Social grant dependence, irrigation water use and on-farm entrepreneurial spirit: a behavioural explanation for smallholders in KwaZulu-Natal.

Abstract

Unemployment, poverty, hunger and inequality still remain the key rural development challenges in South Africa. Since the demise of apartheid, one of the key objectives of the South African government has been to decrease the level of poverty and improve the quality of life for all South Africans. The government, in its efforts to alleviate poverty to the disadvantaged and vulnerable segments of communities, introduced several poverty reduction strategies such as the social grants. With social grants becoming the main source of income for most rural households in South Africa, there is a concern that poor rural households are turning away from small-scale agriculture as a result of their dependence on social grants. However, there is insufficient empirical research examining the possible effects of social grants on on-farm entrepreneurial spirit of smallholders. Therefore, this study ought to fill this knowledge gap by explaining the behaviour of smallholder farmers using a revealed preference (RP) method. While other previous studies have constructed entrepreneurship and psychological capital (PsyCap) indices following the stated preference (SP) method, this study adopted the RP method to construct entrepreneurial spirit and PsyCap indices using a behavioural approach. The study was also unique compared to other studies evaluating the impact of unearned income on utilising agricultural resources at their full capacity by farmers. Most studies in the past analyse the impact of social grants and remittances on agriculture separately. Thus, pooling social grants and remittances to analyse the impact of unearned income on the proportion of land operated makes this study different compared to other studies in the past. The study was conducted in two irrigation schemes (Tugela Ferry and Bululwane) in the KwaZulu-Natal province, South Africa. Both purposive and stratified random sampling techniques were applied to select the respondents in this study. The study purposively selected small-scale farmers who were involved in food crop farming to allow for comparison between different farmer typologies. A stratified random sampling method was then used to select the respondents. Smallholder farmers were categorised into four types of farmers, namely, scheme irrigators (104), homestead food gardeners (32), community food gardeners (23) and non-irrigators (16). The reason for stratification according to the farmer type was to capture the developmental paths and challenges or constraints of progressing to the next level in each farmer type. A total sample of 175 farmers, comprising of different farmer typologies, was obtained in the selected irrigation schemes. The data were analysed using descriptive statistics, Principal Component Analysis (PCA), a two-limit Tobit regression model and Fractional Logit model. The analysis of descriptive statistics was used to summarize the data set and to compare differences between farmer typologies including the household demographics and socio-economic characteristics. The Tukey’s HSD post hoc test was conducted to indicate which of the specific farmer typologies differed from each other. The study used the PCA technique to create positive PsyCap indices (mainly capturing hope, resilience, self-efficacy and optimism) and on-farm entrepreneurial spirit indices (proactive, innovative, competitive and risk taking). The Keiser-Meyer-Olkin (KMO) and Bartlett’s sphericity tests were applied to test the assumptions underlying the use of PCA. A two-limit Tobit regression model was applied to estimate the impact of social grant dependence on on-farm entrepreneurial spirit of smallholders. The Fractional Logit model was adopted in this study to analyse the impact of unearned income on smallholders’ ability to utilize their resources at their full capacity. The study found a positive relationship between social grants and on-farm entrepreneurial spirit. Though the level of packaging and processing fresh produce is generally low among small-scale farmers, it improves as the proportion of income from social grants increases. This implies that the lack of entrepreneurship among smallholders is caused by other factors. For example, results indicated low levels of education among smallholders making it difficult for them to search for information. Scheme irrigators were also found to be less entrepreneurial compared to other farmer typologies which can be attributed to failure of irrigation schemes. It is recommended that the policy makers revisit the idea of rehabilitation of schemes in the rural areas to revive entrepreneurial spirit among smallholders. The findings also show that, while the proportion of unearned income has a negative impact on the proportion of land operated, the use of social grants as an investment in agricultural activities is positive. This implies that when social grants are used as an investment in agricultural activities, they indirectly meet the object of poverty reduction. More operated land means more agricultural production, more income, which in turn, reduces poverty or food insecurity among beneficiary households, ceteris paribus. However, when the grants are not invested in agriculture, this policy acts as a disincentive to agricultural production. In their design, social grants were never meant for use in agricultural production but they were expected to provide temporary relief to overburdened individuals or households so that they can meet their immediate needs. Thus, the policy itself as it stands, before considering the practice by rural households to invest the money in agriculture, does not encourage households to work for themselves. The government and its strategic partners should review the policy and ensure that the unintended negative consequences on labour productivity in agriculture are minimized. Male farmers put more land under cultivation compared to females. This indicated partial absence of women empowerment in the rural areas which is caused by current customary laws. It is recommended that strategies and interventions for empowering women farmers should be developed and implemented not only in irrigation schemes but in the broader smallholder agricultural sector. Women are the majority of smallholder farmers in irrigation and hence the future of smallholder agriculture cannot be certain without empowered women. Areas for empowerment include access to and control over resources, especially those that are critical in agricultural production such as equipment, education and training and entrepreneurial skills. Given the positive impact of social grants on rural households’ farming activities, this study recommends that the social cash transfers policy should continue. However, the fact that smallholder farmers are using social grants for agricultural purposes implies that there is a gap in terms of agricultural support. This means there are other farming and institutional factors which hinder smallholder farmers’ entrepreneurial spirit. Addressing these farming constraints (e.g. limited access to credit, inadequate farming assets, water insecurity, lack of farming inputs, etc.) and improving institutional support (e.g., access to credit, training, other extension services) will positively contribute to enhanced on-farm entrepreneurial spirit and utilisation of farm resources. Future research should also seek further investigation into the use of social grants as an investment in agriculture. This study did not go deeper to understand how exactly the social grants are used in agriculture and to what extent. Furthermore, it would be useful to investigate the impact of CSG on youth’s willingness to participate in small-scale farming. Such an analysis is required to broaden the understanding of the role of social grants in the smallholder agricultural sector.