Masters Degrees (Agricultural Economics)

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Adoption and willingness to pay for organic fertiliser: a case of smallholder potato (solanum tuberosum L.) farmers in KwaZulu-Natal, South Africa.
(2020-03-12) Bhekani, Sandile Zondo.; Baiyegunhi, Lloyd James Segun.
Potato cultivation involves intensive soil tillage throughout the cropping season, which often results in soil degradation, erosion, and leaching of nitrates. Literature suggest that efforts to produce sufficient food necessitate an increase in agricultural production per unit of inputs by adopting fertility-enhancing techniques (both organic and inorganic fertilisers) to replenish soil nutrients required by crops. However, inorganic fertiliser as a soil ameliorant is known for causing soil degradation, environmental pollution, and it is associated with escalating costs. As a result, smallholder farmers are constrained in realizing their maximum yield potential. One of the ways to boost productivity without degrading the environment is to adopt a more sustainable, low-cost, and efficient integrated nutrient management system, which also suit their socioeconomic status. Although there is sufficient advocacy in the adoption of sustainable agricultural inputs such as organic fertiliser, the economic linkage between farmers' socioeconomic factors and adoption has not been adequately explored. Moreover, there is a dearth of empirical evidence regarding the willingness of farmers to pay a price premium for organic fertilisation of their soil. The aim of this study was to evaluate socioeconomic factors influencing the adoption and use intensity of organic fertiliser among smallholder potato farmers’ as well as to estimate their willingness to pay (WTP) a price premium for organic fertiliser. Primary data was collected from 189 smallholder farmers in three municipal areas in KwaZulu-Natal Province, South Africa, through a multi-stage sampling technique. The analytical framework incorporated descriptive statistics, double-hurdle, and ordered probit models. The double-hurdle model was used to identify the factors influencing the adoption and use intensity of organic fertiliser, under the assumption that the decision to adopt and the intensity of adoption are separate. The contingent valuation method (CVM) was used to elicit information for the WTP, and after that, the ordered probit model was employed to estimate the determinants of farmers' WTP for organic fertiliser. Empirical results indicate that factors such as household head gender, household size, access to credit, access to extension, knowledge of organic fertiliser usage, land ownership, livestock size and access to social grants significantly influenced the decision of organic fertiliser adoption. In contrast, factors such as the age of farmer, knowledge of organic fertiliser usage, farm size and livestock size significantly influenced the use intensity of organic fertiliser. In addition, results revealed that factors such as marital status, access to extension services, and knowledge of organic fertiliser usage, land ownership, livestock size and distance to the source of organic fertiliser were also statistically significant in determining the farmers’ WTP a price premium for organic fertiliser. The study found that the rate of organic fertiliser adoption is very high among the sampled potato smallholder farmers even though there is still a notably large number of farmers who are not using organic fertiliser. This result leads to the conclusion that organic fertiliser is the most popular soil nutrient ameliorant among smallholder potato farmers in KwaZulu-Natal Province, South Africa. This study also found that WTP a price premium for organic fertiliser was very high and this lead to a conclusion which justify the prospect of commercialization of organic fertiliser to facilitate the availability of organic fertiliser to those that are willing to pay for it. This study recommends improved access to extension services to improve technical information dissemination and knowledge of organic fertiliser usage among smallholder farmers. There is also a need to develop policies that strive to institute security of land tenure among smallholder farmers, which will encourage smallholder farmers WTP and also adopt and intensify organic fertiliser. Keywords: Organic fertiliser, smallholder farmers, adoption, use intensity, willingness to pay, Contingent valuation, Craggs’ Double Hurdle model, Ordered logit model.
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.
Analysing the causes and symptoms of poverty in a land reform community in the midlands of KwaZulu-Natal.
(2004) Shinns, Lauren Hazel.; Lyne, Michael Charles.
The objectives of this thesis were firstly, to review existing literature in order to identify broadly accepted and measurable indicators of the possible causes of poverty and the resulting symptoms. Secondly, to gather baseline information from a group of land reform beneficiaries in order to identify the different dimensions of poverty affecting the current and future well-being of these households. Thirdly, to undertake empirical analysis to assign these households to a small number of groups exhibiting different symptoms of poverty and then explain these differences in terms of their possible causes. A census survey of 38 land reform beneficiary households - members of a Communal Property Association (CPA) established to purchase Clipstone, a 630 hectare subdivision of the farm Sherwood in the midlands of KwaZulu-Natal - was conducted in May 2002 to gather data on poverty indicators. Principal Component Analysis was used to construct an index of the standard of housing, which was then combined with variables measuring other symptoms of poverty (income, wealth and health) in a Cluster Analysis of the households. This revealed five clusters representing four distinct groups of poverty; households relatively income and asset rich, income rich but asset poor, asset rich but income poor and households with the lowest incomes and assets. Linear Discriminant Analysis was then used to distinguish the households that were relatively income and asset "rich" from those that were relatively income and asset poor, and those that were relatively income poor but "asset rich" from those relatively asset poor but "income rich". The main distinguishing indicators were found to be gender of the household head, family size, dependency ratio, education and access to markets. These findings show that there is a need to increase child welfare grants as pension earnings become less effective (due to decreasing life expectancy and high levels of dependence on pensions as a source of income) in the short run. In the long run, there is a need for increased education and vocational training - especially for women along with better access to transport, jobs and banking facilities (to mobilise savings).
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).
Analysis of factors determining livelihood diversification among smallholder farmers in KwaZulu-Natal.
(2016) Yobe, Collin Lazuras.; Mudhara, Maxwell.
Abstract not available.
Analysis of rhino poaching incidences and management strategies in South Africa.
(2016) Moneron, Sade Leigh.; Ngetar, Silas Njoya.
ABSTRACT The illegal hunting and global trade in wildlife and wildlife products is a transnational, highly organised crime that threatens the survival of many endangered species. The rhinoceros is a well-known example of this trade as the demand for rhino horn for use in East Asia has resulted in the global decline of rhino populations, resulting in the Western Black rhino in Africa (Diceros bicornis longipes) officially being declared extinct in 2011. Although poaching has always existed, the number of African rhinos killed by poachers has escalated in the past eight years with at least 1 338 rhinos killed by poachers across Africa in 2015. This is the highest level since the rhino poaching crisis began in 2008, resulting in at least 5 940 African rhinos being killed. The majority of these incidences occurred within South Africa. South Africa plays a leading role in the conservation of the African rhino, currently conserving 83% of the African rhino population. However, it has been suggested that should poaching continue to increase as it has done over the past few years the rhino population in South Africa may begin to decline as early as 2016. South Africa’s upsurge in rhino poaching over the last few years has given rise to a kaleidoscope of debates on how to reduce poaching. An understanding of the different management strategies and their effectiveness would play a large role in identifying which method or combinations of methods work best to reduce poaching. The second chapter of this dissertation thus critically analyses the past, current and proposed strategies that are relevant to reducing incidences of rhino poaching using empirical literature from various scholars and stakeholders and attempts to provide insight into which strategy or combination of strategies is best suited to reduce poaching. As poaching involves a combination of aspects, it is clear that no one strategy or management tool will address all of these aspects on its own, and if implemented in isolation will not be successful. A combination of strategies that address all aspects of poaching needs to be working concurrently to decrease poaching levels. Law enforcement is one such management strategy crucial in the reduction of poaching and with increasing poaching incidents, law enforcement efforts in the form of deployment of anti-poaching unit, focused on high risk areas would provide for a more efficient and effective use of resources in reducing poaching incidences. The third chapter of this dissertation sought to investigate the spatial and temporal patterns of rhino poaching in the Hluhluwe-iMfolozi Park (HiP) between 1990 and 2013 and examine the relationships between observed patterns of poaching and biophysical and human variables using Geographic Information Systems (GIS). The results reveal poaching hot spots, and spatial and temporal variation in poaching incidences. Biophysical and human variables were also found to influence poaching densities differently depending on where they occurred spatially or temporally. The successful use of GIS in this analysis validates its potential as a geospatial tool for understanding the spatial and temporal distribution patterns of rhino poaching in the HiP. Understanding these patterns is crucial for future anti-poaching planning and mitigation of poaching activities with protected areas.
An analysis of the economic competitiveness of green maize production in smallholder irrigation schemes : a case of Makhathini flats irrigation scheme in KwaZulu-Natal, South Africa.
(2014) Chirigo, Kudakwashe Collen.; Mudhara, Maxwell.; Derera, John.
Recent assessments of smallholder irrigation schemes indicate that their success has been limited. Factors that contributed to their modest performance were poor infrastructure, limited knowledge of crop production among smallholders, lack of reliable markets and ineffective credit services. However, studies have not looked at the economic competitiveness of different crops grown under irrigation and efficiency in the allocation of farm resources. Different crops are grown in the irrigation schemes, but there is no economic criteria employed for analysing the economic competitiveness of the crops grown and on how choices are selected to maximise farmers’ profits. The aim of the study was to conduct an analysis of the household level characteristics on decisions to grow green maize and on the proportion of land allocated to it by smallholder farmers in Makhathini Flats irrigation scheme. A random sample of 150 farmers was drawn from a population of 314 irrigation farmers. The Heckman two-step regression model was used for assessing determinants of the decision to grow green maize. The results reveal that age, household size, plot size, extension and green maize gross margins significantly affect the decision to grow green maize, while gender, marital status, plot size, credit, gross margin of cabbages and green maize significantly affect the proportion of land allocated to green maize production. The study also sought to determine the economic competitiveness of green maize production as compared to alternative crops grown in the scheme using gross margin budget analysis and LP model. The gross margins analysis reveals that cabbage is the only crop with higher gross margins than green maize. The LP results also paint the same picture, indicating green maize competitiveness to other crops except cabbages. A factor contributing to the competitiveness of green maize is being an enterprise with low production costs compared to other enterprises. Farmers indicated that they lack capital to finance large pieces of land for crops with high production costs and the study concluded that availing credit to farmers could increase farm profits from enterprises with high production costs. Farmers indicated that they also produce for subsistence. This means that certain crops are not grown based on their economic viability, but rather on their contribution to household food security. More often than not, these goals are conflicting. The study recommends formulating a multi-criteria decision-making model that aims at allocating farm resources efficiently by optimising a set of important socio-economic objectives.
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.
Causality analysis and physio-economic impacts of climate change on maize production in South Africa.
(2019) Magodora, Tatenda Lysias.; Baiyegunhi, Lloyd James Segun.
Agriculture, as part of the human ecological footprint on climate change, has become a serious concern because climate change has an impact on agriculture. For instance, when crop production is considered, climatic elements are influenced by greenhouse gas emissions that come from agricultural activities such as the application of synthetic fertilizers, herbicides and pesticides, as well as the use of heavy machinery in modern crop production. This study analyzed the possible causalities between climatic variables and maize production in South Africa using time series data for the period 1924 to 2016. The analysis was done using VAR Granger causality analysis to ascertain if there are feedback loops between climatic elements and maize production in South Africa. The results from the Granger analysis suggest a bidirectional causality that runs between maize production and temperature. Rainfall alone was found not to be significant in influencing maize production but a combination of both temperature and rainfall affects maize production in South Africa. The results from variance decomposition of the future forecasts suggest a relatively large magnitude of impact (13.37%) of temperature on maize production in the 3rd year of the forecast with the highest effect of 27.43% in the 15th year of forecast. The forecasted impact of rainfall on the other hand remained relatively low (below 10%) throughout the forecast period. Continued current production activities (use of synthetic fertilizers and agricultural chemicals, for example) will affect climatic variables both in the short term and in the long term, and the effects of these changes in climatic elements on maize production will be realized in the long term as revealed by the variance decomposition result. The study further investigated the impacts of global warming on maize production in South Africa using meta-analysis (for physical impacts) and the Ricardian analysis (for economic impacts). The meta-analysis made use of studies that investigated and reported percentage changes in maize yield owing to climate change in South Africa. The average estimated percentage change in maize yield was calculated from 34 studies using the bootstrapping sampling technique. Results from the meta-analysis suggest that maize yield will drop by more than 15% owing to temperature increase of about 20C to be realized between 2081 and 2100. The Ricardian analysis made use of time series data for the period 1987 to the end of 2018. The results from the Ricardian analysis also show that climate change is a significant threat to the South African maize industry, as it is estimated to lose an average of 38% of revenue owing to plus 20C warming. Given these outcomes, the study suggested the adoption of sustainable farming activities such as minimum tillage, balanced fertilization and biochar amendments at a much faster rate in order to ensure a sustainable increase in maize production, while at the same time reducing the human ecological footprint on climate change. The study also recommends the recognition of the agricultural sector as one of the sectors that should be targeted by the carbon emission reduction systems.
Causes of bankruptcy amongst commercial farmers in South Africa : management and policy implications.
(1997) Swanepoel, Deon Smartenryk.; Ortmann, Gerald Friedel.; Darroch, Mark Andrew Gower.
The number of commercial farms declared bankrupt in South Africa rose sharply over the period 1948 to 1994. Aggregate farm bankruptcies rose from 18 farms (0,016 percent of all farms) in 1948 to 389 farms in 1994 (0,632 percent of all farms). The number of bankrupt maize farms increased from 16 to around 150 farms per year over the period 1970 to 1994, while the number of bankrupt extensive beef farms increased from 12 to about 50 per year over the same period. The objective of this study is to analyse factors affecting bankruptcies of aggregate farm bankruptcy during 1948 to 1994 maize and extensive beef farm bankruptcy from 1970 to 1994. Possible causes of farm bankruptcy include both business and financial risk factors. Business risk factors (inherent in a business and its operating environment, regardless of the way the business is financed) include drought, fluctuations in producer prices and changes in real government subsidies to agriculture. Financial risk factors (associated with debt financing) are reflected by variable real interest rates and the level of the aggregate farm debt/asset ratio. Principal components regression confirmed a priori theoretical expectations of farm bankruptcy determinants. The aggregate farm bankruptcy rate was positively related to the lagged aggregate farm debt/asset ratio and lagged real interest rates (financial risk factors), but negatively related to a lagged drought index (lower index values reflected drought) and lagged real government subsidies to agriculture (business risk factors). Maize and extensive beef farm bankruptcies were negatively related to lagged annual rainfall (business risk factor), but positively related to the lagged aggregate farm debt/asset ratio and lagged real interest rates (financial risk factors). Lagged real maize and beef producer prices (business risk factors) were negatively related to bankruptcy among maize farmers. Beef farm bankruptcies rose with lower lagged real beef producer prices and higher lagged real stockfeed subsidies and transport rebates (business risk factors). These results show that farm bankruptcy in South Africa is a dynamic process, with time lags between business and financial risk factors and ultimate farm bankruptcy. The aggregate, maize and extensive beef farm bankruptcy models also suggest that the rise in farm bankruptcies over time can partly be attributed to changes in agricultural price and macroeconomic policies.
Comparative analysis of the impact of food prices on household food security : evidence from the North-West and KwaZulu-Natal Provinces, South Africa.
(2015) Phali, Lerato.; Mudhara, Maxwell.; Baiyegunhi, Lloyd James Segun.
The prevalence of household food insecurity in South Africa is not a result of a shortage of food but of a lack of access to food. Contributing to this are the rising food prices that adversely affect the rural poor, as most of them are net buyers of food. Due to the higher food prices, poor households are forced to spend a large proportion of their income on food. The objectives of this study are to determine socio-economic characteristics that influence household perceptions of food prices and to evaluate the impact of food prices on rural household food security in South Africa. The study considers two rural areas that have different food price regimes, namely, Jericho in the North-West Province and Swayimane in the KwaZulu-Natal Province. The results are based on household level data collected from a sample of 300 households using structured questionnaires. The Ordered Logit Regression (OLR) model was used to evaluate the impact of food prices on rural household food security status, using the Food Expenditure Income (FEI) ratio as a household food security indicator. The ratio indicates the proportion of household income spent on food. Its components are directly linked to two of the four aspects of food security, namely food stability and food accessibility. According to Engel’s Law, the proportion of income spent on food declines as income increases. This implies that low income households spend a large proportion of their income on food, resulting in a high FEI ratio. The findings of the study indicated that households in Swayimane are more likely to be “well-off”, compared to those in Jericho. Location, gender of household-head, number of permanently employed household members and total household income significantly influenced household food security. Food price perceptions influence buying and consumption patterns of households. Using the Tobit regression model, households’ socio-economic characteristics that determine household perceptions of food prices were identified. A Food Price Perception (FPP) index was generated using principal components analysis and was used to evaluate the relationship between food price perceptions and household food expenditure patterns. The results showed that households in Jericho had higher perceptions of food prices and that location, total household income and the number of permanently employed household members influence a household’s perception of food prices. Another finding was that households with a higher perception of food prices were low-income households that spend a large proportion of their incomes on food. The study recommends that policy priorities should be focused on the establishment of retail outlets in rural communities. Establishment of new employment opportunities and increased wages will also help improve household food security through increased food affordability.
Competitiveness analysis of the South African avocado value chain.
(2022) Zwane, Sibonelo.; Ferrer, Stuart Richard Douglas.
The economic sustainability of the South African avocado industry is highly dependent on its trading performance, with approximately 50-55% of its total production consistently being exported since the 1990s. About 95% of the avocados in South Africa are exported to the EU, the UK, and Russia markets. The South African avocado industry faces potential intense competition from Peru, Mexico Spain, Israel, and Kenya, in these markets. Due to the significant contributions in terms of economic returns the supplying of avocados to the export markets has on this industry and the GDP of the country, and also considering the higher levels of competition this industry has been experiencing from its global rivals, there is a greater need to transport this commodity with fewer rejections, and less inefficiencies and damages to the fruit quality. In 2018, the South African avocado export industry was ranked number nine worldwide, contributing to 1,7% of the total avocado exports in the global markets. By 2020, the industry experienced a major decline which resulted in it falling to number 12. It has been noted that South African exports are increasing, but its share of the world market is decreasing. This is because exports from other countries, primarily South and Central America, including Peru, Colombia, and Mexico, have grown at a greater rate. For example, between 2012 and 2017, South African avocado export volumes grew only by 3% per annum while major competitors such as Mexico and Peru grew by 8% and 15%, respectively. Many factors could be contributing to this phenomenon, and one of the most significant factors could be the competitiveness of the South African avocado value chain. A review of the literature identified a significant gap in the local research when it comes to the understanding of the structure, actors, processes and the flow of avocados in the South African avocado value chain, the competitiveness of the South African avocado value chain, and the factors which are influencing the competitiveness of the South African avocado value chain. Moreover, it also identified that competitive analyses of value chains can provide information and strategies for agribusiness managers to improve value chain competitiveness. This study will try to close this gap by providing a detailed competitiveness analysis of the South African avocado value chain in order to have a better understanding of the state of competitiveness of this value chain. The general objective of this study was to conduct a detailed competitiveness analysis of the South African avocado value chain in order to recommend strategic actions that the value chain participants could use to improve the competitiveness of this value chain, especially in relation to export markets. More specifically, the objectives are to identify the key players involved in the value chain, identify factors which are negatively affecting the competitiveness of this chain, and analyse this information to provide an improved understanding of the business trends, challenges, and transport and logistic processes of this industry. To achieve the main objective of this study, a 7-steps-6-analyses analytical framework was designed and used to provide a much-detailed competitiveness analysis of the South African avocado value chain. Analyses one and two served as an inquiry part of this study were knowledge regarding the structure of the South African avocado value chain, the number and the type of actors in this value chain, flow of avocados, processes within this value chain, relationships between actors in this value chain and how these relationships are developed and maintained, and the factors which are responsible for the inefficiencies within this value chain were identified by these analyses. Analysis two also had a quantitative part, were some of the relationships that actors have within and outside this value chain were quantified using the concept of Social Network Analysis in order to determine how these relationships influence the functioning as well as the competitiveness of some of the actors in the South African avocado value chain. Analyses three, four, five and six were analyses that analysed different components/parts of the South African avocado value chain in order to understand the competitiveness state of the overall value chain and recommend strategies to improve it. The final step (seventh step) involved a critical analysis of all the findings from the six analyses in order to provide the state of competitiveness for the South African avocado value chain. Moreover, during this step that is where the strategic actions to alleviate the constraints/factors negatively affecting the competitiveness of this value chain were developed. The overall findings of this study suggested that the South African avocado value chain is struggling to keep up with competition from its global competitors, mainly Peru, Mexico and Kenya. Moreover, this study was able to conclude that the cause of this was the overall continuous decline in the competitive advantage which is being experienced by this value chain. The overall finding also suggested that this decline in competitiveness is as a result of a number of factors. These factors include supply of nursery trees, relatively lower yields than other competing origins around the world, higher transportation costs, port inefficiencies, low supply of skilled labour, one major export destination, lack of value chain collaborations, higher input costs, increased plantation of avocados by global rivals, and government policies. This study gave rise to 13 strategic actions that could be used by the most important players in the South African avocado value chain, such as agribusiness managers, producers, exporters, seaports and SAAGA in order to improve the competitiveness of this value chain. Some of those strategies include collaborations between different types of value chain actors, understanding of the value chain relationships and systems, attracting and training of new skilled workforce, development of late varieties, economic research, and access to new markets. Keywords: Avocado, Competitiveness, Export markets, Global rivals, Strategic action, Value chain
A demand analysis of farm labour employment in the South Coast and Midlands commercial sugarcane farming by labour categories : implications of the sectoral determination.
(2016) Pilusa, Tshepo R.; Ferrer, Stuart Richard Douglas.; Darroch, Mark Andrew Gower.
The objective of this study is to investigate the impact of changes to the regulatory environme nt governing farm labour employment since the mid-1990s on wages and employment of farm workers in the South African sugar industry. This study may be differentiated from previous research on the topic, e.g., Conradie (2005), Sparrow et al. (2008), Murray and van Walbeek (2008), Bhorat et al. (2012), and Stanwix (2013) in so far as the impacts on wages and employment are investigated for four categories of farm workers (namely, drivers, seasonal cane harvesting staff, permanently employed elementary farm workers, and casual labour); whereas previous studies have analysed the impacts on aggregate employment. The distinc t ion is important because not all categories of farm workers historically earned wages less than the real minimum wage rate and because the wage elasticities of demand for labour in sugarcane farming are expected to vary by labour category and by sugarcane producing region. Whilst it is well established that the wage elasticity of demand for farm labour in commercial farming in South Africa is relatively price elastic in the long run (Sparrow et al., 2008; Bhorat et al., 2012), no published research has determined the wage elasticities of demand for farm labour in sugarcane farming in South Africa, per se. The time series data on wages and employment of farm workers in sugarcane production by large scale growers (LSGs) from 1978 to 2012 based on Labour Utilisation and Cost Survey (LUCS) were obtained from the South African Cane Growers Association (SACGA). Analysis of the data verifies expectations that the introduction of regulations on wage structure and computation through the Sectoral Determination (SD) for the Farm Worker Sector in 2003 is associated with an increase in real average cash wages and a reduction in the average real absolute value of non-pecuniary benefits (e.g., on-farm accommodation and rations) received by workers in sugarcane farming. Furthermore, the increase in cash-wages outweighed the reduction of non-pecuniary benefits, on average composite wages. Implementation of the SD is also associated with an increase in standardisation of wages for relatively unskilled seasonal and permanent farm employees, which is in line with an intended objective of the SD to standardise the farm wage. Whilst real average wages of workers in sugarcane farming increased by about 70% from 1978 to 2012, employment in sugarcane farming, measured as Full-Time Equivalents (FTEs) Worker, declined by about 36% during the same period, which gives rise to a simple elastic ity computation of -0.51 (Δemployment/Δwage = -0.36/0.7), without accounting for changes in factors other than the wage. In order to account for other factors affecting the supply of and demand for the various categories of farm workers in sugarcane production, econometric techniques were used to estimate the relationships between real farm wages and employme nt in sugarcane farming, and in turn, the wage elasticity of the demand for each category of labour for the industry as a whole and for two particular sugarcane producing regions, the South Coast and Midlands of KwaZulu-Natal (due to the topography of the two regions, sugarcane production on the South Coast is relatively more labour intensive than in the Midlands). High levels of multicollinearity in the data precluded satisfactory estimation of supply and demand functions for farm labour using 2SLS regression techniques. Instead, the Principal Component Analysis (PCA) extraction procedure proposed by Chatterjee and Price (1977) was used to estimate the supply and demand functions separately. Whilst the statistical fit of the estimated farm labour supply (demand) functions was relatively poor and satisfied, respectively, the theoretical fit of the estimated supply of and demand for labour functions was satisfactory. After accounting for changes in the area under sugarcane, the price per ton of sugarcane, price index of chemicals and labour-related policy implications, estimates of the wage elasticities of demand for the various categories of farm labour, regions and aggregate sugarcane production by LSGs ranged between -0.028 and -0.488 in the short-run, and between -0.041 and -0.647 in the long-run. This finding that the demand for farm labour in sugarcane production is relatively inelastic is consistent with observations that, by and large, sugarcane production methods remained relatively unchanged in the industry and each of the two regions for the 1978-2012 period. The results further indicate that farmers adjust employment in response to a wage change within a period of three years. Over-and-above the impact of changes in the policy on wages, the changes in policy are associated with a further reduction in aggregate employme nt of an estimated 4119 FTEs and 5768 FTEs in sugarcane production by LSGs in the short- and long-run, respectively. Other things being equal, considering employment levels in 1978 and 1994, LSGs reduced employment in sugarcane farming by 6.82% and 17.1% in the short- and long-run, respectively. This impact may be ascribed to regulation induced changes in non-wage costs of employment, such as transactions costs and perceived risk. The results further verify that chemicals application is a strong substitute for labour in sugarcane production (especially in the Midlands region), and that employment of farm workers in sugarcane production is positively related to the price of sugarcane and the extent of area planted to sugarcane. Bearing in mind the increases in the real minimum wage of farm workers post 2012, a revision of the current labour legislation to reduce some of the non-wage costs of employing farm workers is recommended to help preserve employment, especially of relatively unskilled workers in sugarcane farming. Activities that increase (reduce) the price received by farmers for sugarcane will have a positive (negative) impact on farm labour employment, both through the price effect, as well as an increase in the area under sugarcane. Finally, considering the trend of declining farm employment, programmes to improve education and training of former farm workers and other people in rural areas are important to improve their prospects of finding employment in non-farm sectors. Furthermore, more research on compliance issues is recommended to improve the effectiveness of compliance on the labour markets that are covered by the SD.
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.
Demand and supply factors in the export of South African fresh oranges to the European Union (EU) : 1976-1993.
(1997) Khuele, Percival Ramapulana Selai.; Darroch, Mark Andrew Gower.
This is the first empirical study of the factors affecting the demand for and supply of South African (SA) fresh orange exports into the five main European Union (EU) markets: the United Kingdom (UK), France, Germany, the Netherlands and Belgium. Simultaneous-equation models of SA fresh orange export demand and supply were specified for each market and estimated by Two-Stage Least Squares using annual data for the period 1976-1993. Export demand was negatively related to the price of SA fresh oranges relative to the price of fresh oranges from Israel in the UK, Germany, Netherlands and Belgium. In France, however, export demand was negatively related to the SA export price relative to the price of fresh oranges from Morocco. Israel appears to be the major fresh orange competitor for SA in the UK, Germany, Netherlands and Belgium, while the main competitor in France is Morocco. Export demand was also positively related with lagged SA fresh orange exports in all export demand functions. This implies that consumers in the EU markets do not adjust fresh orange consumption immediately following a relative price change, probably due to habit formation. Estimated short-run relative price elasticities of export demand were inelastic in each EU market. Export supply in all markets varied directly with lagged net export realisation price relative to the SA domestic fresh orange price. Export supply in the UK also depended on the UK price of SA oranges relative to the French price. Conversely, export supply to the other four markets was positively related to the SA orange price in each market relative to the price in the major UK market. In addition, lagged exports (showing export orientation), and supply shocks (weather) positively influenced export supply to all markets. Export supply was price inelastic in both the short-term and long-term, supporting a priori expectations that supply reacts sluggishly to changes in the relative price of fresh orange exports. The low relative price elasticities of export demand imply that Capespan International and future orange exporters may consider alternative markets to the traditional EU markets to increase real revenue. Lower import tariffs if citrus is included in a Free Trade Agreement (FTA) with the EU would make SA fresh orange exports more competitive with exports from Israel and Morocco. Fresh orange exports from SA to the EU under this scenario are unlikely to increase markedly as long-run supply is price inelastic.
Economic analysis of conservation and sustainable use of indigenous medicinal plants by smallholder farmers.
(2024) Mbelebele, Zusiphe.; Mdoda, Lelethu.
The agricultural sector is a lucrative pillar of survival for smallholder farmers worldwide for its determination to produce commodities that are key components in survival such as food. Farming is ideally one of the best means that has kept a significant number of smallholder farmers from poverty, malnourishment and food insecurity. African agriculture contributes merely 15% of the Gross Domestic Product (GDP) with smallholder farmers producing approximately 80% of the food from farms that are less than 2 hectares each. Smallholder farmers are involved in numerous direct and indirect methods of sustaining livelihoods such as passive income received from remittances from family, income from formal employment, and income from social grants. Medicinal plants have existed indigenously within the environments where smallholder farmers live for time immemorial. They have been great contributors to the livelihoods of smallholder farmers starting from health benefits greatly in bringing monetary value to household income through the development of trade arrangements of medicinal plants. There is a big market for medicinal plant products from people seeking traditional healthcare for themselves, livestock health and potential trade of high-value medicinal plants with pharmaceutical mega companies. However, smallholder farmers are faced with various impediments in the production of medicinal plants. Limited resources that are necessary for housing and sanitation, basic education, basic healthcare and crime prevention prohibit sustainable progress in the husbandry of and maintainable use of medicinal plants. Furthermore, the overharvesting of lucrative medicinal plant species without the desired amounts of propagation is depleting valuable species from existence and poses a threat to ecology and species diversity. The study investigates the conservation and sustainable use of indigenous medicinal plants by smallholder farmers of the Eastern Cape Province of South Africa. It seeks to identify and profile challenges faced by different indigenous smallholder farmers, establish the determinants of profitability for high-value medicinal plants, assess the effective production of household welfare, and examine conservation strategies of indigenous medicinal. A sample size of 150 smallholder farmers actively involved in medicinal plant extraction and trade was used to achieve the objectives of the study. Descriptive statistics and regression analyses were utilized to analyse the relationship between social demographics, economic factors, institutional, profitability and conservational factors of smallholder medicinal plant farmers. The Tobit regression model was used to identify and profile different challenges faced by different indigenous medicinal plant farmers. The results portrayed an adverse relationship between challenges in adopting medicinal plant farming, age, gender and education. The knowledge about indigenous medicinal plants is vested with the old generation of the community that has little or no education, who are mostly females, therefore they are most eligible to reap economic benefits. The profitability and determinants of high-value medicinal plant farmers were established using the budgetary technique and multiple regression. The statistical evidence suggests that variable costs impact significantly on the level of profitability of a farmer. In the case of the study, analyses revealed that the cost of production is relatively low due to the abundance of valuable medicinal species in the wild and most of the farmers, extract for themselves without needing to hire labour. Moreover, the factors influencing the production output were measured with a Multiple regression model. The variable costs influence the gross value of the production level at a 1% significance. The effects of producing medicinal plants were measured using the Propensity Score Matching technique. The econometric results showed that the production of medicinal plants has strong conservational outcomes, income generation opportunities, livelihood enhancement and poverty alleviation. The conservation strategies of indigenous medicinal plants were generated using a Likert scale and were analysed using descriptive statistics. The results depicted that there is a negative relationship between over-exploitation and the conservation of medicinal plants. Furthermore, evidence showed that more smallholder farmers are in the habit of harvesting medicinal plant material without proper intentions to propagate. Given that the medicinal plant market is promising to be booming, smallholder farmers should be encouraged to participate and share written knowledge with each other such that information is not lost. The increased profitability of the enterprise impacts positively on the livelihoods, social welfare of smallholder farmers and food security. However, if farmers are not courteous about maintaining the species diversity they may face an endangerment problem in future. This will need conservational experts and extension officers to be directly involved in imparting knowledge and foreseeing that order is maintained accordingly.
An economic analysis of irrigation water rights transfers in selected areas of South Africa.
(1998) Armitage, Roger Myles.; Nieuwoudt, Wilhelmus Liberté.
Due to the enormous incremental construction cost of water storage and conveyance infrastructure, and because most water resources in South Africa have been fully appropriated, attention has changed from supply side responses to water scarcity to demand side responses. Emphasis is now on providing for optimal allocation and efficient use of water. Establishing water markets will generate significant efficiency improvements in water allocation and use. A survey of irrigation farmers along the Lower Orange River in November 1997, revealed that a market for unused "outer land" water rights had emerged. Discriminant analysis results show that water rights transferred to farmers with the highest return per unit of water applied, producing table grapes, and with high potential arable "outer land" without water rights. Trading developed within a centralised allocation system, and despite a significant extent of bureaucratic regulation. The institutional arrangements facilitating market development were well defined, reliable, enforceable, and transferable water rights, a large number of willing sellers, and an administrative function performed by the regional offices of the Department of Water Affairs and Forestry. Strengthening the market could be achieved by delegating authority to the regional Water Affairs office to approve trades, eliminating the need for a cultivation certificate to develop land, and in extending the support of Water Affairs to market transfers of canal and conserved water. A second survey of irrigation farmers in the Nkwaleni Valley in May 1998 found that no water market had emerged despite the scarcity of water. While 41 percent of farmers wanted to purchase water rights, no willing sellers existed. Demand to establish tradable water rights seems unlikely at present since crop profitability is similar for potential buyers and non-buyers. Further, farmers generally use all their water rights, and may be unwilling to sell water rights for land they have developed. Under the new Water Act, improving the equity in access to water resources is an important objective to be addressed by Government. However, in so doing it is not necessary to destroy water markets. Water markets will require that water use allocations be specified for reasonable periods, be inherently secure, and trading be legally permitted.
An economic analysis of restructuring the South African hake quota market.
(1998) Strydom, Marc Bradley.; Nieuwoudt, Wilhelmus Liberté.
Hake is the most valuable fisheries species in South Africa, with an estimated landed value of R658 million in 1997. Fundamental restructuring of the South African hake fishery is however recommended by the White Paper on Marine Fisheries Policy (1997). This study aims at providing economic solutions to some of these problems of restructuring. Management methods such as imposing upper limits on catches, access restriction (licenses), input restrictions and taxes have been shown to be unsuccessful at maximising economic rent generated by fisheries' resources. Hence the move by leading international fishing nations towards individual transferable quota (ITQ) management. According to the White Paper, South Africa intends pursuing very similar management techniques, to those employed by these leading countries, and it is therefore crucial that policy makers combine international experience with local knowledge and conditions, to draft the best possible fisheries' policy for the country. Factor analysis of data collected from a postal survey of existing South African hake quota holders and rejected hake quota applicants, suggests that distinct differences in attitudes towards restructuring exist amongst respondents. Four factors, representing groups of respondents defined as, (1) applicants, (2) quota holders, (3) small scale respondents (comprising of both applicants and quota holders), and (4) larger, longer established quota holders, sharing similar attitudes towards restructuring, were extracted. Applicants seem concerned with having to compete with established business for quota, opposing any form of payment for quota. Applicants also opted for a rapid change from the status quo, to a free and open system of allocation, where quota is also allocated as a fixed tonnage, as opposed to a proportion of total allowable catch (TAC). Current quota holders on the other hand, seem more concerned with issues of self-utilisation and the effect paying for quota might have on present business operations. Another group of respondents defined as smaller scale respondents (comprising of both quota holders and applicants) demonstrated concern about the present imbalance in the industry, where a few large companies receive the majority of quota. These respondents wish to see a rapid redistribution of quota, and a move towards a freer and open quota market. Analysis also revealed a group defined as larger, longer established quota holders who's primary concern seemed to be possible sudden reductions in quota allocation, and proposed methods of payment for quota. These companies have been receiving large allocations of quota in the past, and are therefore concerned with the impact restructuring might have on employment and international market share and competitiveness. Discriminant analysis revealed that the most important variable discriminating between current quota holders and rejected applicants was grandfathering (issuing quota according to past allocation). The second most influential variable involved new entrants paying a predetermined price for quota, demonstrating applicants' opposition to paying for a resource which current quota holders have been receiving free of charge in the past. Allowing new entrants the right to on-lease quota to established operators, and the issuing of 'paper' quota, were ranked third and fourth respectively. This highlights the opposing views of current quota holders and applicants on the issue of new entrants receiving token allocations of quota, when they are often not in a position to utilise it, and making a windfall gain by on-leasing to established quota holders. A substantial annual rent of approximately R279 million is generated by the South African hake industry, which is presently harvested free of charge by those issued with quota. These rents appear high relative to the landed value of hake of approximately R658 million. This may be evidence of the capital intensive nature of the hake industry, with large quota allocations needed to sustain an economically viable operation. Extraction of these rents through auctioning should be considered, while a portion of the TAC could be set aside for allocation to poorer communities.
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.
An economic analysis of the factors that affect the success of new freehold growers in the South African sugar industry.
(2009) Floyd, Warren N.; Darroch, Mark Andrew Gower.
The South African (SA) Sugar Industry is committed to transformation in land ownership and supports the SA government's target to transfer 30% of freehold sugarcane land to previously disadvantaged individuals (PDls) by 2014 via the land market under the willing buyer/willing seller principle. The medium-scale farmer scheme for emerging commercial sugarcane farmers, which was introduced in 1996 to help redistribute commercial sugarcane farmland to PDIs is an important component of the SA Sugar Industry's land reform strategy. The average financial performance of emerging commercial farmers (now called New Freehold Growers or NFGs) in the SA Sugar Industry was below that of large-scale commercial farmers during 1997-2007 (real average annual net return per hectare of R390 versus R3 075 in 2007 Rand). Given that this trend raises concerns about the long-term viability of NFGs, the first aim of this study is to identify factors that distinguish between successful, less successful and unsuccessful NFGs using a stratified random sample of 96 NFGs in KwaZulu-Natal (KZN) surveyed during July-November 2008. These NFGs were classified according to whether their mortgage loans were current (successful), in arrears (less successful) or in the process of legal action (unsuccessful). Student t-tests indicate that successful NFGs, on average, had statistically significantly more experience in farming sugarcane, larger farm sizes (proxied by average annual gross farm income), greater solvency and liquidity, and larger areas annually replanted to sugarcane than the less successful and unsuccessful NFGs. The successful NFGs also placed relatively more emphasis on computerized record keeping systems that can save time in conducting production and financial analyses to improve farm profitability. They also on average tended to make more use of their own financial record keeping system in addition to the services of bookkeepers, and used more risk management strategies than unsuccessful NFGs, in particular having off-farm investments and keeping cash and credit reserves. A multinomial logit model of factors affecting the sample NFGs' mortgage loan repayment status estimated that extension contact, production and financial risk management capacity, farm financial and production management ability, own record keeping and cash management, and having more sugarcane farm experience to operate larger farm sizes were key determinants of successful loan repayment. The results suggest that policy makers can promote the viability of NFGs by (1) encouraging them to manage solvency and liquidity levels and implement replanting schedules in line with industry norms (e.g. debt:asset ratio of 0.5 or lower, and the replanting of 10% of the area under cane (AUC) per annum); and (2) facilitate the transfer of adequate size farms (expected annual gross farm income can meet annual loan repayments) in commercial transactions or transactions funded via government grants to farmers who have the relevant farming experience. New Freehold Growers are also encouraged to build business relationships with industry support staff, implement good record keeping practices, and develop strategies to manage risk (e.g. off-farm investment and holding cash and credit reserves). The second aim of this study was to document the NFGs' perceptions of the scheme and industry role players in order to identify what aspects could be improved for both current and future farmers. The results suggest that most sample respondents (84%) can identify with, or have experienced the relatively low current returns (cash flow problems) usually associated with the early years after land purchase, while about 60% of the sample NFGs would have preferred to first lease their land before buying. Future NFGs, or the beneficiaries of other land reform initiatives, must be informed that an investment in land has low current returns relative to capital growth and that the annual profit from farming is low relative to the land value. The possibility of leasing could also be considered for future land transfers to NFGs or other land reform beneficiaries to help manage the liquidity constraints associated with land purchase. Ninety-nine percent of the sample NFGs felt that it was important for new farmers to have a mentor. Post-settlement support thus needs attention from industry role players, and a sustainable mentorship programme could, in part, meet this need.

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