Agricultural Economics

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Agricultural Economics applies economic principles to solve agricultural and agribusiness problems. Our degrees equip graduates for professional and senior management positions, and are highly valued by employers. They give our graduates the flexibility to pursue a wide range of career opportunities. The Agricultural Economics major can be taken as part of a BScAgric (4 year) degree. Students taking the BScAgric option must major in Economics and Agricultural Economics, and take subjects such as Biometry and Statistics, Animal Science, Crop Science, and Horticultural Science.

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An economic analysis of the demand for resources and the supply of output in South African agriculture.
(1970) Nieuwoudt, Wilhelmus Liberté.; Behrmann, Herbert Ian.
No abstract available.
An economic study of the technology of harvesting and transport systems used in clearfelling Acacia mearnsii, Eucalyptus grandis and Pinus patula.
(1984) De Laborde, Robert Michael.; Nieuwoudt, Wilhelmus Liberté.; Schönau, A. P. G.; Behrmann, Herbert Ian.
Objectives of this thesis are to project the description and supply of Black labour in the forestry industry of southern Africa, survey harvesting and transport systems used overseas and locally, select and adapt a method to analyse and quantify local systems and present the results of this research. The next objective is to write a computer programme which uses these results to estimate labour and machine requirements with their respective production rates and give standard cost analyses. This supplies the detail for system selection, daily management of harvesting and transport operations and the basis for control by comparing projected production rates and costs with historical data. Although labour intensive systems are still being comployed, it was found that costs and unavailability of Black labour has forced a conversion to capital intensive systems. This trend is expected to continue at an increasing rate. Many European machines appear to have developed from forwarders with various heads fitted to their cranes to perform different operations. American equipment has tended to develop around the articulated front-end loader. In South Africa, the locally invented three-wheel loader has been adapted to fill a similar role. However, it is premature to forecast the direction southern African forestry will follow. Of the possible work measurement techniques, the so-called stop watch methods were selected as they proved to be the most accurate, penetrating and rapid. Results were reproducible and highly significant when regressed on the appropriate tree, terrain or work site dimensions. A survey of available computer simulation programmes revealed that in their present form they were unsuited to southern African harvesting and transport operations investigated. Consequently, the writer wrote a programme in FORTRAN 77 which contains all results in this thesis and analyses timber harvesting and transport. The programme, named Techno-Economic Analysis of Logging (TEAL), supplies its results in a form suitable for both field staff and senior management. TEAL analyses have been found to compare closely with efficient operations. Many of this thesis' data have been compiled into tables giving piece work rates in simplified form. These are presented in appendices.
The economic feasibility of producing ethanol from sugar-cane in South Africa.
(1985) Ortmann, Gerald Friedel.; Nieuwoudt, Wilhelmus Liberté.
The study is an evaluation of the economic feasibility of producing ethanol from sugar-cane in South Africa. With the depressed state of the sugar market and recent substantial increase (40% in January 1985) of liquid fuel prices linear patterns in South Africa, the study is of a topical nature. A regional linear programming model is used which simulates current production patterns in 22 areas of the South African Sugar Industry. The model incorporates demand functions for crops, substitution in demand between crops, supply functions for labour and variance-covariance matrices to account for risk in production. The model is used to evaluate the effects of alternative sugar policies, namely a pool scheme and a free market for sugar, with particular emphasis on ethanol production. Results show that the total ethanol cost (including opportunity cost) per litre in an industry producing one billion litres a year was over twice the refinery-gate or pre-tax petrol price around 1979/80 but similar to the pump price of petrol. More recently (1985) petrol prices have increased relative to ethanol costs due to the weakening of the rand against other major currencies. Ethanol costs are now (1985) about 25% above the refinery-gate petrol price and below the pump price of petrol. SASOL's petrol costs at present appear to be similar to fuel costs based on crude oil and below ethanol costs (from sugar). For new SASOLs the capital cost is expected to increase substantially due to the relatively weak rand. This may make ethanol production from sugar-cane more competitive. A strong positive correlation is evident between sugar-cane production and labour employment. With a subsidized billion-litre ethanol industry labour employment is estimated to increase by 45 000 (34%) under a pool scheme and by 25 000 (19%) under a free edible sugar market compared with current employment. Development costs per worker are estimated to be about R30 000 compared with over one million rand per worker for a new SASOL plant. In a free market the area under sugar-cane is estimated to decrease by about 50% and labour employment by 26%. Areas moving out of cane production include Pongola, Hluhluwe, Nkwaleni Valley, Tala Valley, Umfolozi Flats, Zululand hinterland, South Coast, Natal Midlands (North and South). No sugar would be exported. The local equilibrium sucrose price is estimated to be about 9% below the producers' price under the current policy (that is, up to and including the 1984/85 season) and 17% below the A - pool producers' price under the pool scheme. Social costs of the current policy are estimated as 6.8% of total sucrose value compared with 4.7% under a pool scheme with A - pool quotas transferable only within Mill Group areas and 2.3% where A - pool quotas are transferable between regions. Ethanol production would add to social costs.
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.
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.
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.
Economic factors affecting human fertility in the developing areas of South Africa.
(1990) Fairlamb, Cheryl Denise.; Nieuwoudt, Wilhelmus Liberté.
The World Bank has expressed concern over the high population growth rates in sub-saharan Africa. South Africa's annual population growth rate in the traditional sector is 2,9 percent. This study identifies the economic factors affecting family size choice to provide policy makers with a strategy for reducing fertility. A neoclassical utility framework was used to analyse linkages between family size decisions and socio-economic variables. Household utility for "child services" and "standard of living" was maximised subject to the resource constraints of time, labour and income. A stratified sampling technique was used to collect household data from Ulundi and Ubombo in KwaZulu. One hundred and seventy five women in three occupational strata were interviewed. A static demand function for children was estimated by multiple regression. The demand function was re-estimated within a simultaneous model of family decision making which was estimated by two-stage least squares regression analysis. Dummy dependent variables were estimated by probit analysis. Principal components analysis was used to confirm the underlying theoretical linkages and discriminant analysis was used to distinguish users from non-users of modern contraception. Results show that child education, woman's opportunity cost of time and formal labour market participation were negatively related to fertility reflecting a substitution from numbers of children (time intensive goods) to fewer, more educated children (less time intensive) as opportunity costs rise. Principal components confirmed that this substitution effect dominated the pure income effect as lifetime family earnings increased even though children are normal goods. Child labour and children's contribution to income were positively related to fertility. These benefits accrued mainly to rural people because in urban areas parents depend less on subsistence farming and essential services (water and electricity supply) are provided. Discriminant analysis showed that 47,7 percent of the respondents used contraception (including abstinence and sterility). The most important reasons for use were for child spacing and the desire for no more children. The latter reason was given by women who had completed fertility and young women who wanted to avoid untimely pregnancy. The actions of the young women emphasise the importance of opportunity cost which was further supported by positive relationships between woman's current income, child education and contraceptive use. Therefore strategies to reduce population growth rates should include improvements in education and employment opportunities which would raise time costs for women. Provision of time saving devices and essential services, and better pension and social security schemes would reduce the benefits from children thereby reducing family size. For better community acceptance of contraception, the benefits for child spacing and survival should be promoted.
Economic evaluation of a transport development programme for small-scale cane growers.
(1995) Erasmus, Jaco.; Nieuwoudt, Wilhelmus Liberté.
The recent deregulation measures in the South African sugar industry have the effect of removing most of the previous restrictions to entry faced by potential small-scale cane growers. To accommodate the current and envisaged expansion the Government of KwaZulu-Natal is implementing an infrastructure programme as part of a comprehensive Small-Scale Cane Grower Expansion Programme. This study uses Cost-Benefit Analysis procedure to determine the viability of the first phase of this infrastructure programme aimed at improving transport routes for small growers in ten mill areas. Two representative mill areas were evaluated, namely Amatikulu and Sezela, situated on KwaZuluNatal's North and South coasts respectively. Three models were constructed as the Sezela area was subdivided into the Kwa-Hlongwa (labour intensive) and Cabhane (plant hire) projects. Both financial (reflecting returns to resources engaged before financing) and economic (reflecting the contribution to the total economy) results were computed, using a real discount rate of 8%. The financial Net Present Values (NPVs) calculated for Amatikulu, Cabhane (Sezela) and KwaHlongwa (Sezela) respectively are: R3.2 million, R7.61 million and R911 thousand. The economic NPVs calculated for Amatikulu, Cabhane and Kwa-Hlongwa respectively are: R8.18 million, R7.91 million and Rl.91 million. These results, reflecting the tangible costs and benefits, indicate that all the projects are viable as measured in both financial prices (before financing) and economic prices (after shadow pricing and transfer payment correction). A sensitivity analysis was conducted as a risk analysis procedure to see what effect the changing of key variables would have on the investment criteria. Indications are that the economic NPV criterion (which measures the contribution to the total economy) is positive for a wide range of discount rates for all projects. Indications are that the financial NPV becomes positive after 9, 13 and 18 years for Cabhane, Amatikulu and Kwa-Hlongwa respectively. It is expected that since the economic NPVs for the different projects are higher than the corresponding financial NPVs, the economic NPVs will become positive after a shorter period of time than that indicated by the financial NPVs. The Amatikulu model was found to be sensitive to changes in yield and B Pool sucrose price (as measured by changes in the economic NPV criterion), while the Cabhane and Kwa-Hlongwa models were found to be sensitive to changes in yield, % cane adoption and the B Pool sucrose price. The economic NPVs of the Amatikulu and Cabhane models are, however, still positive after a 30% ceteris paribus decrease in the individual assumptions experimented with. Kwa-Hlongwa's economic NPV becomes negative if the base assumption of yield or B Pool sucrose price is reduced by 30%. It is, however, unlikely that the base assumptions of yield or B Pool sucrose price would drop by 30% for an extended period of time. In addition to this, the base results obtained for the Kwa-Hlongwa model could be seen as conservative as the delayed cane development projected for the base model could well be accelerated and the intangible benefits characteristic of the labour intensive construction method present at Kwa-Hlongwa are not accounted for in the results obtained. In view of results obtained in the base models and sensitivity analyses, indications are that the benefits of the project will outweigh the costs by a considerable margin, making the project a viable investment decision.
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.
An economic analysis of soil conservation policy for selected commercial farms in KwaZulu-Natal.
(1995) Barlow, George Richard.; Nieuwoudt, Wilhelmus Liberté.
Inherent in the erosion process is a high level of uncertainty. This is associated with the inability to accurately quantify and predict the consequences of prolonged erosion for agricultural production, or estimate the time period over which induced innovations will be able to compensate for it. Therefore, there are incentives to formulate strategies that will achieve tangible reductions in erosion. Data were collected through a postal survey conducted in October 1993, from the following five commercial farming regions: Dalton/Wartburg, Camperdown/Eston, Dundee, Estcourt, and Winterton. Soil conservation incentives are expected to differ according to enterprise types and site-specific circumstances, and stratifying according to these regions incorporates a diverse spectrum of agricultural systems. There were 480 potential survey respondents, and 159 (35 percent) usable questionnaires were returned. The response rate is relatively good for a postal survey, although results may be slightly biased in favour of farmers that are concerned or interested in soil conservation. Adoption of soil conservation measures is modelled as a multi-stage decision process, representing the following phases: awareness of the erosion problem, the perception that erosion is worth trying to resolve, farmers' technical and financial abilities to implement soil conservation measures required for their farms, and finally the actual adoption of conservation practices. A logistic regression analysis shows visible erosion impacts, knowledge of erosion's adverse implications for agricultural productivity, farmers' willingness to invest their own capital in conservation activities, predominantly crop farms, and sufficient financial resources, have significant positive impacts on adoption. The mean predicted probability score for the Technical Ability model is 0.54, illustrating farmers' lack of technical soil conservation skills to implement appropriate conservation measures is a major constraining factor within the adoption process. Variables influencing conservation effort, reflecting the extensiveness and effectiveness of soil conservation measures, are expected to differ from those affecting adoption, and effort is modelled separately using linear regression. Results support prior expectations indicating conservation effort depends mainly on the following financial characteristics: farmers' willingness to invest their own capital in conservation activities, debt fmancing, and on-farm financial and managerial benefits from implementing soil conservation activities. Farmers' perceptions regarding the monitoring and enforcement of soil conservation legislation are also analyzed using frequency tables. Although 65 percent of respondents believe that violations of Act 43/1983 will be discovered, only 20 percent perceive that transgressions will be both detected and subsequently prosecuted. This suggests the transactions costs related to enforcing prosecutions are high, and the possibility of being prosecuted is unlikely to encourage farmers to implement soil conservation activities. Agents (eg. Soil Conservation Committees and extension officers), and media (eg. extension service reports) play an invaluable role in promoting soil conservation. High transactions costs associated with enforcing legislation indicate it may be appropriate for the government to play an active part in research, and in providing information about erosion and soil conservation, to facilitate a better functioning land market. This is distinct from having a clear advantage over market forces in the use of this information. Cross-compliance programs, should perhaps be considered as short to medium-term strategies, to encourage farmers to implement soil conservation activities.
Institutions to govern wildlife in the developing regions of KwaZulu-Natal.
(1995) Wynne, Adrian Theodor.; Lyne, Michael Charles.
In practice, property rights to wild flora and fauna are determined by de facto property rights to the land on which they are found. However, access to wildlife may become open regardless of land tenure due to the growing demands of expanding rural populations living at subsistence levels. This precarious outcome is more likely in areas where land is "communal". Traditional common property user groups are unstable because transaction costs become inhibitory in large groups. Non-user groups with small management teams (eg. companies and trusts) are better equipped to devise and enforce rules restricting access to communal resources. Three community-based organisations (CBO's) from KwaZulu-Natal are described, viz. Dukuduku Forest, Shongweni Resources Reserve and the Thukela Biosphere Reserve. Support for conservation rules appears to be strongest amongst communities at the Shongweni Resources Reserve where: community management organisations are formal institutions with legally binding constitutions; community representatives are broadly accepted and share decision-making power with the resource owner, and; community members get direct benefits from the Reserve. However, in all three cases change was prompted by agents who stood to lose substantially when neighbouring communities invaded or poached resources on their land. This is an important finding as it suggests a need for outside intervention in communal areas where common property institutions have collapsed and natural resources are being over-utilised. The case studies are analyzed and compared using criteria suggested by the theory of Institutional Economics to determine why some CBO's are more successful than others. It is concluded that individuals have an incentive to abide by rules if they are assured of receiving benefits in return for their compliance. Creating appropriate management institutions is a necessary first step, but it may also be necessary to subsidise their development programmes and support local enforcement owing to the high cost of protecting and instituting conservancies for commercial purposes.
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.
Implications of new labour legislation for commercial agriculture in KwaZulu-Natal.
(1996) Newman, Robert Anthony.; Ortmann, Gerald Friedel.
New labour legislation was introduced to agriculture in September 1993. This study examines the effects of the new legislation on agriculture, mainly in terms of increased farmers' transaction costs when dealing with labourers. The new legislation introduced to agriculture includes the Basic Conditions of Employment Act (BCEA), Unemployment Insurance Act (UIA) and Agricultural Labour Act (ALA). Data were collected via a postal survey of 450 commercial farmers in KwaZulu-Natal (including 150 sugar-cane farmers, 150 dairy farmers and 150 beef farmers), of whom 135 returned usable questionnaires. The questionnaire dealt with the financial and labour structures on the farm, implementation of the new legislation, use of contractors, impact of minimum wages, education and trade unions. The supply of labour to agriculture in South Africa is relatively elastic, due to the high percentage of unemployed people. An increase in the cost of labour may cause farmers to use more substitutes, such as machinery, new technologies and contractors. The study examines machinery and labour contracting in commercial agriculture in KwaZulu-Natal and to what extent new labour legislation may affect farmers' attitudes towards the use of contractors. Descriptive statistics show employment of contractors, impact of enterprise type on use of contractors, and farming activities which are contracted out. Logistic regression suggests that on-farm implementation of new labour legislation, enterprise type, age of the respondent and turnover (farm size) influence a farmer's decision whether or not to contract in machinery contractors. New labour legislation has affected the structure of labour on commercial farms in KwaZulu-Natal by increasing transactions costs between labourer and farmer, and by raising wages; for example, farmers now have to pay overtime rates for work after-hours and on Sundays. Survey respondents indicated that, if minimum wages were imposed, cash wages would be paid and perquisites would be charged for. If the minimum wage was set above present wages, labour would be replaced with machinery and contractors. Respondents would prefer an industrial council to determine minimum wages (if they are imposed), accounting for enterprise and regional differences. Study results show that average cash wages for general (unskilled) farm labour are negatively related to distance between the farm and nearest large town or city, and positively related to turnover (farm size) and application of the new legislation. Enterprise type influenced the cash wage, value of rations paid to general farm labour and the provision of land rights for workers. Substitution of cash for non-cash benefits, and capital for labour may occur if the new legislation is strictly enforced. Farmers feel that there are a number of management problems they face in the future, involving labour, unions, government and finance. Future opportunities include marketing, export of produce, and labour upliftment and training.
An economic evaluation of water treatment costs in the Umgeni catchment area.
(1996) Dennison, Diane Bridget.; Lyne, Michael Charles.
This study has two objectives: first, to identify the main contaminants responsible for high water treatment costs in the Umgeni catchment area, and second, to predict water treatment costs from observed levels of contaminants. Reliable information about the origin of high water treatment costs is required to inform both policy and planning decisions. Partial adjustment models of water treatment costs are estimated using ordinary least squares regression and principal component analysis. First a model is estimated for the DV Harris treatment plant, which draws water from Midmar Dam. This model highlights important policy issues and explains 61 per cent of the variation in chemical treatment costs. Environmental contaminants have a marked impact on real water treatment costs at the DV Harris plant. Water treatment costs increase when levels of alkalinity, sodium and turbidity fall. Conversely, real costs rise with higher levels of dissolved oxygen and water stability. Paradoxically, clean water - typical of Midmar Dam is expensive to treat. Water treatment costs also rise when concentrations of the algae, Chiorella, decline. Second, a model is estimated for the Durban Heights treatment plant, which draws water from Nagle and Inanda Dams. This model explains 68 per cent of the variation in chemical treatment costs. Biological contaminants have a marked impact on real water treatment costs at the Durban Heights plant. Again, water treatment costs increase when levels of, Chiorella fall. Apparently the level of Chiorella varies inversely with the level of other, more expensive, contaminants at both treatment plants. Conversely, real costs rise with higher levels of total kjeldahl nitrogen, temperature, Anabaena and Microcystis. Water treatment costs also rise when turbidity and concentrations of silica, suspended solids and iron increase. The model predicts actual water treatment costs well (except during occasional peak cost periods) and provides a useful tool for scenario testing. For example, a simulation exercise in which turbidity levels were held constant at 6 NTU (nephelometric turbidity units) indicated an annual saving of R54 531 in water treatment costs.
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.
Market reform, contestability and determinants of the Maize Board-Miller marketing margin in the South African maize industry.
(1996) Vigne, William James Frederick.; Darroch, Mark Andrew Gower.
The dissertation analyses market reform in the South African Maize Industry at two levels. Firstly, aspects of the theory of contestable markets are used to analyze maize grain marketing reform and identify what measures are appropriate to promote contestability (ease of entry and exit, and potential rather than actual competition as a means of constraining uncompetitive behaviour). A brief history of the South African Maize industry since 1931 shows a highly regulated grain marketing system which lacked contestability. Recent amendments to the Maize Marketing Scheme such as abolition of controlled prices for maize products at retail/merchant (1960) and wholesale/milling (1971) levels; movement away from limited registration of maize processors (1977); and abolition of the statutory single channel fixed price pool scheme and storage control allowing "free" trade within the domestic market (1995), promote market contestability. Contestability can be further enhanced by reduction of sunk costs through possible on-farm storage and handling facilities (bunker storage, plastic tunnels, steel and concrete silos) and the leasing of existing silo space (possible excess capacity and alternative uses) by producers and maize traders. The maintenance of some statutory powers for the Maize Board (single channel exports, compulsory registration and levy payments) still limits contestability. Secondly, the determinants of the Maize Board - Miller (MBM) marketing margin between 1977 - 1993 (period defined by data limitations) are identified using Ordinary Least Squares (OLS), Three Stage Least Squares (3SLS) and Principal Component Analysis. The MBM margin was positively related to miller market power (proxied by industry conjectural elasticity), the real miller maize meal selling price, real variable processing costs, and a change in Maize Board maize grain pricing policy after 1987 (export losses reflected in low real net producer maize price). The estimated conjectural elasticity was low, indicating competitive conditions, although concentration ratios indicate entrenched, but falling, market power. The main component of the Maize Board-Miller (MBM) marketing margin for 1977 - 1993 was variable processing costs. The real consumer price of maize could be reduced via lower real processing costs of maize meal, possibly with the removal of fixed administered prices of inputs (like electricity) and moderation of real wage demands in negotiations between trade unions and millers. Foreign exchange and import controls may, however, raise input costs if the Rand should continue to weaken. The increased number of "bosmeulens" (small mills not registered with the Maize Board and using relatively inexpensive technology not having substantial sunk investment) entering the market means that mill sunk costs may be less of a deterrent to entry in future. The 1987 Maize Board pricing policy change captured the effect of input price risk on the MBM margin indicating a significant effect of past maize pricing policies on this margin. The Maize Milling Industry appears to be competitive (low industry conjectural elasticity) over the study period, although the oligopoly component still contributes significantly to the MBM margin. Miller market power may possibly be exerted on other products (e.g. wheat) as white maize may be seen as a loss leader. This interrelationship between maize and other grains in processing is an area for future research.
Grain marketing policies and food aid in Lesotho : implications for food security.
(1996) Makenete, Andrew Lehlohonolo.; Ortmann, Gerald Friedel.
Food security is a necessary condition for the survival of every nation, household and individual. With the failure of the food self-sufficiency policy in Lesotho alternative food security objectives are suggested. Supply and demand factors need to be considered to develop a holistic and balanced view of food security. Maize marketing and pricing policies as well as food aid impact on food (in)security since they affect the movement and trade of maize grain and maize meal, the primary staple of Lesotho. A study was conducted amongst policy makers, government officials, retailers and millers in Lesotho to review the maize marketing system and procedures for setting maize prices at producer, mill-gate and consumer levels. Set prices distort price signals which influence decisions to allocate and distribute resources to provide goods and services for markets. Lesotho is a net importer of maize grain, the major staple, implying that maize pricing and marketing policy affect food security. Results indicate flexible informal marketing channels, fixed formal marketing channels and declining real producer, mill-gate and consumer prices in recent years. Falling real South African Maize Board export grain prices and evidence of subsidies to commercial Lesotho mills explain these price trends. Changes to the one channel formal marketing system and nationally administered price structure that would encourage an open market system with less restrictive interregional maize trade are recommended. The extent of food aid dependence in Lesotho and the possibility of reducing reliance on food aid are also analyzed. Primary data on food aid statistics were collected from various food aid agencies and institutions, supplemented with secondary data obtained from government documents. Results show that reducing food aid dependence is unlikely in the longer term, which has implications for the level of food (in)security in Lesotho. Food aid to Lesotho supplements commercial imports to meet the shortfall in local cereal production. It improves nutritional and consumption levels of vulnerable households, but shows no correlation with producer and consumer prices. Food aid reduces government budgetary expenditures on food, saves on foreign exchange to pay for food imports, and when used as 'food for work' to build infrastructure, has multiplier effects on agricultural growth, leading to expanded income and employment in other sectors of the economy. Poverty alleviation measures and income generating activities must be the primary focus if food aid dependence is to be reduced.
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.
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.

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