Masters Degrees (Agricultural Economics)

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Institutional and governance factors influencing the performance of selected smallholder agricultural cooperatives in KwaZulu-Natal, South Africa.
(2009) Chibanda, Mutsa.; Ortmann, Gerald Friedel.
This dissertation investigates the impact of institutional and governance factors on the performance of 10 selected smallholder agricultural cooperatives (case studies) in KwaZulu- Natal (KZN). All the selected cooperatives were traditionally structured (e.g., one-member, one-vote system). Due to logistical and administrative constraints, the selected smallholder cooperatives were drawn from the EThekwini and UMgungundlovu Districts (the latter comprising of two sub-districts, namely Camperdown and Msunduzi), which incorporate the major cities of Durban and Pietermaritzburg. Five of the cooperatives grow and market vegetables, three produce and market poultry, one is a beef production cooperative and another operates a bakery. Information from the interviews suggests that members of the selected smallholder cooperatives do not fully understand cooperative principles and have high expectations of potential benefits of being members. Descriptive analysis of the case studies describes total membership of each selected cooperative; average number of management meetings per month; gender and age composition of cooperative members; the characteristics of chairpersons of these cooperatives (e.g., gender, age and education); the initial capital structure of these cooperatives; annual turnover; growth opportunities; and institutional and governance factors influencing the performance of these cooperatives. The results of a cluster analysis suggest that the performance of the selected smallholder cooperatives is influenced by institutional and governance problems. Institutional problems give rise to low levels of equity and debt capital, reliance on government funding, low levels of investment, and subsequent loss of members. Governance problems are strongly linked to the absence of secret ballot, low levels of education, lack of production and management skills training, weak marketing arrangements and consequent low returns to members as patrons or investors. The conclusion is that appropriate institutional arrangements and good governance are important to the performance of enterprises initiated by groups of smallholders. South Africa’s new Cooperatives Act prevents smallholder cooperatives from adopting good institutional arrangements. Alternative ownership structures such as close corporations and private companies offer better institutional arrangements and opportunities for equity-sharing partnerships.
Analysis and prediction of chemical treatment cost of potable water in the Upper and Middle Vaal water management areas.
(2009) Gebremedhin, Samuel Kahsai.; Ferrer, Stuart Richard Douglas.; Graham, Mark.
This study is a component of a research project on the economic costs of eutrophication in the Vaal River system. Its objective is to investigate the relationship between raw water quality and the chemical costs of producing potable water at two water treatment plants: Zuikerbosch Station #2 (owned by Rand Water) in the Upper Vaal Water Management Area (UVWMA), and Balkfontein (owned by Sedibeng Water) in the Middle Vaal Water Management Area (MVWMA). Time series data on raw water quality and chemical dosages used to treat raw water were obtained for Zuikerbosch Station #2 (hereafter referred to as Zuikerbosch) for the period November 2004 – October 2006 and for Balkfontein for the period January 2004 to December 2006. Descriptive statistics reveal that raw water in the Vaal River is of a poorer quality at Balkfontein compared to that at Zuikerbosch. Furthermore, the actual real chemical water treatment costs (measured in 2006 ZAR) averaged R89.90 per megalitre at Zuikerbosch and R126.31 at Balkfontein, indicating that the chemical water treatment costs of producing potable water tend to increase as raw water quality declines. Collinearity among water quality (WQ) variables at both water treatment plants was analysed using Principal Component Analysis (PCA). The dimensions of water quality identified in the analysis are similar to those reported in Pieterse and van Vuuren’s (1997) study of the Vaal River. For both water treatment plants, Ordinary Least Squares (OLS) regression was used to identify the relationship between real chemical costs of water treatment and the dimensions of water quality identified through the respective Principal Components Analyses. The estimated regression models account for over 50.2% and 34.7% of variation in real chemical water treatment costs at Zuikerbosch and Balkfontein, respectively. The coefficient estimated for PC1 at Zuikerbosch is statistically significant at the 1% level of probability with high negative loadings of total alkalinity and turbidity. Increases in the levels of total alkalinity and turbidity in raw water treated at Zuikerbosch is negatively related to the chemical costs of water treatment. An increased total alkalinity level was found to reduce the chemical costs of treating potable water. PC2 is statistically the most important variable in the estimated explanatory model for Balkfontein. The estimated regression coefficient for PC2 is statistically significant at the 5% level of probability. The estimated relationship between chemical water treatment costs and PC2 shows that there is a positive relationship between the raw water temperature and chemical water treatment costs. However, increases in the levels of chlorophyll and pH in raw water treated at Balkfontein is negatively related to the chemical costs of water treatment. Total hardness, magnesium, calcium, sulphate, conductivity, and chloride, being the highest positive loadings in PC1, relate negatively to the chemical cost of treating water. For predictive rather than explanatory purposes, a partial adjustment regression model was estimated for each of the two water treatment plants. Using this model, real chemical water treatment costs were specified as a function of real chemical water treatment costs in the previous time period, and of raw water quality variables in the current period. The R2 statistics for the two regression models were 61.4% using the data for Zuikerbosch and 59.9% using the data for Balkfontein, suggesting that both models have reasonable levels of predictive power. The chemical cost of water treatment for Zuikerbosch and Balkfontein are predicted at R96.25 and R90.74 per megalitre per day respectively. If raw water nitrate in the UVWMA increases by 1% per megalitre a day while other factors remain constant, chemical water treatment costs at Zuikerbosch can be expected to increase by 0.297% per megalitre and the cost accompanied this change is (R0.285*1998ML*365days) R207,841.95 provided that Zuikerbosch treats an average of 1998 megalitres per day. Likewise, if Zuikerbosch maintains its daily average operating capacity and is able to maintain an optimal level of total alkalinity in UVWMA, the estimated saving on chemical water treatment cost will be R150.063.78 per annum. At Balkfontein, chemical water treatment cost is expected to increase on average by 0.346% per megalitre per day for a 1% per megalitre per day increase in the level of chlorophyll-a, and the cost accompanied this change is R41,128.20 per annum. The prediction also shows a 2.077% per megalitre per day increase chemical water treatment cost for a 1% increase in turbidity and this accompanied with a chemical water treatment cost of R 249,003 per annum, provided that Balkfontein operates at its full capacity (i.e., 360 megalitres per day).
Land redistribution for agricultural development : an evaluation of stakeholder responses in KwaZulu-Natal.
(2004) Sekgetle, Sandra Galeiphiwe.; Nieuwoudt, Wilhelmus Liberté.
The objective of this study is to research how the slow process of land redistribution in South Africa can be accelerated, given the urgency of land resettlement. A subprogramme of redistribution, Land Redistribution for Agricultural Development (LRAD), was launched by the Minister of Agriculture and Land Affairs in A1.}gust 2001. A redistribution project goes through five phases (refer Appendix A for LRAD project cycle). Each phase has different steps, which is an LRAD project cycle. Firstly, the thesis analyses the project cycle - the aim was to establish how long it would take a farmer to obtain ownership of land and how the process can be expedited to settle more farmers. Secondly, it studies the role and views of stakeholders involved in the programme (such as NGOs, financial (nstitutions, design agents and governmental departments). Thirdly, it examines the performance and progress made since the implementation of the programme In KwaZulu-Natal. Lastly, the study focuses on problems and general concerns regarding the policy. Some policy recommendations on the need and performance of land redistribution in South Africa are made. The LRAD project cycle could take at least nine months or more. During this period beneficiaries cannot buy land from auctions, while some landowners are reluctant to go through with this long process, because it may not result in a land sale. Engaging property owners in the process can accelerate land delivery. In addition, government must try to streamline its policies and procedures, so that landowners who wish to sell do not perceive it to be such a serious disadvantage to engage in selling to redistribution applicants. The LRAD programme started slowly in KwaZulu-Natal and by the end of 11 April 2002, the DLA had received only 105 applications for the grant. By May 2003, out of 1 300 applications only 169 had been transferred since LRAD started. According to experience by Ithala Bank, many projects are delayed and sales collapse. Long delays are a major problem, because many projects are approved but few transferred. A recommendation is that commercial banks be given a chance to approve LRAD grants, contingent on loan approval. Extending approval powers to commercial banks has the advantage of identifying creditworthy projects quickly and accurately, as private lenders are putting their own resources at risk. Some of the problems and concerns identified around LRAD are: disposal of state land and unresolved land-claims. The Department of Land Affairs (DLA) needs to integrate the new programme with other programmes of land reform, especially in cases where different communities are competing for the same land, but through different programmes. Another problem is that the programme has missed market opportunities because landowners are reluctant to sell due to delays and uncertainty. The DLA has consistently been under-spending their budget, leading to their budget being cut. Financial assistance to farmers with no own collateral is insufficient. The farmers are not being placed in a financial position to purchase a viable farm and they will experience serious cash flow problems if maximum loans from the Land Bank are accessed. The Department of Agriculture (DoA) has postponed the training programme several times and to date it is not yet implemented. It is highly recommended that the issue of mentorship be addressed, as a matter of urgency.
Impact of farmer support and socio-economic factors on agricultural production in Gikongoro Province, Rwanda.
(2005) Bizoza, Alfred Runezerwa.; Ortmann, Gerald Friedel.
Rwanda, in its transition phase since 1994, has had the support of major international development organizations, including the World Bank, the International Monetary Fund (IMF), the United Nations Development Program, the US Agency for International Development (USAID), and other development organizations. The aim of this support is to promote Rwandan agriculture in which 45 percent of the Rwandan GDP and 90 percent of employment share originate. The possible role that farmers can play in this process through their small-scale farmers' associations is well recognized by the Ministry of Agriculture in Rwanda. Farmers in Gikongoro province, the study area, are constrained by many factors, such as soil infertility, small land areas, and lack of access to modern inputs (e.g., seed, fertilizer and lime) and agricultural credit. In addition, land degradation in the form of soil erosion, soil acidity, and nutrient depletion undermines soil productivity leading to poor crop yields, and keeps farmers dependent on potential support from government and non-governmental projects. Between 2000 and 2004, farmers in Gikongoro province received support from the Development Activity Program (DAP) under the umbrella of World Vision International, Rwanda. The DAP supports farmers mainly in land terracing for soil erosion control, and supported farmers also receive modern inputs (fertilizer, seed and lime), storage facilities, and training. This study analyzes the impact of agricultural assistance afforded by the DAP and socioeconomic characteristics of households on agricultural production in Gikongoro province. Data for this study were collected from July to August 2004 using a stratified multistage sample of 204 household heads who are members of 24 farmers' associations of which 10 are supported by the DAP in the three districts; Mudasomwa, Kivu, and Nyamagabe. The study compares DAP supported and unsupported farmers in terms of differences in household incomes and crop yields. Descriptive statistics indicate that DAP supported farmers have significantly higher yields, household income, and better access to modern inputs and terraced land than unsupported farmers. These results seem to indicate that DAP support has had a significant impact on agricultural production and household incomes in Gikongoro province. However, these results are based only on a univariate analysis. The relationship between socioeconomic characteristics and household potato production in Gikongoro province was also analyzed to identify other factors that affect food production. A recursive system of linear and log-linear equations was estimated to analyze the effects of DAP, cultivated potato area, liquidity, gender of the household head (producer), years of schooling, family size, and age of the producer on farmers' productivity as measured by potato yields. Investment in operating inputs (fertilizer, seed, and lime) was used as a determinant of potato yields. Results indicate that cultivated potato area, liquidity, family size, and age (greater experience and lower transaction costs) of the household head significantly increase the use of operating inputs, which in turn has a significant positive impact on potato yield. The study suggests that DAP may need to be more selective in supporting farmers, focusing more on the farm size, education and family size profile of association members when deciding where to channel support. The study also recommends more research into the efficiency of land rental and credit markets to better understand land and liquidity constraints to improved household production in Gikongoro province. A networking model for supporting farmers' associations is proposed, in which a joint role for the Rwandan government, academic and research institutions, NGOs, and the private sector is expected to lead to sustainable agricultural development in Gikongoro province, Rwanda.
Loan products to manage liquidity stress when broad-based black economic empowerment (BEE) enterprises invest in productive assets.
(2005) Finnemore, Gareth Robert Lionel.; Darroch, Mark Andrew Gower.; Lyne, Michael Charles.
Investments in productive assets by broad-based black economic empowerment (BEE) enterprises in South Africa (SA) during the 1990s have been constrained, in part, by a lack of access to capital. Even if capital can be sourced, BEE businesses often face a liquidity problem, as conventional, equally amortized loan repayment plans do not take into account the size and timing of investment returns, or there are lags in the adjustment of management to such new investments. The aim of this dissertation, therefore, is to compare five alternative loan products to the conventional fixed repayment (equally amortized) loan (FRL) that lenders could offer to finance BEE investments in productive assets that are faced with liquidity stress, namely: the single payment non-amortized loan (SPL); the decreasing payment loan (DP); the partial payment loan (PPL); the graduated payment loan (GPL); and the deferred payment loan (DEFPLO-2). This is done firstly by comparing loan repayment schedules for the six loans using a loan principal of R200 000, repaid over 20 years at a nominal contractual annual interest rate of 10%. Secondly, data from five actual BEE loan applications to ABSA Bank and Ithala in KwaZulu-Natal (KZN) during 2003 are used to compare how the FRL, SPL, DP, GPL, and DEFPLO-l, affect investment profitability, and both the borrower's and the lender's cash-flows, assuming that the lender sources funds from a development finance wholesaler. Results for the first part of the study show that the SPL has smaller initial annual repayments than the FRL (R20 000 versus R23 492) that ease liquidity stress in the early years after asset purchase, but requires a nominal balloon repayment of both interest and principal in year 20 of R220 000. The SPL is also the most costly loan, with total nominal and real repayments that are R130 162 and R43 821, respectively, more than the FRL. The PPL has the lowest total nominal and real repayments assuming that the borrower can make the nominal balloon repayment in year 5 of R202 173. If not, the ending balance of the loan in year 4 would have to be refinanced at current market interest rates. In this situation, the PPL uses very similar financing terms to that of the variable rate long-term loans already used in SA, and thus may not be a useful option to consider for BEE investments facing a liquidity problem. Interest rates may have risen over the last four years of the loan, encouraging lenders to add a premium into the interest rate for the refinanced loan, which could worsen the liquidity position of the BEE enterprise. The DP requires higher initial nominal annual loan repayments (R6 508 more than the FRL) that do not ease the liquidity problem in the early years of operation. The DP loan, however, has total nominal and real repayments that are R59 838 and R23 118, respectively, less than the FRL. A GPL with diminishing, finite interest-rate subsidy seems to have the most potential to ease the BEE investment's liquidity stress. The 17YRGPL used to buy land had total nominal and real repayments that were R84 634 and R67 726 (after subsidy), respectively, less than the FRL. If the GPL was used to purchase machinery-type assets, then the 6YRGPL would have required total nominal and real repayments of R13 957 and R12 596, respectively, less than the FRL. Finally, the DEFPLO-2 loan required a total nominal repayment of R531 128 (R61 290 more than the FRL) and a total real repayment of R345 358 (R26 095 more than the FRL). Clearly, the GPL and DEFPLO-2 loan repayment schedules can partly resolve the liquidity problem in the early years (assuming no major income shocks), although the DEFPLO-2 plan requires higher total repayments than the FRL. The question remains whether lenders would be prepared to implement these two financing plans for BEE investments in productive assets, where the funds to finance the diminishing, finite interest-rate subsidy or the deferment would be sourced, and how the interest-rate subsidy would affect asset values. In the second part of the study, the profitability of the five proposed BEE investments in KZN during 2003 was compared for the five loan products using the Net Present Value (NPV) and the Internal Rateof- return (lRR) capital budgeting procedures. The loan terms, interest rates, principal and characteristics of each BEE firm are different with current rates of return on equity varying by business type. Companies A (five-year loan) and C (10-year loan) are agribusinesses with a higher expected current rate of return of 8% on machinery investments, while companies B (eight-year loan), D (15-year loan), and E (20-year loan) invest in farmland with a lower expected current annual rate of return of 5%. The five business plans may not be representative in a statistical sense of all BEE firms in KZN, but were used because they were readily available. Initially it was assumed that donor/grant funds from a development finance wholesaler were lent to an intermediary (like a commercial bank), which in turn, could finance the five investments using any of the five alternative loans, with the lender's repayment to the wholesaler being via a FRL. It was then assumed that the lender could repay its borrowed funds using the same loans, or combinations of them, that it had granted to these companies. Results show that GPLs and DEFPLs can resolve the liquidity problem associated with investments like land in the early years after purchase provided that projected business performance is adequate, while the SPL and GPL are preferred for BEE projects with stronger initial cash-flows like machinery investments. The study also shows that the loan product that best improves the borrower's liquidity is not always best suited to the lender. In most cases, the GPL suited the borrower, but in four of the five cases, the lender would prefer the SPL and to repay the wholesaler using the SPL. The SPL, however, is unlikely to be used, given the large negative real net cash-flows that it generates when the final payments are due. Recent SA experience with the GPLs (interest rate subsidies funded by private sector sugar millers via Ithala) and the DEFPLs (via the Land Reform Empowerment Facility (LREF) which is a wholesaler of funds in SA) suggests that there is scope to alleviate the liquidity problem if a wholesaler of funds can offer such terms to private banks and venture capital investors who then on-lend to finance BEE asset investments that are otherwise considered relatively high credit risks. This would shift the liquidity problem away from the client to the wholesaler of the funds, but requires access to capital at favourable interest rates. Such capital could be sourced from dedicated empowerment funds earmarked by the private sector, donors and the SA government. The lesson for policymakers is that broad-based BEE could be promoted in other farm and non-farm sectors in SA using similar innovative loan products to complement cash grant funds via financial intermediaries, bearing in mind the limitations of the GPL and DEFPL - such as how to finance the subsidy or deferment, and the impact of income shocks. Donor and National Empowerment Fund capital could be used to allocate grants to provide previously disadvantaged individuals with own equity and also to fund finite, diminishing interest-rate subsidies via GPLs, or to fund DEFPLs (many LREF loans have been leveraged by a cash grant component). This could create an incentive for public/private partnerships, as public/donor funds could be then used to attract private sector funds to finance broadbased BEE investments in SA that satisfy empowerment criteria. The five case studies did not show how the GPLs and DEFPLs could make all profitable (positive net present value) but financially infeasible (returns do not match the size and timing of the lender's financing plan) BEE investments in productive assets under the FRL feasible, except for Company E that showed a positive NPV and IRR when the 19YRGPL was used. They did, however, show how the alternative loans could improve liquidity for investments with either strong or poor cash-flows. The financiers consulted to source case studies in KZN in 2003 at the time of the study could not provide the researcher with any profitable, but financially infeasible, BEE business plans. This raises some concern about how effective these empowerment loan products could be in the future as there is uncertainty over how many potential BEE investments in productive assets in SA are likely to be profitable but financially infeasible. Further research is thus needed to assess the impact of these alternative loans on a wider range of broad-based BEE investments, particularly non-farm projects, than considered in this dissertation.
Sources and management of risk in large-scale sugarcane farming in KwaZulu-Natal, South Africa.
(2007) Mac Nicol, Richard.; Ortmann, Gerald Friedel.; Ferrer, Stuart Richard Douglas.
The South African (SA) sugar industry supports approximately 50,940 small and large scale producers who collectively produce 22 million tons of sugarcane seasonally, on average. SA farmers face many challenges that lead to an uncertain decision making environment. Despite a general consensus among agricultural economists that risk constitutes a prevalent feature of the production and marketing environment, various authors have recently stated that risk-related research has failed to provide a convincing argument that risk matters in farmers' decisions. The various shortcomings of previous research have been identified and recommendations for the future proposed. Recommendations include that the focus of future risk research should be on holistic risk management. This study firstly identified the perceived importance of 14 separate sources of risk for a sample of 76 large-scale commercial sugarcane farmers in KwaZulu-Natal. Once a sufficient understanding of the risk perceptions of respondents had been attained, their use of 12 risk-related management strategies was determined. Principal components analysis (PCA) was used to investigate how individual management instruments are grouped together by respondents into choice brackets in order to make use of complementary and substitution effects. The study then proposed and demonstrated a technique that may be used in future research to isolate the effects of risk on individual risk-related management responses by modelling the management strategies contained within individual choice brackets with two-stage least squares regression analysis (2SLS). The most important risk sources were found to be the threats posed by land reform, minimum wage legislation and the variability of the sugar price, in that order. PCA identified seven risk dimensions, collectively explaining 78% of the variance in all 14 risk sources considered. These dimensions were: the "Crop Gross Income Index", "Macroeconomic and Political Index", "Legislation Index", "Labour and Inputs Index", "Human Capital and Credit Access Index", "Management Index" and the "Water Rights Index". Respondents were also asked questions regarding risk-related management strategies, including diversification of on-farm enterprises, investments and management time. PCA identified six management response brackets, collectively explaining 77% of the variance in the 12 responses considered. These response indexes were: the "Mechanisation and Management Bracket", "Enterprise and Time Diversification Bracket", "Insurance and Credit Reserve Bracket", "Geographic and Investment Diversification Bracket", "Land Trade Bracket" and the "Labour Bracket". Lastly, the study proposed a methodology for investigating the role of individuals' risk preferences in decision making. The recommended technique involves the simultaneous modelling of the major risk-related management strategies within each management response bracket, using 2SLS. A measure of risk preference was included in the 2SLS analysis to establish the influence of risk on decision making. By applying this methodology to the data obtained in this study, respondents were shown to be taking advantage of various complementary and substitution effects that exist between management responses. This was evident from the PCA and confirmed for the first previously identified management response bracket using 2SLS regression analysis. Risk attitude was shown to be a significant determinant of management decisions regarding the extent to which back-up management is kept in reserve. Important policy recommendations stemming from this study include that government review restrictive labour legislation and decrease the uncertainty surrounding new land redistribution legislation. Farmers need to make better use of available information by considering the effects of any single management decision on separate decisions, enabling them to take further advantage of substitution and complementary effects that may exist between management strategies previously considered in separate decision brackets. The fact that mechanisation and labour use occur in separate risk-related management response brackets in this study is an example of one such substitution effect that farmers do not seem to be utilising in terms of their management decision making. Future research using time series data is important in order to identify how risk perceptions and management portfolios change over time. Also, further research using the methodology proposed in this study may prove to be a useful means of more adequately addressing the question "Does risk matter in farmers' decisions?"
An institutional analysis of South Africa's new cooperative act : evidence from selected case studies in KwaZulu-Natal.
(2010) Nganwa, Peace.; Ferrer, Stuart Richard Douglas.; Lyne, Michael Charles.
Cooperatives are a means through which farmers may gain economic power by reducing unit transaction costs associated with production, marketing and distribution of products. In South Africa, cooperatives are promoted as a means of advancing economic development in rural areas through empowerment, development of income generating activities, improvement of human resource capacity, and increased savings and investment. The new Cooperatives Act 14 of 2005 was enacted in August 2005 to promote the role of cooperatives as organisations for pro-poor development in South Africa and to increase their chance of survival in the economy. This study uses a New Institutional Economics (NIE) framework to analyse the Cooperatives Act and its worth as a vehicle for promoting pro-poor development. A hypothetical cooperative, predicated by the new Act, was analysed using the NIE to identify institutional problems likely to constrain the collective efforts of small producers. A case study approach was then used to analyse three production cooperatives in KwaZulu-Natal that were registered post August 2005 and still operational in 2008. Interviews were conducted with individual members, directors and project managers (where applicable) between May and July 2008. Open-ended questions provided the flexibility needed to explore the institutional roots of problems identified by respondents. Free-rider, horizon, portfolio, control and influence problems were identified in the case studies. These problems, which stem from ill-defined voting and benefit rights, resulted in low equity investment, low investment in long term assets, a preference for current cash flows rather than future investment, and social conflict – all of which constrained the competitiveness and growth prospects of the cooperatives studied. In an attempt to mitigate these problems, two of the cooperatives shed their poorest members, a solution which is not consistent with the objective of pro-poor economic development. Additionally, two cooperatives opted to create their own rules to reward investors with capital gains - an institutional arrangement that is not permitted by the new Act. It is concluded that the new Act should be amended to give cooperatives greater flexibility in their institutional arrangements. In particular, cooperatives should be allowed to issue tradable equity shares that offer benefits proportional to shareholding. If these tradable equity shares carry voting rights and are offered to non-patron investors, aggregate voting rights conferred on these non-patron investors should be capped to prevent loss of control by patron members. It is further recommended that the same level of start-up support should be made available to all producer groups that formally register their business, regardless of the business model chosen, and that member empowerment should be an essential requirement for registration and public funding. Keywords: Agricultural Cooperatives, Cooperatives Act, New Institutional Economics, Case Study
Tourists' willingness-to-pay for biodiversity conservation accreditation.
(2007) Fannin, Timothy Gower Donovan.; Ferrer, Stuart Richard Douglas.
Imperfect information on aspects of biodiversity conservation will constrain the extent to which tourists’ preferences for biodiversity conservation are revealed in game reserve (GR) tariffs, reducing the incentive for tourism businesses to invest in biodiversity conservation. Accreditation is an institutional approach to addressing the issue of imperfect information on biodiversity conservation. In this study, Choice Experiments (CE) and the Contingent Valuation Method (CVM) are used to estimate tourist’s willingness-to-pay (WTP) to visit biodiversity conservation accredited terrestrial nature-based tourism (NBT) destinations in selected areas of South Africa (SA). A survey of 97 domestic tourists and 96 foreign tourists was conducted at 16 private and public GR camps in north-eastern KwaZulu-Natal (NEKZN) and Mpumalanga/Limpopo Provinces (MP/LP) during October and November 2004. The survey captured socio-economic data to be used in discriminating between market segments, eighteen hypothetical CE questions and a CVM question. Analyses comparing the preferences of domestic tourists from foreign tourists, tourists visiting NEKZN from tourists visiting MP/LP and tourists visiting private GRs from tourists visiting public GRs were performed. In addition, Hierarchical Cluster Analysis (HCA) was used to identify groups of tourists with similar preferences. Respondents are grouped into three market segments according to their revealed preferences using HCA. Linear Discriminant Analysis (LDA) was used to discriminate the three groups based on socio-economic characteristics. These groups were named “Conservation Vacationers”, “Incidental Sightseers” and “Big 5 Brigade” based on socioeconomic characteristics unique to each group. The region (NEKZN or MP/LP), level of education and itinerary (independent travellers or part of tour group) were the most powerful in discriminating “Big 5 Brigade” from the other two groups in the first function. The second function primarily discriminates Conservation Vacationers from Incidental Sightseers based on membership to a wildlife society, gender and education. Results of the CE and CVM studies respectively, indicate that, overall, respondents were willing to pay premiums of R114.41 and R87.67 per person per night (all premiums are presented as per person per night, unless otherwise stated) to stay at a GR accredited with having a high standard of biodiversity conservation. Foreign tourists were, on average, willing to pay the highest premium of R136.35 for biodiversity conservation accreditation, while tourists visiting private GRs were, on average, willing to pay the lowest premium of R 96.42. A further three market segments were identified using HCA. The average WTP estimates for biodiversity conservation accreditation for Groups 1(Conservation Vacationer), 2(Incidental Sightseer) and 3(Big 5 Brigade), identified by HCA were R171.41, R66.15 and R14.94, respectively. On average, respondents in all groups, game-viewing quality was most highly valued, followed by the level of congestion. Results of this study may be useful to NBT operators and managers in developing marketing strategies targeting specific market segments. Analysis of the results by market segments indicates that CE may be a more reliable technique than CVM. Further research on the costs and benefits of biodiversity conservation accreditation is necessary to predict the extent to which NBT businesses are likely to adopt biodiversity conservation accreditation.
Factors affecting participation in livestock lease agreements : a study of dorper sheep and jersey cattle farmers in South Africa.
(2007) Rodewald, Dieter Wilhelm.; Ferrer, Stuart Richard Douglas.
This dissertation investigates the hypotheses that high transaction costs contribute to relatively low participation rates in livestock leasing in South Africa; and that specific contractual characteristics contribute to minimising total transaction costs of livestock leasing contracts in South African commercial agriculture. Many emerging livestock farming businesses may value the option of leasing-in livestock. Likewise, many established livestock farming businesses are currently undergoing expansion (especially dairy farms) and may also value the option of leasing-in livestock. A reduction in transaction costs and an improvement in efficiency of the livestock lease market could prove beneficial for emerging/expanding livestock farms. Likewise, investors, who anticipate competitive rates of return from investments in livestock, may value the option of owning and leasing-out livestock to suitable farm businesses. Transaction costs in livestock rental contracts include costs of information about contracts, costs of monitoring and enforcing contracts, costs of finding party members to contract with, the costs of risk of an agreement being terminated due to exogenous factors such as land claims, the risk of incomplete contracts and the costs of risk bought about by adverse selection and moral hazard. The magnitude of transaction costs incurred by participants of a livestock leasing contract are a function of how costs and risks are shared between the lessee and lessor, the inclusion of specific contractual clauses, the type of leasing contract, the relationship between party members and additional contractual characteristics. A census postal survey of two populations of livestock farmers, namely members of the Jersey Breeders' Societies of South Africa, was conducted during April and May 2007 to collect data on farmers' perceptions of and their participation in livestock rental contracting agreements. Elicited data was analysed using a multinomial discriminant analysis to identify factors that discriminate between non-participants of the livestock leasing market, lessees of livestock and lessors of livestock. Ordinary least squares regression was used to identify preferred characteristics of livestock lease contracts. Results of the first analysis suggest that a livestock leasing market does exist in South Africa; however, the market is characterised by high transaction costs. Non-participation in livestock leasing markets amongst survey respondents is partially attributable to the high perceived costs of obtaining market information and establishing and enforcing livestock lease agreements. Findings of the second analysis show that survey respondents, on average, showed a preference for formal agreements, leasing commercial animals for shorter periods and keeping detailed inventories. It is concluded that providing livestock farmers with information about important characteristics of successful livestock lease agreements may reduce transaction costs, and thus reduce market inefficiency in the market.
South African citrus farmers' perceptions of the benefits and costs of compliance with private sector certification schemes for citrus exports.
(2010) Ndlovu, P. G.; Darroch, Mark Andrew Gower.
The main objective of this study was to analyse South African (SA) citrus farmers’ perceptions of the benefits and costs of complying with quality assurance (QA) certification schemes for citrus exports to the European Union (EU). The study used an e-mail and postal survey questionnaire mailed to a stratified random sample of 260 SA commercial citrus growers during July 2007. The survey yielded 108 usable responses - a response rate of 10.8% from the target population of 1001 commercial SA citrus growers. The main factors motivating respondents to adopt QA certification were to keep and maintain access to existing markets; to improve customer confidence in their products; to access new markets; and to meet food safety and retailer requirements. Principal Component Analysis (PCA) identified six underlying dimensions of motivators, which suggest a drive by sampled respondents to gain certification to meet market requirements, achieve intra-farm benefits such as cost-reduction, and to remain competitive in existing and new foreign markets. The sampled respondents identified the main internal benefits from QA certification as the ability to retain existing markets; improved worker health and safety; better access to foreign markets; better farm organisation; and improved fruit safety and orchard management. The PCA identified six broad dimensions of these internal benefits. Comparing the motivator and perceived benefit dimensions, most of the motivators seem to have been in part realised by the respondents. Respondents rated shared goals and values about the product; more joint decision making on fruit safety; more working together on quality assurance; a better business working relationship; improved coordination; and improved trust as the six major supply chain benefits from QA certification. The two dimensions identified from these external benefits by PCA were: (1) Improved working relationship and product quality benefits, and (2) Improved cooperation and contractual benefits. The major costs of implementing EUREPGAP certification related to initial investment costs and the recurrent annual costs of compliance. The respondents, on average, spent an estimated R70655 on initial compliance costs, mainly for infrastructure, additional buildings and employees training. Some 60% of respondents spent less than 1% of annual farm turnover on initial compliance costs, while most of the respondents (84%) spent less than 1% of annual farm turnover on recurrent costs of compliance. Growers that owned a pack-house had statistically significantly higher initial and annual costs of compliance. Most (63%) of the respondents had a relatively high level of overall satisfaction with QA certification. The second objective of this study was to analyse the determinants of SA citrus farmers’ overall level of satisfaction with QA certification. Ordinary Least Squares (OLS) regression estimated that perceived dimensions of internal benefits, namely (1) Foreign market access benefits; (2) Intra-farm benefits; (3) Improved fruit safety and orchard management; (4) Quality and worker welfare benefits; and (5) Ability to retain existing markets, all had a statistically significant positive influence on the sampled growers’ overall level of satisfaction with QA certification. Supply chain benefits also had a positive effect on overall level of satisfaction, although the effects were not statistically significant. Similarly, no statistically significant relationship could be established between farm size or the respondents’ level of satisfaction with their certifying agents and their overall level of satisfaction with QA certification. Record keeping is required by nearly all EUREPGAP control chapters and for farm audits. Crop protection is also perceived as a complex requirement of the EUREPGAP protocol. Policymakers thus need to be aware of the extra costs that protocols create for management. The Citrus Growers’ Association of Southern Africa (CGA) could consider providing more extension advice to farmers on the technical requirements of certification (particularly best practices for implementing the control chapters). Comparing the motivator and perceived benefit dimensions, most of the motivators for QA certification seem to have been in part realised by the respondents. For instance, the drivers to improve business image/market competitiveness/market access requirements/farm profitability were realised via perceived reputation/input cost savings/foreign market and profit improvement benefits. The study results, therefore, provide some evidence that QA certification is a necessary strategy for maintaining competitiveness in EU citrus markets.
The economic impact of a rural land tax on selected commercial farms in KwaZulu-Natal, South Africa.
(2007) Lee, Richard Brian.; Darroch, Mark Andrew Gower.
This study investigates the potential economic impact of a land tax implemented in terms of the Local Government Municipal Property Rates Act No. 6 of 2004 (“the LGMPRA”) on selected commercial farms in KwaZulu-Natal (KZN) using individual farm data for the period 2001-2006. The study first presents a brief history of land taxes around the world, describing the origins, prevalence and rates of land tax in the United States of America (USA), Australia, Britain and some Nordic countries. This sets the background for a brief history of land taxation in South Africa up to the implementation of the LGMPRA. The study then identifies the economic effects of a land tax, highlighting issues such as the capitalization of a land tax, relevant views of this tax, valuation methodologies, the advantages and disadvantages of a land tax, and the effects of a land tax on future capital investment on farms. Thirdly, the study presents key provisions in the LGMPRA pertaining to farmers with regard to land tax rebates, reductions and exemptions, farmland valuations and the determination of a land tax rate. The effect and applicability of these rebates, reductions and exemptions on the effective land tax rate are also discussed. Fourthly, the study uses a Residual Income Methodology (RIM) framework to estimate the annual economic profit (return to risk and land excluding capital gains) for five different case study farms in the Mtonjaneni and Umgeni municipal districts of KZN. This RIM framework makes allowance for the opportunity cost of management in estimating annual economic profit. These case studies are typical of the main farming enterprises in KZN such as sugarcane, timber, intensive poultry, intensive dairy, cattle, maize and potatoes. Sensitivity analysis is then applied to assess the effect of land tax rates ranging from 0.5% to 5% of the market value of land and fixed improvements on the five farms’ ability to pay a land tax after accounting for rebates proposed by the Department: Provincial and Local Government (DPLG). The estimated mean annual rate of return to risk and land (excluding capital gains) prior to the land tax for the five case study farms during 2001-2006 ranged from -8.50% to 2.94%, with an average of -1.74%. The case farms’ ability to pay a land tax rate of 1% on the value of improved land with and without proposed DPLG rebates from annual current operating returns ranged from zero to five out of five years, with an average of two out of five years. A 2% land tax rate with such rebates could be financed using annual current operating returns also only in two out of five years on average. These results suggest that land taxes at the proposed rates of 1.5% (Mtonjaneni) or 1% (Umgeni) on these specific farms would markedly reduce the incentive to invest in farm improvements These results also indicate that further research in KZN and other provinces in South Africa needs to be conducted to help ascertain the effects of the implementation of the LGMPRA in other municipalities.
Labelling to promote broad-based Black economic empowerment in South Africa : a case study of the Thandi empowerment label.
(2007) Skinner, Cliff.; Lyne, Michael Charles.; Ferrer, Stuart Richard Douglas.
Broad-based black economic empowerment (BBEE) is a policy objective in South Africa. Farmworker equity-share schemes (FWES) satisfy several of the empowerment goals specified by the proposed AgriBEE Scorecard. Information about the costs and benefits of subscribing to an empowerment label will help managers to make more informed decisions about empowerment and could therefore promote BBEE. The Thandi label is an initiative to market fruit and wines originating from FWES and farms operated by previously disadvantaged farmers. A case study of the Thandi label was undertaken to determine whether or not the accredited empowerment attribute adds value to Thandi products. An exploratory-explanatory case study was adopted basing questions largely on the theoretical propositions of asymmetric information, the benefits of product labelling and the preconditions for a successful label. Primary data were collected via in-depth interviews with managers of Capespan, The Company of Wine People and empowerment farms participating in the Thandi label. The study made use of in-depth interviews with key informants to investigate issues considered (on theoretical grounds) to be critical in establishing a successful label. Responses were subsequently tabulated and compared, where relevant, across respondents in order to check for consensus views. Results indicate that the Thandi label had not succeeded in differentiating fruit, whereas the Thandi wine label had increased sales revenue and was covering accreditation costs incurred by farms as well as the recurring costs of maintaining and marketing the label. Thandi fruit had not grown its share of the domestic or export markets and did not command a price premium, Capespan subsequently discontinued the Thandi fruit label. Thandi wine, on the other hand, had grown its export market and consumers were prepared to pay a premium for Thandi wine products. The data indicate that empowerment attributes were useful in finding shelf space for products, but that quality is essential to grow market share and to earn price premiums. In short, accredited empowerment attributes can add value to quality products sold to discerning consumers who lack information about empowerment and quality attributes at the point of sale. Empowerment labels must include quality attributes. Government should at least absorb some of the transaction costs confronting producers and marketing agencies in negotiating standards for farms and firms participating in generic empowerment labels. It could also offer auditing services to local accreditation agencies to improve their credibility. Further research estimating consumers' willingness-to-pay for products branded with empowerment labels is necessary to estimate the size of premiums that different products may command.
A demand analysis of labour in South African agriculture : the effects of labour legislation.
(2006) Sparrow, Gregory Neal.; Ortmann, Gerald Friedel.
Labour legislation was introduced into agriculture in the early 1990s with the Basic Conditions of Employment Act (BCEA) being gazetted in 1992. Since the mid-1990s "new" labour legislation pertaining to agriculture has been implemented in South Africa, and includes the Basic Conditions of Employment Act 75 of 1997 (amended), the Unemployment Insurance Act 63 of 2001 (amended), the Labour Relations Act (LRA) 66 of 1995, the Land Reform (Labour Tenants) Act 3 of 1996, the Extension of Security of Tenure Act 62 of 1997, the Employment Equity Act 55 of 1998, the Skills Development Levies Act 9 of 1999, and the Sectoral Determination (an amendment of the BCEA 75 of 1997) which includes the imposition of minimum wages. This study examines the legislation in detail as well as the implications of this legislation for agricultural labour employment in South Africa. A relative increase in the cost (transaction and wage) and risk associated with labour motivates farmers to replace labour with machinery, machinery contractors, labour contractors or new technologies that are labour-saving. This results in a decrease in the demand for unskilled workers and higher levels of poverty and unemployment in South Africa. This study estimates long-run price elasticities of demand for regular labour in South African (SA) agriculture using both Ordinary Least Squares (OLS) regression and a Two-stage Least Squares (2SLS) simultaneous equations model. The 2SLS model includes a labour supply equation. Secondary data obtained over a 43 year period (1960-2002) from Statistics South Africa and the Abstract of Agricultural Statistics were used in this study. Both models were estimated for the period 1960-2002, and included a piecewise slope dummy variable for wages with the threshold year taken as 1991 to reflect expected changes in farm labour legislation. Study results show that the estimated long-run price elasticity of demand for labour for the pre-1991 (i.e., 1960-1990) period was -0,25 for the OLS model and -0,23 for the 2SLS model suggesting that the demand for regular labour was jnelastic during this period. For the post-1991 period (1991-2002), the long-run elasticity was estimated as -1,32 for the OLS model and -1,34 for the 2SLS model. This shows a structural change in demand that questions the appropriateness of minimum wage and other labour legislation that has raised the cost of regular farm labour in South Africa. Labour legislation introduced in the early 1990s encouraged farmers to substitute casual workers for regular workers. However, the inclusion of all casual workers in minimum wage legislation from 2006 is expected to slow the casualisation of agricultural labour as farmers turn to labour contractors, chemicals and machinery as the next best substitutes. The study found that an increase (decrease) in the price of chemicals (pesticides and herbicides for crops, and labour saving dips and sprays for animals) result in an increase (decrease) in the demand for regular labour. The demand for labour is also sensitive to changes in real interest rates (used as a proxy for machinery costs). The cost of capital would decrease (increase) as interest rates fall (rise), resulting in farmers adopting more (less) machinery and equipment, causing a decrease (increase) in the demand for regular labour, ceteris paribus. In order to reverse the regular labour unemployment trend in SA agriculture, government could choose to adopt more flexible labour market regulations (i.e., legislation regarding the hiring and dismissing of farm workers, and increases in wages and benefits for the farm worker could be based on the individual performance of each worker as opposed to increasing the wages of the entire workforce through minimum wages) which would reduce labour costs and encourage farmers to employ more labour.
Factors affecting the survival, growth and success of small, medium and micro agribusinesses in KwaZulu-Natal.
(2004) Clover, Theresa Ann.; Darroch, Mark Andrew Gower.
The sustained growth of small, medium and micro enterprises (SMMEs) could help to reduce poverty, income inequality and unemployment problems in KwaZulu-Natal (KZN). Public and private sector institutions can identify policies and strategies to, increase the survival and growth rates of SMMEs if they have more information about the factors that constrain business performance, and the link between entrepreneurial quality and enterprise success. The owners of 44 agribusiness SMMEs in a stratified random sample of Ithala Development Finance Corporation (Ithala) clients in KZN were, therefore, surveyed during October 2003-February 2004 to identify what they perceive are constraints on business survival and growth, and how entrepreneurial quality affects business success (using loan repayment performance at Ithala as a proxy for success). Principal Component Analysis of 36 potential constraints ranked by the survey respondents identified eight dimensions of perceived constraints: A lack of access to services; funding constraints at enterprise start-up; a lack of management capacity in the enterprise; access to tender contracts; compliance costs associated with VAT and labour legislation; liquidity stress; a lack of collateral, and a lack of institutional (government and private sector) support. A lack of collateral and access to services seemed to affect the Retailer stratum relatively more, while Speculators considered lack of capital at start-up to be their major constraint. Harvester contractors and Processors seemed to be most affected by compliance costs, while Processors were especially prone to liquidity stress. Possible solutions to ease these constraints include the provision of appropriate infrastructure and training, development of innovative loan products to address cash flow and collateral issues, more transparent tendering processes, and policies to reduce the costs of compliance with legislation. An empirical logit model showed that strong energizer behaviours (current and planned business expansion and staff training) that reflect entrepreneurial quality, more business experience, and family assistance to become an entrepreneur, promote loan repayment (success), while a lack of access to electricity and training facilities increase the probability of loan default. This suggests that more focus on the personal characteristics of credit applicants and (again) the development of appropriate infrastructure and training services could help to promote the future success of agribusiness SMMEs in KZN.
Efficiency implications of water markets in the lower Orange and Crocodile rivers, South Africa.
(2004) Gillitt, Christopher Glen.; Nieuwoudt, Wilhelmus Liberté.
Irrigation farmers in the Lower Orange (Kakamas and Boegoeberg) and Lower Crocodile rivers (between Nelspruit and Komatipoort) areas in South Africa were surveyed during October 2003 in order to study whether water marketing has promoted efficiency in water use. This study is a follow-up on research undertaken by Armitage (1999) in the Lower Orange River area and Bate et al. (1999) in the Lower Crocodile River area. Factors associated with future investment in irrigation farming were also studied in the Lower Orange River Irrigation Scheme. Econometric procedures used included principal component analysis, and logit and ridge regression. Results from the two areas will be discussed separately. Econometric results for the Lower Orange River farmers indicate that purchasers of water rights produce lucrative export grapes and horticultural crops with relatively less raisin, wine or juice grapes and less field crops; are more specialised in production (table grapes); have more livestock (probably liquidity factor) and have a less negative view of the five-year water license review period. The water market has facilitated a transfer of water use from relatively lower value crops to relatively higher value crops, and also promoted the use of more advanced irrigation technology. An investment model using Ridge Regression indicates that the following variables are associated with increased future investment in irrigation farming; higher expected profitability and lower levels of risk perception and risk aversion (Arrow/Pratt). Results confirm that farmers who are more risk averse are likely to invest less in the future as can be expected from theory. Policies that increase risk in agriculture will have a significant negative effect on future investment in irrigation. What is significant from the results is that irrigation farmers in the Lower Orange River area are highly risk averse (down-side). Results also show that farmers who feel that water licenses are not secure expect to invest less in the future. The latter effect is thus amplified, as farmers appear to be highly risk averse. This has important policy implications, and measures should be taken to improve the perceived security of water licenses. This could be achieved by keeping farmers more informed about the practical implications of the New Water Act (NWA) (Act 36 of1998) and, specifically, water licenses. In the Lower Crocodile River area, almost all the water trades (permanent and rentals) observed in this study were from farmers above the gorge to farmers below the gorge. It is concluded that in the transfer of water some attributes in the purchasing area such as lower production risk (sugar cane) and lower financial risk and better cash flow (bananas and sugar cane) were more important than the expected income per cubic meter of water. Water supply in this area is highly irregular, while sampled farmers were again found to be extremely risk averse especially as far as down-side risk is concerned. The average water price in this area in recent years (2002 to 2003) was between R2000 and R3000 per ha (l ha = 8000 cubic meters). Buyers have large farms and are progressive farmers that purchase (and rent) from many sellers (or lessors). It is concluded that information on water transfers (sale prices and rents) is asymmetrical. Few permanent transfers have taken place in the Crocodile River in recent years. It is concluded that there are reasons why transfers at present are not processed, such as excess demand for water (due to the irregular flow of the Crocodile River, and role players should discuss these reasons and possible solutions before further action is taken.
Feasible indicators for monitoring the performance of equity-share schemes in South African agriculture.
(2004) Gray, Bernadine Claire.; Lyne, Michael Charles.; Ferrer, Stuart Richard Douglas.
This study aims to develop a robust methodology for measuring the performance of equity-share schemes in South African agriculture. Equity-share schemes are privately owned farming operations that are generally restructured as companies with the original owner and the farmworkers as shareholders. Several studies have investigated various aspects of the performance of these schemes but no single study has yet measured their performance using a comprehensive and objective set of criteria. Four categories of criteria are proposed: poverty alleviation; empowerment and participation; institutional arrangements and governance; and financial performance. This study does not aim to assess the performance of existing equity-share schemes rather a methodology for the four criteria based on empirical evidence gathered in 2004 from a land reform project in the Midlands of KwaZulu-Natal and seven established equity-share schemes in the Western Cape. Poverty alleviation is measured using a transition matrix of households grouped by four different symptoms of poverty: current income, wealth, health and a principal component index of housing quality based on building materials, access to safe drinking water and adequate sanitation. Eight. categories of indicators are recommended for empowerment and participation: control and ownership; skills transfer; understanding of the structure of the scheme; information; outcomes; trust; outreach; and participation. A scorecard applying norms based on empirical evidence gathered at equity-share schemes in the Western Cape is used to assess the indicators. A scorecard approach is also applied to institutional arrangements and governance, which are measured using three categories of indicators: accountability, transparency and property rights. Recognised indicators ;of financial performance are applied to balance sheet and income statement data provided by four of the seven equity-share schemes in the Western Cape. This analysis highlights problems with several of the conventional ratios used to measure the profitability, solvency and growth of recently restructured farming enterprises whose 'empowerment' status attracts exceptionally high levels of debt capital to finance long-term investments. To avoid these problems it is recommended that, for equity-share schemes, profitability should be measured by the return on assets or dividend return; solvency by the debt/asset ratio; liquidity by cash flow projections; growth by changes in the (estimated) real. value of shares; and workers' total returns by changes in the sum of the real wage bill, capital gains, dividends, interest and other benefits accruing to workers in aggregate. The proposed performance measures are relevant, manageable in number and have feasible norms based on empirical evidence. These indicators and their norms need to be tested on a wider scale and over time. Further research should be undertaken to estimate weights for the empowerment and institutional indicators.
Best institutional practices for farmworker and community equity-sharing schemes in South Africa.
(2003) Knight, Sharon L.; Lyne, Michael Charles.
Farmworker equity-share schemes were initiated by the private sector in the Western Cape region of South Africa in the early 1990's as a method of redistributing farm assets to land reform beneficiaries while maintaining the viability of commercial farming operations. This study set out to identify the institutional characteristics of successful farmworker equity-share schemes in South Africa, and to discern a set of best institutional practices that will likely promote the success of future equity-share schemes. A detailed study of nine commercial farming ventures involving partnerships with farmworkers was undertaken in the Western Cape during November 2001 to explore relationships between their institutional arrangements, worker empowerment, management quality and performance. Farmworker equity-share schemes (FWES) have received both positive and negative publicity. This thesis adds to the debate surrounding these land reform projects by comparing the results of case studies conducted by the Surplus People's Project in 1998 with more recent (2001) case studies. The latter suggest that many of the concerns raised by the Surplus People's Project, such as beneficiaries' participation and expectations, power relations between management and worker-shareholders, skills transfer and labour relations, have been addressed. The dissertation also highlights those issues that remain areas of concern, for example, beneficiaries' tenure security, literacy levels amongst worker shareholders, skill and wage differences between men and women, and exit procedures. A cluster analysis of variables measuring four constructs of a successful farmworker equity-share scheme, viz. sound institutional arrangements, effective worker empowerment, competent management and good performance, revealed positive relationships between these constructs. Best institutional practices identified by the analysis suggest that farmworker equity-share schemes should be operated as (or like) a company with voting and benefit rights proportional to individual shareholdings, but with restrictions on certain share transactions to prevent free-riding by non-workers and the loss of creditworthiness through sudden outflows of equity and managerial expertise. However, this positive relationship between best institutional practices and enterprise performance is dependent on effective worker empowerment (e.g. skills transfer and gender representation), good governance (e.g. external auditing) and competent management (e.g. schemes to reward worker performance and to resolve disputes). From a policy perspective it is recommended that public land reform grants should be awarded only to beneficiaries of FWES that have been co-financed by a bank or reputable investor as this ensures a thorough financial assessment of the project, and only to projects that can demonstrate a history of good labour relations. It is also recommended that the Department of Land Affairs should consider extending its grants to regular but seasonal farmworkers who wish to participate in an established project. While farmworker equity-share schemes may not provide all of the answers to land reform they have an important role to play in redistributing wealth and de-racialising commercial agriculture in South Africa.
Economic and institutional factors affecting the performance of the graduated mortgage loan repayment scheme used by medium-scale sugarcane farmers in KwaZulu-Natal.
(2003) Mashatola, Mopai Clement.; Darroch, Mark Andrew Gower.
Private sector sugar millers and Ithala Development Finance Corporation (Ithala) implemented a graduated mortgage loan repayment scheme in the 1995/96 sugarcane production-season to try and improve access to farmland by aspirant commercial farmers in KwaZulu-Natal. By March 2001, the scheme had financed 106 "medium scale farmers" (MSFs), 99 of whom were still in the scheme (one loan had been repaid from own funds, and another six from the proceeds of life insurance policies). The first aim of this study was to analyse factors affecting whether or not the MSFs were current or in arrears on loan repayments as at 31 March 2001. A logit model based on full information for 83 MSFs shows that the estimated probability of a MSF being current on loan repayments was higher for clients with higher levels of average annual gross turnover relative to loan size, and for clients with access to substantive off-farm income. This suggests that farm size (proxied by annual farm gross turnover) does matter when policymakers in South Africa consider future similar schemes designed to improve access to commercial farmland by people that previously could not buy farmland. Smaller-sized, creditworthy farms with loan sizes that are relatively low compared to the expected average annual gross income may also be viable. Access to off-farm income could also be considered as a criterion in selecting potential farmers for future similar schemes, as it helps to provide additional liquidity to fund future operations and debt repayments, and can reduce leverage levels. The second aim was to conduct personal interviews with the 99 MSFs between July and September 2001 in order to identify what aspects of the scheme could be improved for new members . Responses from 88 of these MSFs show that 68% of them would opt to first rent land before purchasing, while 78% of them recognize, or have experienced, the cash flow problem associated with land purchase. Most of the MSFs felt that long-term sugarcane supply agreements constrain enterprise diversification, and that the quality of mentorship that they currently received was not satisfactory. Industry players could consider leveraging donor funding for empowerment projects to improve the quality of future mentorship programmes. There is also some scope for Ithala to improve the client-lender relationship by better clarifying the structure of the graduated repayments, sending loan statements on time, and helping clients to interpret loan statements. Growers perceive the need for a coordinator to monitor, and advise on how to improve, their financial performance this could be a new commercial service opportunity. Using an independent valuer to conduct farm valuations may also be necessary to avoid perceptions of bias in the value of farms offered for sale by the millers. A logit model of the MSFs' preferences for first renting land before purchase shows that new growers joining this scheme, or similar schemes for other farm products, with relatively less liquidity and less farming experience should be given the choice to rent land with an option to purchase. The preference for first renting by most of the surveyed MSFs could indicate that many very highly leveraged MSFs still experience cash flow stress despite the interest rate subsidy. A second policy implication, therefore, is that the current subsidy level, which reduces the effective starting interest rate level to about ten per cent relative to a typical five per cent current return on land, could be increased to promote access to farmland markets. Alternatively, loan terms in the next round of the scheme could be changed to require higher proportions of own equity (lower leverage levels), or to permit the deferral of principal payments, or to permit the purchase of smaller farms by creditworthy, part-time farmers. Another strategy to improve liquidity is to advise growers to limit family drawings in the early years after farmland purchase.
Improving the productivity and competitiveness of small-scale sugarcane contractors in KwaZulu-Natal.
(2004) Nothard, Brendon Wasley.; Ortmann, Gerald Friedel.
The productivity of small-scale sugarcane contractors affects not only their own profitability and sustainability, but that of other stakeholders as well, such as the small-scale sugarcane farmers they contract to and the sugar mills these farmers supply in the form of improved services to growers and a steady flow of sugarcane to mills. This study firstly illustrates the organisational structures of the sugar industry. It then aims to identify constraints that inhibit the performance (such as timely haulage operations and cost effectiveness) of small-scale sugarcane contractors in the small-scale sugar industry of KwaZulu-Natal (KZN). To obtain this information, interviews were conducted with 124 randomly selected contractors from 11 mill group areas in KZN between September 2002 and July 2003. Case studies (concerning institutional issues such as organisational structures) of contractors, sub-committee members, and development officers were also conducted in eight mill group areas of KZN between September 2002 and February 2004. Sample statistics and case study results show that contractors face institutional constraints (work allocation limitations, lack of performance incentives and high transaction costs, such as negotiation costs, the risk of losing work and contract default risk), cash flow problems, poor physical infrastructure and a lack of labour. It is concluded that the promotion of a more competitive small-scale sugarcane contractor sector will alleviate many of the problems (such as work allocation limitations) faced by small-scale contractors, while providing incentives for the provision of higher quality and cheaper services to small-scale sugarcane growers. The study also examines the attributes of small-scale sugarcane contractors that affect their quality of service as perceived by small-scale sugarcane growers (SSGs) within current institutions. Information is drawn from the same sample survey, although ten observations from the Umfolozi area are excluded because they were not part of the sample drawn from population lists. Further interviews were conducted in the same time period with SSGs for information on contractor service quality (transport and general service timeliness, meeting of daily ratable delivery requirements, low downtimes, good staff management, and minimal disagreements on service terms). Results show that factors affecting a contractor's perceived service quality include gender, training, the quality of information used (industry focused information sources such as the South African Sugar Association Experiment Station (SASEX) and the Ingede magazine, or general sources such as the radio), and sugarcane tonnage transported (size of business). Being a male contractor and having a larger business positively influence service rating as perceived by SSGs. The importance of the quality of information used and increased training levels highlights the need for the continual provision of relevant information and training for sugarcane contractors by extension services (government, SASEX and milling companies). The study also identifies the need for further research on the issue of contractor machinery costs. In a competitive sector contractors would need to have adequate information on own costs in order to compare these with contract rates in the market. Further guidance by extension staff and other industry advisors (e.g. development officers) in the accessing of adequate finance may also be necessary. Government has a role in strategising the creation of land markets to promote efficient use of resources (land), while providing improved rural infrastructure (mainly district roads). Government also needs to ensure unbiased tribal court rulings, review the impacts of minimum wage legislation on contractors sourcing labour, and provide protection for those competing for work.
Adoption of hybrid maize seed, fertilizer and machinery technologies by communal farmers in KwaZulu-Natal.
(2001) Essa, John Abdu.; Nieuwoudt, Wilhelmus Liberté.
This study investigates the characteristics of technology adoption by small-scale farmers, notably the factors influencing the adoption of hybrid maize seed, inorganic fertilizer and machinery technologies. The study also on the basis of socio-economic and institutional factors, identifies the dimensions of small-scale farmers. Data for the study were obtained from a sample survey of 160 households in the Amangwane and Amazizi wards, located in the Okhahlamba magisterial district of KwaZulu-Natal during August 2000. The chief aim of this study is to generate empirical information that can be used to devise programs to encourage small-scale farmers to adopt agricultural technologies. The motivation of the research emanates from the fact that there is limited empirical information as to the actual adoption patterns of agricultural technologies by small-scale farmers. The nature and relative importance of factors associated with technology adoption is time and location specific. The study by using more recent and broader information builds on previous studies in order to complement technology adoption research on small-scale farmers. Understanding what factors influence the adoption of farm technologies and categories or dimensions of small-scale agriculture should provide information on policy options to stimulate technology adoption and improve growth in agricultural productivity. A categorical dependent variable was specified to identify farmers' adoption pattern of hybrid maize seed and fertilizer. Seventy-two farmers were adopters of both hybrid seed and fertilizer, 56 were adopters of either hybrid seed or fertilizer while 32 farmers were non-adopters. The results of binary logistic regression analysis indicate the adoption of hybrid maize seed and fertilizer is positively associated with, in order of importance, larger farms, older household heads, more value of livestock and better access to information sources. An index that indicates farmers' status of adoption of machinery technologies was constructed using a principal component analysis technique. The analysis showed that the adoption of machinery technologies can be represented by the single index which could be used as a dependent variable. A principal component regression analysis was subsequently used to determine factors contributing to the adoption of the machinery technology index. The results indicate that adoption was higher for (1) older and male headed households in general and residents of the Amangwane ward in particular; (2) operators of more arable land, owners of more livestock and earners of more non-farm income; and (3) households with large family labour, and households that made use of extension services and information sources. These results are consistent with hypothesised relationship between technology adoption and the predictors and are supported by previous empirical findings. Priority should be given to policies that alleviate the tenure insecurity problem on arable land and this in turn promotes a land rental market. This would involve an institutional change and legal infrastructural support services. Arable land holding is highly skewed within the communal setting and the state needs to address this equity issue on arable land through redistribution or reform policies. The state needs also to invest in public goods that alleviate the problems of private investors for example by encouraging credit providers or promoting rural financial markets to alleviate liquidity constraints and enhance adoption. Investment in farmer training and education should therefore, be seen as priority if higher adoption rates and an improvement in income are to be achieved. Inadequate and poor extension and information services imply an urgent need for the formation of community and farming associations and for the provision of extension services to groups of farmers. Investment in these areas may reduce the cost of technology transfer programmes. The results of a principal component analysis to identify the dimensions of small-scale farmers in communal areas of KwaZulu indicate that farmers fall into distinct categories. Component 1 is an emerging commercial and a more mechanised household while component 2 is a land-less farm household that is more educated and earns more non-farm income largely from contractor services. Component 3 is a non-farm female headed household that depends on income from land renting and non-farm jobs. Component 4 is a small intensive garden farmer, headed by a relatively educated female who has access to institutional services. Component 5 is relatively less educated, a female-headed and land-poor household that rents land and produces intensively. It is concluded that a single policy measure cannot do justice to the needs of all of the farmers since it would affect different households differently. An integrated and a comprehensive programme is needed that would promote agriculture; facilitate income transfer or safety nets to alleviate poverty and the relief of short-term stress; address the problems of tenure insecurity; overcome the gender inequalities in accessing resources; and restructure institutional supports by providing rural finance, and an extension and legal infrastructure.

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