallocation of resources between farm size groups in pursuit of land redistribution. In any industry where there are specialized resources to specific firms like labour and management, it is difficult to define an efficient farm size because returns to these specialised productive factors will differ, as such influencing costs per unit, resource valuation and eventually the size of operation. In this situation there will tend to be an optimum distribution of firm size rather than optimum size of a firm. This renders any study of optimum size rather dispensable. However, in South Africa where government is encouraging small farm development, the question of efficiency and equity becomes relevant and it is not possible to simply abstract from this issue. The study is based on data collected from a sample of 160 small and large sugar cane units in the North Coast region of the KwaZulu-Natal sugar cane belt during March/April 1995. The sample was stratified to maximize the variation of the farm size variable in order to study the effect of this variable on efficiency. The study shows that small farms as compared to large farms; are deficient in human resource capital, less competitive in the credit market, incur high input costs relative to farm income, have less incentive to acquire more farming knowledge, and of less capacity to adopt better farming methods. A linear discriminant model shows that human capital capacities of farm operators, information, farm size, and wealth are important determinants of the likelihood of adoption of appropriate and improved farm practices on sugar cane farms. Major implications are that: adequate information through training on better farming methods will improve the managerial capabilities of farmers, and sugar cane farmers with different resource endowments should be targeted distinctively in the provision of extension support services. Economies of size, whereby large farms reduce their costs by spreading fixed machinery, labour and management costs, information, and transaction costs in the credit market over more output are evident in the data. Results indicate that farms producing less than 500 tons of cane (operating approximately less than 10 hectares under sugar cane) exhibit substantial economies of size. Such economies tend to decline with size of enterprise, and farms with output of about 2500 tons (50 hectares of land under sugar cane) appear to have near constant returns to scale. This implies that small farms producing less than 500 tons (ten ha of sugar cane) require significantly more resources to produce a rand's worth of output than larger farms. The major policy implications are that, if commercial farms are subdivided in the land resettlement programme, significant efficiency loss may occur if the resettled farms produce less than 500 tons. Little efficiency loss is expected if resettled farms produce more than 2500 tons (50 hectares). Finally, empirical evidence using a tobit (econometric) model suggests significant linkages between scale efficiency and farmers' education, managerial adeptness, training, age, and size of farm holdings. This implies that efficiency of very small scale sugar cane farms (producing less than 500 tons) can be enhanced by land consolidation, farm operators' education, training and extension services for expansion and propagation of modern techniques of cane production.
Economic analysis of crop production in Lesotho : a household-based programming approach.
(1995) Mokitimi, None Raletsema.; Nieuwoudt, Wilhelmus Liberté.
Agriculture in Lesotho is a key sector and a major source of employment within the country, with approximately 85 percent of the population living in rural areas. Crop farming is characterised by a high proportion of subsistence farming with most production being kept for home consumption. Lesotho's agriculture has shown declining production despite government intervention in the form of area-based development projects and massive international aid. Approximately 40 percent of Lesotho's male labour force is, at any time, engaged in employment in the Republic of South Africa (RSA) as migrants. Migrant workers' remittances account for approximately 50 percent of GNP. Agriculture as the main source of income has decreased substantially while dependence on migrants' remittances and foreign aid has increased. The purpose of this study is to identify factors affecting crop production in Lesotho and to analyse different economic policies on resource allocation. The study applies household economics theory which recognises the fact that most farm households in developing countries are deficit producers and as such are engaged in both production and consumption, this being the situation in Lesotho. The purpose of the study was achieved by using a mathematical programming model to predict responses to several economic policies. The programming model aggregates enterprise levels for four representative household types to form a sector model. Representative farm households were selected using principal component and cluster analyses. Aggregate resource levels in each household type were computed as the product of the representative (mean) household resource levels and the estimated number of households in the group. Data were obtained from a sample survey of 160 crop producing households located in northern Lowlands and Foothills of Lesotho. To account for risk, a linear approximation of the gain-confidence limit (E,L) criterion suggested by Baumol (1963) was used. Risk aversion coefficients were estimated independently for each representative household by simulating its observed enterprise mix. To account for differences in wage earning potentials, offer wage rates were estimated for all household members not wage employed. Offer wage models predicted that men have a higher wage earning potential than women. Results of the offer wage models indicate that people wage employed within Lesotho are relatively more educated than those employed as migrants in RSA. For those wage employed within Lesotho women tend to be more educated than men. Several economic policies were simulated and results compared with the base solution. Most of the policies examined focus on maize prices because maize is the most important staple food in Lesotho and changes in its price are expected to affect rural households' resource allocation and welfare. Results from a household-based programming model indicate that even though agriculture is the key sector in Lesotho, Basotho households are more responsive to consumer than producer prices. This is attributed to the fact that the majority of rural households are net consumers of maize. Deregulation of the RSA maize marketing system is expected to lead to lower maize import prices which is simulated to increase household welfare as the majority of households are net consumers of maize. This deregulation is also expected to result in reduction in maize production in Lesotho and increased wheat production and fallow land. There is an increase in maize imports, a decrease in maize self-sufficiency but households' affordability to purchase maize improves thus enhancing food security. A simulated increase of 10 percent in maize producer prices with maize consumer prices held constant, does not have any effect on crop production. Simulations of the model indicate that maize producer prices have to be increased by over 100 percent in order for households to produce maize for market purposes. This shows that most of agricultural production in Lesotho will remain for subsistence even under relatively high maize prices. A reduction in workers wage employed in RSA and Lesotho is simulated to have little impact on crop production but has a significant negative impact on household welfare. An interest rate subsidy aimed at farmers operating under the Food Self-Sufficiency Programme (FSSP) has almost no effect on household welfare and leads to an increase in FSSP maize production and this results in minimal increases in total maize production. Results also indicate that land rental arrangements can lead to increased production but transaction costs exceed the rental value and this has resulted in the non-existence of a land rental market in Lesotho.
Tenure security and productivity in the Zimbabwean small farm sector : implications for South Africa.
(1996) Moor, Graham Malcolm.; Nieuwoudt, Wilhelmus Liberté.
Within the context of sub-Saharan Africa's rising population growth rate and declining agricultural productivity, there is much debate about whether communal land tenure institutions are a constraint on agricultural productivity and transformation in the region. Some argue that tenure institutions have adapted to the needs of the local communities, while others contend that the evolution of tenure institutions is constrained by the actions of vested interest groups and prohibitive transaction costs. This study empirically tested the relationship between land tenure security and agricultural productivity in the Zimbabwean small farm sector. Specifically, the study investigated the interaction between land tenure security and credit use, long-term on farm investments , complementary short-term input use and yield from a sample of 119 Zimbabwean households interviewed during 1995 . Implications for land reform in South Africa were derived from the empirical results. The study area was stratified so as to maximise the variation on the tenure variables measured. Three strata were identified, namely the privately owned small scale commercial sector, the traditional communal area and the government initiated Model A Resettlement Area. Tenure security was estimated as an index, capturing the breadth, duration and assurance of an individual's property rights to land. A simultaneous equation model was estimated using two-stage least squares regression analysis. Empirical results indicate that households with more exclusive and assured property rights invested significantly more in long-term on-farm improvements, applied greater levels of short-term inputs and attained higher yields compared to households with less secure property rights, ceteris paribus. Credit use was too infrequent in the sample to warrant statistical analysis. Given similarities between the Zimbabwean and South African agricultural sectors, the result has two important implications for proposed land reform in South Africa. Firstly, the result lends support to the notion that communal tenure in South Africa is likely to be a constraint on agricultural development. Secondly, any national land reform policy must be accompanied by innovative tenure institution which facilitate economic interaction and internalise externalities on land resettled to individuals or groups. In this regard, the process of institutional change must be impartially administered and well adapted to the particular needs and resource constraints at community level.
A study of land rental markets and institutions in communal areas of rural KwaZulu-Natal.
(1996) Thomson, David Neville.; Lyne, Michael Charles.
Most rural households in KwaZulu engage in wage employment and have little incentive to make good use of their arable land for crop production. Crop incomes are low relative to off-farm incomes and many households find it cheaper to buy food than to grow it themselves. However, this does not explain why - despite intense population pressure and acute poverty - arable land is left idle in KwaZulu. The anomaly arises because there is no rental market to transfer unused arable land to people who can and would farm it. A rental market offers farmers an opportunity to expand their operations for either subsistence or commercial production while other households, unwilling or unable to farm, earn rental income from land they previously left idle. More important, these efficiency and equity gains are not achieved at the expense of creating a landless class. Initially it was hypothesised that land rental in K waZulu was constrained by high transaction costs, including risk. It seemed that potential lessors were reluctant to lease land out as they risked losing their land permanently. Institutional changes were introduced in the Upper Tugela Catchment to promote an active land rental market. Tribal authorities agreed to support the market and to uphold rental contracts in customary courts. Despite this assurance, households were reluctant to enter into lease agreements. Many households were willing to lease land out, but few were prepared to farm additional land. The fundamental problem was insecure land tenure. Survey data gathered in the Upper Tugela Catchment and at Tugela Ferry revealed that livestock were invading arable lands during the summer and damaging crops. In effect, crop farmers had lost their exclusive rights to arable land. The first step taken to improve tenure security in the Upper Tugela Catchment was to reinstate customary rules, particularly those assigning exclusive rights to arable land. Tribal councillors agreed to the establishment of a representative 'Rules Committee', whose initial task was to define an annual 'planting date' after which all livestock had to be removed from arable lands. Dispute procedures were also clarified and compensation rates set for crops damaged by stray livestock. Results the following season were encouraging as the numbex of respondents suffering crop damages caused by stray livestock declined from 71 to 31 per cent. Overall, efforts to reduce risk perceptions and to improve tenure security raised the number of rental transactions from three to 17 - an increase from four to 25 per cent in the number of households engaged in rental transactions. The average area rented increased from 0.63 hectares to 1.71 hectares. Lessees farmed their land more intensively than lessors. They applied inputs at five times the rate that lessors did, made greater use of contractor services, and invested much more in tractors, ploughs and planters. Equity also improved. Land transferred from larger to smaller farmers, while income transferred from wealthier to poorer households.
The role of the farmer's wife in farm management.
(1989) Botha, Jacobus Johannes.; Ortmann, Gerald Friedel.
Despite the fact that the farming profession is largely dominated by men, the farmer's wife contributes significantly to the farm business. The contribution of the farmer's wife can vary from "holding the fort" on one hand to meaningfully influencing long-term decisions on the other. On average, farmers spend 56,4 hours per month away from the farm and 7,9 hours per day outside on the farm and not in the vicinity of the homestead. The office or his house forms the only contact point with the outside world and is the place where most of the farm activities are arranged and co-ordinated. During the farmer's absence, his wife has to take important decisions and often has to see to the running of farming activities. On average the farmer's wife spends 2,2 hours per day on farm activities. She is mainly involved in answering the telephone, running errands and first aid to farm labourers. With regard to decision-making on the farm, the farmer's wife is the sole decision-maker in the household and in the purchasing of small items. She makes decisions jointly with her husband on family matters and long- and short-term issues. Many aspects cause unhappiness on the farm, of which farm labour, drought and finance are listed as the most important reasons. The children are also active in some activities on the farm such as answering the telephone, running errands and caring for animals. The farmers' wives in KaNgwane are highly involved in farm activities and in decision-making. Although they do not distinguish between "hard" and "soft" jobs, the farmers' wives have a preference for cropping aspects.. These women spend an average of 7,9 hours per day on farming activities. Transport facilities and the poor quality of water cause a great deal of unhappiness on the farms. These and other problems hamper the expansion of the role of the farmer's wife on the farm and her future development. Both groups of farmers' wives feel a need for a special course geared to equip them better for their role in farm management.
Returns on agricultural research and development in the South African sugar industry.
(1989) Donovan, Philip Anthony.; Nieuwoudt, Wilhelmus Liberté.
The lack of information on returns to R&D is considered a handicap to effective decision-making by policy-makers and managers in agricultural commodity organisations. Results of studies reported in the literature, mostly using economic analysis of aggregated and multi-product data, are usually insufficiently detailed to assist decision-making at institute level. The objective of this study is to find an empirical and practical method of estimating returns for that purpose. Returns on sugarcane production R&D in the South African Sugar Industry are estimated as the factor share of technology in a production function analysis of productivity, as yield per unit area per annum, in which the other significant variables were found to be rainfall, costs of production and area under crop. Eight other variables were excluded from the analysis for lack of significance or collinearity. Under a user pays policy, advisory services are considered self-financing, leaving the estimated returns to be divided between the other two primary functions of an R&D institute, research and extension. It is suggested that the increase in yields obtained by technologists in field trials can represent technology (the output of research) while the increase in the Industry's yield over the same period represents technology plus the transfer of technology (the function of extension) . In percentage terms the ratios of research to extension, for three successive decades to 1986, were found to be 65%:35%, 37%:63% and 17%:83%, indicating decline in the contribution of research and increase in the contribution of extension to the Industry's declining productivity. Research's contribution (17% of the total return on R&D during the last decade) was then apportioned among research programmes in the proportions of the subjective estimates made of their returns, after deducting the return on plant breeding, the only programme whose productivity could be quantified directly from production data. Returns and costs are then compared in terms of percentage net returns [(returns - costs) /costs x 100) and benefit:cost ratios (return/cost). The returns estimated on research, extension and whole Station activities, were similar, in terms of benefit : cost ratios, to those obtained in the few other comparable studies. The advantages of the methods proposed are their empirical simplicity and applicability down to programme (project) level.
An economic analysis of the impacts of monetary policy on South African agriculture.
(1990) Dushmanitch, Vladimir Yvan.; Darroch, Mark Andrew Gower.
A general equilibrium, simultaneous equations model was constructed to analyse the impacts of monetary policy on South African agriculture via the interest rate, exchange rate, inflation and real income. Annual data (1960-1987) were used to estimate equations representing the field crop, horticultural, livestock and manufacturing sectors, and the money and foreign exchange markets. The interest rate, general price level and exchange rate were determined endogenously to capture the effects of monetary policy on these variables. Macrolinkages whereby the impacts of monetary policy are transmitted to agriculture were simulated. Due to insufficient degrees of freedom, the final model was estimated by two-stage principal components. Dynamic simulations of an expansionary monetary policy suggest that such policy action has important implications for South African agriculture. In the short run, an increase in money supply causes the real interest rate to fall, general price level to rise and exchange rate to depreciate. Depreciation of the exchange rate and higher domestic inflation raise input prices. Increased cost effects of higher input prices outweigh the reduced cost effects of lower real interest rates causing real field crop and horticultural supply to decrease. Stock effects of lower real interest rates and cost effects of higher input costs impact negatively on livestock supply. The resultant decrease in real agricultural supply causes product prices to rise which lowers real per capita quantiy demanded for agricultural products. The net effect is a decline in total real gross farm income for the sectors modelled. Dynamic simulations of the separate impacts of changes in the interest rate, general price level and exchange rate on agriculture support these conclusions. Inflationary impacts of monetary policy changes were larger than interest rate and exchange rate impacts, which were generally similar in magnitude.
Distortion of incentives for farm households in KwaZulu.
(1989) Lyne, Michael Charles.; Nieuwoudt, Wilhelmus Liberté.
KwaZulu is a less developed region of South Africa. Low agricultural incomes have contributed to widespread poverty in the region. Despite intense population pressure on the land, arable resources are underutilized. Conversely, grazing resources are overutilized. Tribal tenure prevents the sale of land and has also precluded an active land rental market. Population growth has reduced farm sizes because households have an incentive to retain their rural land rights. At the same time, the opportunity cost of household farm labour has increased. As a result, the average cost of producing crops has risen relative to product prices. Households are generally able to procure food and income at lower cost by allocating better educated workers to urban wage employment. Consequently, many households have little incentive to produce crops and are deficit food producers. Arable land is underutilized because these households cannot rent land to others who would farm it. A mathematical programming model constructed from models of representative households demonstrates that output responses to higher food prices and reduced input costs are small. Furthermore, an increase in food prices harms most rural households and lower input costs do little to improve household welfare. However, the model predicts that a land rental market will have a substantial impact on crop production and could generate significant income opportunities in agriculture and its service industries. A rental market for arable land would require minor institutional changes and has equity as well as efficiency advantages. The uncultivated portion of a household's tribal land allotment is regarded as common property for grazing purposes. Access to these grazing resources is not restricted and an empirical analysis of herd data indicates that stocking rates decline when the private cost of keeping cattle increases relative to their perceived benefits. Unlike most 'solutions' to the common property problem, privatization of grazing land would not only reduce overstocking and its associated social cost, but would also improve incentives to upgrade herd and pasture quality. It is recommended that privatization of grazing land (even in the limited sense that arable land is privately controlled) should be encouraged.

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