Doctoral Degrees (Agricultural Economics)

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Open Access
Transfer and adoption of technology: the case of sheep and goat farmers in Qwaqwa
(University of the Free State, 1998-12) Nell, Wilhelm Thomas; Van Schalkwyk, H. D.; Sanders, J. H.; Schwalbach, L.
English: It is evident from the literature studied that very little is known about the characteristics and farm level factors (predictors) contributing to or affecting the adoption of livestock veterinary technologies of small ruminant (sheep and goat) farmers in former homelands and rural areas of South Africa. This study contributes by identifying and evaluating critical factors (variables) that predict the transfer, adoption and utilisation of livestock veterinary technologies by small ruminant farmers in Qwaqwa, a former homeland of South Africa. A wide selection of variables had to be tested in this study due to the absence of previous studies. Logit and multinomial logit models are used to select predictors of adoption of five different livestock veterinary technologies. Of the 34 possible predictors, 20 were selected in one or more of the seven different logit models. The suspension of veterinary surgeon services provided by the government at sheering sheds and farmer days before 1994, contributed to an increase in the costs of services, inputs and information. Together with the deterioration of infrastructure and institutions, this caused a collapse of the livestock veterinary technology transfer process in Qwaqwa. Farmers who want to adopt this technology (potential adopters), cannot do so because it became too expensive (increased transaction costs). When the assumption of elastic supply of services or inputs, and increased transport costs due to the farm's location is violated (traditional definition of adoption - potential adopters grouped with non-adopters), potentially misleading conclusions can be made regarding the significance of variables (predictors) which contribute to technology adoption. It is for this reason that an adapted definition of adoption (potential adopters grouped with adopters) should be used in future research. The results of medication technology indicate that grouping of livestock medication is essential if research on the characteristics of farmers using these technologies have to be estimated. The fact that former homeland farmers react on what they see when it comes to usage of veterinary medication technologies, making it more likely for them to adopt therapeutic medication for treatment (external, internal remedies and antibiotics) rather than prophylactic medication for prevention (vaccines), is evident throughout this study. Vaccine technology showed the lowest adoption level of the four medication groups studied. The high adoption rates of external parasite remedies (no non-adopters) and internal parasite remedies (two non-adopters) confirm this conclusion. However, there is a severe lack of basic knowledge amongst farmers on the correct application of these remedies as the majority (86%) of the farmers applied these remedies incorrectly. The most important predictors of the adoption of antibiotics is access to roads. This medication technology is urgently needed when an animal is sick and access to roads decreases the cost of obtaining the drug. Small ruminant farmers in this study tend not to be full adopters of all the different livestock veterinary technologies simultaneously. The fact that only 20 per cent of the farmers were adopters of veterinary surgeon services as well as full adopters of external parasite remedies and partial adopters of internal parasite remedies, antibiotics and vaccines, confirms this conclusion. The efficiency of the present extension services in Qwaqwa on veterinary livestock technologies is very poor. Extension visits did not emerge as a significant predictor of adoption of any of the livestock veterinary technologies. The reappointment of a state veterinary surgeon, the retraining of inexperienced extension officers, the improvement of infrastructure and the development of farmer-to-farmer extension programmes, using the sheering association chair persons and young, educated and progressive farmers, must receive the highest priority in agricultural policymaking. The implementation of an affordable minimum herd health prophylactic package can contribute to the correct adoption of medication technologies resulting in higher farming efficiency, better profits and contribute to the alleviation of poverty of former homelands and rural areas of South Africa.
Open Access
Die gebruikswaarde van besluitnemingsondersteuningsmodelle vir trekkervervanging in die Vrystaat
(University of the Free State, 2000-11) Coetzee, Koos; Viljoen, M. F.; Heyns, A.
English: The replacement of farm tractors and availability of decision support models for assisting farmers in taking replacement decisions were studied. A literature survey, postal survey of farmers and interviews with various persons were used to gain information on the available replacement models, replacement policies, information availability and farmers' decision making processes. This information was used to model the replacement decision and develop different decision support systems. Different replacement optimising techniques were studied. Minimum-cost models are unpractical for modelling replacement decisions. An extended version of the minimum discounted cost model can be used as a decision support model for advising farmers. A simulation model for establishing replacement strategies was also developed and used to determine optimal replacement strategies. Both models indicate an economic life for tractors in excess of 10 years. An increase in the tax rate results in replacement at an earlier life than with lower tax rates.
Open Access
Modelling the potential impact of a water market in the Berg River Basin
(University of the Free State, 2001-01) Louw, Daniël Barend; Van Schalkwyk, H. D.; Backeberg, G. R.
English: An increasing number of economists believe that market mechanisms should be incorporated in water allocation policies. It is widely recognised that central planning as an economic system has been inefficient. In fact, it is impossible to plan efficiently from the centre, and the bigger and more open the economy is, the more impossible it becomes. The literature abounds with models for analysing alternative water allocation mechanisms. However, the positive mathematical programming (PMP) technique, which was introduced in this study, to calibrate the regional water market, is a relatively new approach. Modelling of water markets in South Africa has received very little interest in the past. This is probably because formal water markets were not permitted in the old Water Act (1956). The new National Water Act (1998) makes explicit provision for the transfer of water rights. However, the rules and procedures for introducing water markets have not been stipulated. To date no attempt has been made in South Africa to develop methodologies to simulate water markets. According to the new National Water Act one of the most important tasks of Catchment Management Agencies (CMA's) will be to design water allocation strategies for each of the major catchments in South Africa. This study contributes to enhance the capacity of water authorities to make economically sensible water allocation decisions. Without a market price, there is little or no incentive to use water efficiently. True pricing will lead to highest-value uses (e.g. drinking water and the production of high value products). Creating incentives for the most-valuable economic use of water will provide certainty; increase supply for more efficient uses, and create an even playing field for all water users including natural systems. There are legitimate concerns that the market mechanism per se will not guarantee equity. Government therefore has an important role to play in ensuring that the rules and procedures exist to deal with externalities. The secret is to achieve a balance that involves interfering in the market mechanism without jeopardising the proper functioning of water markets. The functional organisation for policy-making, water allocation, water management, and monitoring of users, plays an important role in the implementation of a sustainable water development system.
Open Access
Economic implications of trade liberalisation on the South African red meat industry
(University of the Free State, 2001-05) Jooste, André; Van Schalkwyk, Herman; Von Lampe, Martin
English: Successful agricultural trade relations have to a large extent become a function of how well countries are able to measure the possible impact of increased trade liberalisation. Many studies worldwide have attempted to gauge the impact of agricultural trade liberalisation on world production, consumption, trade and prices by means of mathematical programming models. Given the importance of the red meat sector in South Africa's agricultural economy, it is of the utmost importance that the red meat industry understands the implications and consequences of trade liberalisation. Such knowledge would enable this industry to pro-actively provide input to Government on the possible 'effects of trade liberalisation on the domestic red meat industry, that could be used in multi- or bilateral trade agreements. Furthermore, the industry would be in a position to identify threats and opportunities and make the necessary strategic decisions. In South Africa many studies have investigated various different issues of economic importance pertaining to the red meat industry. None of them have attempted to investigate the impact of trade liberalisation within the mathematical programming framework. This study employs a spatial partial equilibrium model embedded in the mathematical programming framework to analyse the possible effects of a reduction of tariffs, increases in world prices of red meat, changes in the exchange rate, the abolishment of the Lomé Convention and changes in population size. The model includes two-stage spatially separated markets for red meat products in South Africa that encompass behavioural parameters to gauge the impact of exogenous changes related to trade liberalisation. In the case where all tariffs on red meat imports are abolished, changes in prices of red meat products will be substantial. Producer prices for cattle, sheep and pigs will decline by 21.11 per cent, 13.90 per cent and 11.99 per cent, respectively. Beef, sheep meat and pork prices will, on average, decline by 27.88 per cent, 28.56 per cent and 13.16 per cent, respectively. Demand will increase substantially for all three meat types. From a welfare point of view consumers will experience welfare increases. Producers, on the other hand, will experience a drop in welfare. In monetary terms the welfare gains by consumers are greater than the welfare losses by producers, which constitutes a net welfare gain to society. Furthermore, the red meat industry in South Africa should carefully consider preferential access granted to third countries under FTA's. Preferential access could easily lead to a reduction in the marginal tariff rate which, in turn, would result in lower domestic prices of red meat. In the case where the world price increases more than 10 per cent for beef, 18 per cent for mutton and 6 per cent for pork, zero imports would result. The losses in welfare to consumers are greater than the gains in welfare by producers. The impact of a 40 per cent depreciation in the exchange rate is very similar to the situation when world prices are assumed to increase, whilst the effect of a possible abolishment of Lomé on the South African beef market would be minimal. Finally, an increase in the population size combined with an increase in world prices will only partly offset the impact of a total reduction in tariffs. Also, increases in demand due to lower prices will largely be met by higher imports.
Open Access
Marketing tea for Uganda's smallholder sector
(University of the Free State, 2001-05) Balyamujura, Hans Natson; Van Schalkwyk, H. D.
English: Literature shows that consumers and processors demand a particular good or product based on the utility they are able to derive from it, or on its ability to meet processing requirements. A riumber of studies have been conducted to model the relationship between price and the various quality attributes for a number of products such as vegetables, pork, beef, pineapples, etc. However, no such studies have previously been conducted on a product like tea, whose price determination is greatly dependent on the physical appearance and savoury. The quality of the various tea grades implicitly determines the price received by the producer. It is widely recognised in the tea fraternity that a good tea fetches a higher price. It is therefore of utmost importance to fully understand the impact of change in various quality attributes on the price of a particular tea grade. The absence of the ability to estimate the impact of change in quality attributes causes tea producers to make decisions without all the necessary information, which could in turn lead to losses in terms of price. Market research has tended to concentrate on seller concentration and has paid little attention to buyer concentration. Literature shows that buyer concentration exists commonly in agricultural markets due to the nature of the products. This study has shown that the level of buyer concentration at the Mombasa auction market is high. Therefore, there are legitimate concerns that the market will not guarantee an efficient price to the producer. The East African Tea Trade Association has an important role to play in ensuring that these concerns are dealt with by seeing to it that the rules and regulations do not encourage this to happen. Producers, on the other hand, may find the balance through increased market access, which will entail exploring other market alternatives and not being too dependent on the Mombasa auction market. There are a number of export opportunities in already established tea markets, which can easily be explored by the tea producers through increased promotional activities and trade alliances. Growth prospects are still greatly limited by the infrastructure, provision of financial and extension services, research, etc. The feeder road networks still remain in a very poor state, at times necessitating repairs by the factories so as to be able to collect green leaf. The government is still unable to provide an adequate agricultural extension service and the smallholder factories have had to start their own extension services. The government has recently embarked on a programme for the modernisation of agriculture, but this will only show tangible results if a conducive environment for agricultural trade in the country is created.
Open Access
Effect of farm size on technical efficiency: a case study of the Moretna-Jirru district in Central Ethiopia
(University of the Free State, 2003-05) Bekele, Abate; Viljoen, M. F.; Ayele, Gezahegn
English: The main objective of the study is to analyze the effect of farm size on farm efficiency at household level in cereal based farming systems and to suggest policy recommendations. The survey was conducted in the Moretna-Jirru district of Ethiopia during the 2000/2001 cropping season. The district was selected for this study on the basis of the relatively longer experience of farmers to use new technology, the number of crop growers and the high potential for crop production. As part of the methodology, a structured questionnaire was developed and used during personal interviews with farmers. The collected data was analyzed using statistical package SPSS Version 10.1. The empirical model used for the estimation of technical efficiency of smallholders in this study was the stochastic production function. The stochastic frontier model results revealed that land area and seed application rate contributed the most to growth in wheat yield whereas increase in land size and application of urea led to statistically significant increases in tef yield. In view of the research objectives the major results/findings of the study were: • The stochastic frontier model analysis revealed that large farms were technically more efficient than small farms regarding both wheat and tef production; • The mean technical efficiency of wheat was calculated to be 0.83 for large farms and 0.79 for small farms (P= .001). The mean technical efficiency of tef for large and small farms was calculated to be 0.74 and 0.68, respectively (P= .001); • The average technical efficiencies of wheat and tef were calculated to be 80.85 % and 70.72 %, respectively. Under the current technology, farmers can thus increase the actual output levels of wheat and tef by about 19.1% and 29.3%, respectively, to become 100% efficient. The challenge remains to decrease technical inefficiency factors and to raise the production level towards the frontier production level. According to the model analysis, land size remains a key variable explaining differentiation in output, especially in keeping farmers near to or on the production frontier. Reduction in farm size and land fragmentation have contributed to technical inefficiencies. From the disaggregated data by size of holding, the conclusion is that larger size holdings perform better with regard to technical efficiency, food production and income generation than smaller size holdings, irrespective of the extension program. The results that emerged from the technical efficiency differentials between small and large farm groups in the Moretna-Jirru district of central Ethiopia have policy implications. A number of policy interventions need to be made by government if smallscale farmers are to improve technical efficiency. These include, among others, that policies on land size and land distribution must be revisited and that further studies are needed to determine the minimum farm size to support farm households. Frequent redistribution and allocation of land has resulted in fragmentation, tenure insecurity, and in too small farms to support livelihood. This in turn contributed to decrease in farm productivity and efficiency. It is important to note that small farms can make a difference in food self-sufficiency schemes, but they will never be big providers of food and fiber for the fast growing population. Small farm producers will fill niche consumer markets. Providing solutions for the root causes of rural poverty and changing the gloomy situation of Ethiopian farmers requires multiple strategies. Therefore, future work in this area should begin by posing questions differently. For example, What is the best path to sustainable agricultural development? What characteristics must a farm possess for it to be sustainable, socially responsible, environmentally sound and economically viable? What is the optimal farm size and how could size be measured in the sustainable era? Such questions do not have easy answers. They do, however, reveal some of the shortcomings of this analysis and can guide further work in this area.
Open Access
Economic analysis of land use: the case of East Hararghe administrative zone in Ethiopia
(University of the Free State, 2004-02) Worseme, Hassen Ibrahim; Viljoen, M. F.; Groenewald, J. A.
This study aimed at developing and applying a methodology for land use analysis through looking for a form of land use that provides sufficient and rising incomes to the agricultural population of East Hararghe Administrative Zone, and at the same time maintains the productive capacity as well as other environmental services of the land resources of the zone. The study starts with the elaboration of the problem statement, objectives, hypothesis and significance of the study. This is followed by the explanation of the approaches pursued in conducting the present study. The study area is also thoroughly described. The problem statement and the objectives of the study indicate that there exists a huge gap between zonal crop production and the population growth despite a substantial expansion of eropland in the zone. This implies the existence of numerous set backs in the land use system of the zone and necessitated a close investigation of the land use systems of the farming community of the study area in order to come up with an improved and efficient land use pattern that will overcome the acute land shortages as compared to the everincreasing population of East Hararghe Administrative Zone. The most important findings and results of this study are based on the literature study; the development of the research methodology; the description of the surveyed data that is obtained through questionnaire survey; and the analysis of the land use model of the study area. Land resource and land use was assessed from a global point of view. The problems that are associated with the use of the land resource in the developing countries were investigated. An extensive study was also carried out to introduce the agricultural sector of Ethiopia. The agricultural sector in Ethiopia is almost entirely dominated by small-scale, resource-poor farmers who produce 90 to 95 percent of all agricultural outputs. The role of economics within land use analysis is also reviewed. This role is elaborated through the discussion of a skeletal model of the agricultural sector; the concepts of regional agricultural planning, land evaluation and farming system analysis; the concepts of resource economics and land economics; and the issues of property rights and sustainable development. A linear programming model for the economic appraisal of the land use in the study area was presented following the description of the conceptual framework of the model. The different parts of the zonal linear programming model were discussed under the headings of objectives, variables and constraints. This was followed by the general formulation of the land use model of the zone called EASTHAR. The matrix of the model includes three sub-matrices each representing a different farm type. The farm types are distinguished on the basis of agro-ecological classification of the surveyed districts and peasant associations. The EASTHAR model was analyzed by using the GAMS software after it was extensively written in the GAMS programming language. Three land use scenarios are analysed to assess the effects of changes in factors that influence land use decisions and whether incomes of farms (fan increase through an improved land use. The results of the base scenario indicated that the incomes of farms can increase with improved land use pattern as the value of the objective function, or the economic surplus, is positive for the entire zone and for the different farm types. The model showed, how land has to be assigned to the different crops at zonal level and at each farm types level for maximizing farm incomes under proper and improved resource use. The most important staple food crops of the population of the zone are all incorporated in the optimum land use and the potential for specialization that can exist among the different farm types of the zone has also been indicated. A comparison of the results of the base scenario with the results of an opportunity cost scenario represented an important outcome of the model. The zonal economic surplus in the opportunity cost scenario is 33% lower than the base scenario. The valuation of the on-farm household labour thus has a negative effect on the incomes of the farm households. However, land use as well as labour, current input and draft power uses did not change from that of the base scenario. This shows that the mere valuation of the onfarm household labour will not automatically disturb land use decisions. An interesting outcome was observed when comparing the results of the base scenario with the results of a scenario of an assumed drought condition. The drought case scenario analyzes the consequences for land use in case drought occurs in the study area. Drought is a recurring problem of Ethiopians especially the rural population. The results of the analysis indicated that almost every land use defining variable was subject to change when drought occurs. According to these results, in a subsistence agriculture which is solely rain fed, a decline in the annual rainfall will undoubtedly lead to large reductions in the income of the farming population. Based on the results of the study important policy recommendations were outlined. The implementation of the envisaged improved land use patterns can have important impact in altering the poor income earning capacity of the farm households in the zone and have a better environmental impact. For farmers to produce the amount of grains required for home consumption and ensure their food security, there is a need to subsidize them to the amount of their lost gross margins during drought periods. Farmers must also be encouraged to save and have financial reserves for unforeseen adverse production conditions through the establishment of appropriate saving institutions to limit the subsidy. It may also be necessary for the government to approach donors to contribute to the subsidy, as this contribution will hopefully be lower than the cost of food aid in monetary terms. However, the dependence on food aid cannot be a preferable alternative and to supply enough food to the growing population of the region more food needs to be produced by the zone itself. This is because although other zones can produce food cheaply, for subsistence farmers who are producing crops mainly for home consumption (and not for the market) it is extremely hard (if not impossible) to engage in trade and rely on outputs produced in other zones.
Open Access
Investigation of key aspects for the successful marketing of cowpeas in Senegal
(University of the Free State, 2004-08) Faye, Mbene Dieye; Jooste, A.; Fulton, J.
Due to the lack of information on the factors that affect the marketing of cowpeas in Senegal, this study investigates key aspects for the successful marketing of cowpeas in Senegal. The contribution this study makes lies in the information it generates to empower role-players in the cowpea value chain to better understand (i) the demand relations of cowpeas in Senegal, (ii) the information needs of role-players and the extent to which markets are integrated, and (iii) for which characteristics of cowpea consumers are willing to pay premiums. An Almost Ideal Demand System (AIDS) model is applied to one period cross sectional data to estimate demand relations of cowpea’s in Senegal. The own price elasticity of cowpea is -1.23 while its expenditure elasticity is 0.97 showing that cowpea is a normal necessity. A sample of 443 respondents was taken to determine the information needs of different role-players in the cowpea supply chain. Availability of price information on local and export markets are deemed vitally important by all role players. Information pertaining to quantities supplied and demanded, and buyers’ preferences are not regarded by all role-players as equally important. The most appropriate mode to dissemination cowpea related information should depend on the accessibility of a particular mode by role-players. Bivariate correlation coefficients, co-integration tests, Granger Causality tests and Ravallion’s model are used to investigate level of market integration. The results show that cowpea markets as a whole are not integrated. This is not a surprising result since it can be linked to the general lack of market information. The influence of cowpea characteristics on cowpea prices is analyzed with a hedonic pricing model. The results show that large grain size and sugar contents are characteristics for which consumers are willing to pay premiums in all markets. The implication of the results of this study has several dimensions, i.e. (i) role-players in the cowpea supply chain now has information to guide pricing strategies, (ii) changes in expenditures on cowpeas can be properly discounted in marketing strategies, (iii) interventions can be designed to address the needs of information users and to address the non-integrated nature of cowpeas markets, and (iv) research programs and role-players should focus their research and marketing activities on those characteristics for which consumers are willing to pay premiums.
Open Access
Investigation of key aspects for the successful marketing of cowpeas in Senegal
(University of the Free State, 2005-04) Faye, Mbene Dieye; Jooste, André; Fulton, Joan
Due to the lack of information on the factors that affect the marketing of cowpeas in Senegal, this study investigates key aspects for the successful marketing of cowpeas in Senegal. The contribution this study makes lies in the information it generates to empower role-players in the cowpea value chain to better understand (i) the demand relations of cowpeas in Senegal, (ii) the information needs of role-players and the extent to which markets are integrated, and (iii) for which characteristics of cowpea consumers are willing to pay premiums. An Almost Ideal Demand System (AIDS) model is applied to one period cross sectional data to estimate demand relations of cowpea's in Senegal. The own price elasticity of cowpea is -1.23 while its expenditure elasticity is 0.97 showing that cowpea is a normal necessity. A sample of 443 respondents was taken to determine the information needs of different role-players in the cowpea supply chain. Availability of price information on local and export markets are deemed vitally important by all role players. Information pertaining to quantities supplied and demanded, and buyers' preferences are not regarded by all role-players as equally important. The most appropriate mode to dissemination cowpea related information should depend on the accessibility of a particular mode by role-players. Bivariate correlation coefficients, co-integration tests, Granger Causality tests and Ravallion's model are used to investigate level of market integration. The results show that cowpea markets as a whole are not integrated. This is not a surprising result since it can be linked to the general lack of market information. The influence of cowpea characteristics on cowpea prices is analyzed with a hedonic pricing model. The results show that large grain size and sugar contents are characteristics for which consumers are willing to pay premiums in all markets. The implication of the results of this study has several dimensions, i.e. (i) roleplayers in the cowpea supply chain now has information to guide pricing strategies, (ii) changes in expenditures on cowpeas can be properly discounted in marketing strategies, (iii) interventions can be designed to address the needs of information users and to address the non-integrated nature of cowpeas markets, and (iv) research programs and role-players should focus their research and marketing activities on those characteristics for which consumers are willing to pay premiums.
Open Access
Farm-level resource use and output supply response: a Free State case study
(University of the Free State, 2006-11) Olubode-Awosola, Olukunle Olufemi; Van Schalkwyk, H. D.; Jooste, A.
Abstract not available
Open Access
The profitability of precision agriculture in the Bothaville district
(University of the Free State, 2006-11) Maine, Ntsikane; Nell, W. T.; Lowenbert-DeBoer, J.; Gudeta, Z.
English: Variable-rate application technology based on soil potential and other field attributes is gradually replacing the standard rates of fertilizer application for individual cropping systems. In South Africa, differential application of inputs in cash crop production is mainly concerned with fertilizer and lime, and this indicates the importance of these inputs. This study evaluates the maize yield response to variable-rate (VR) application of nitrogen (N), and estimates the profitability of VR application of N relative to single-rate (SR) application under South African conditions. Data was collected from an experimental field of 104 ha on a farm in the Bothaville district. A strip-plot design consisting of 180 strips was used for this on-farm research experiment. This design involved treatments that ran in the same direction across the field as planting and harvesting. The objectives were to determine the maize crop response functions under different N rates, to estimate optimal N rates for different management zones in different years, and to assess profit estimates using ordinary least squares (OLS) and spatial error (SER) models. The methodology involves modelling maize yield response functions for N. A Baseline regression model that analyses variable-rate technology as a package was used, while three sensitivity tests were used to determine the consistency of the estimates. The results of this study indicate that there is a significant variation in maize yield response to the applied N on the basis of the application method used. Profit analysis resulting from the application strategies indicates that, in general, VR results in higher farming profits than SR. The analysis indicates that yield obtained from VR strategy can compensate additional costs incurred with the investment in VR technology. This finding is consistent in all the models. It has been established that yield response to fertilizer depends on soil conditions such as the effective soil depth, which has a positive effect on yield. Yield response also differs among management zones. Differences were observed between the results obtained from the OLS models and the results obtained with the SER models, and this has an impact on decision-making. The importance of taking spatial effects into account came to the fore, as inaccurate results can be obtained with methodologies that ignore the spatial dependencies in the analysis of yield monitor data.
Open Access
Trends in South African agricultural land prices
(University of the Free State, 2006-12-07) Obi, Ajuruchukwu; Van Schalkwyk, Herman D.
English: In recent years, concern has been expressed over rising agricultural land prices in South Africa. A major concern was that this situation would impede the successful implementation of the on-going land reform programme. This study aimed to examine the trends and draw conclusions about their determinants against the backdrop of recent policy developments to restructure the agricultural sector and empower the black population to participate more effectively in the nation’s agricultural economy. On the basis of a comprehensive literature review, it was established that land issues have played an important role in past and present configuration of the economy and politics of South Africa. In South Africa as elsewhere in the world, agricultural land prices are central to how land enters the political and economic equations for which reason they are important subjects for research as well as developmental interventions. Despite the implementation of far-reaching governance reforms and agricultural restructuring over the past 12 years, no recent model of farmland prices has explicitly considered these new issues. This study therefore employed cointegration analysis to model the long-run and short-run dynamics of the relationships so as to identify the key determinants as well as attempt a tentative forecast within the constraints imposed by limited data availability to the extent that the available time series permits. To that extent, this study contributes in an important way to the debate and provides a basis for more sophisticated and focused work in the future. Building on previous structural modelling of farmland prices in the country, but using much expanded and some new time series spanning forty-nine years, it was possible to establish clear patterns of relationships between real farmland prices and a range of macro-aggregates, including real interest rate on debt, the rate of inflation, real Gross Domestic Product (GDP) per capita, among others. The results suggest that real farmland prices have strong positive relationships with real GDP per capita and real farm debt per hectare. The importance of real net farm income and the real exchange rate of the rand were also demonstrated. Although the inflation rate was found to be positively related with real farmland prices, the relationship was found to be insignificant. Overall, strong policy effects were confirmed by significant structural breaks in the series. But the fitted error correction model suggests that the systems rapidly adjust to its long-run equilibrium, with most of the deviations being corrected within the next year. While there is no basis to conclude from the results that rising farmland prices are hurting the land reform process, there is no question that sudden increases in prices generate uncertainties and call for measures to ensure greater stability. Actions to moderate the impact of price increases on smallscale and emerging farmers should therefore be explored, particularly by making redistributable agricultural land more abundant and accessible to small-scale farmers unable to compete in the unregulated land market. This will include drawing from the existing pool of state land and purchasing indebted farms for redistribution. Adjusting the rate of interest to keep consumption spending in check can have additional benefits in land price stabilization. Importantly, a fixation on rising agricultural land prices may be diverting attention from the crucial support needed by newly settled farmers to make agricultural land more productive through improvements in the input delivery systems, extension services to enhance the knowledge base of new entrants into the farming business, rural road networks, etc.
Open Access
Integrated modelling for sustainable management of salinity in the lower Vaal and Riet River irrigation areas
(University of the Free State, 2007-05) Armour, Robert Jack; Viljoen, M. F.; Easter, K. W.
English: Salinisation of irrigation schemes has become a problem in various schemes in South Africa. One such area that experiences salinisation problems selected for this research is the Lower Vaal and Lower Riet irrigation areas, upstream from where these two rivers converge and flow into the Orange River. By understanding the dynamics and interactions between irrigation water quality and the soil salinity status on crop yield over time, mistakes made in the past by choosing unsustainable irrigation sites and practices can be prevented in the future. Furthermore the impact of various natural or artificial (e.g. policy mechanism) scenarios on existing schemes can be more accurately modelled, leading to increased economic efficiency and sustainability of the irrigation industry, together with its primary and secondary linkages, as a whole. Aims: The overall aim of the WRC study on which this thesis is based was to develop and integrate multi-dimensional models for sustainable management of water quantity and quality in the Orange-Vaal-Riet (OVR) convergence system. More specifically the following sub-objectives had to be addressed: 1. To better understand the polluting chemical processes and interactions in and in-between the plant and surface-, vadose zone-and ground-water, to achieve efficient and sustainable water quality management 2. To develop new economic models at both, a. Micro level, namely dynamic long term simulation models, and at b. Macro level, using a regional dynamic Input / Output model1 3. To integrate these new economic models with models from the other disciplines of: a. Hydrology2 (incorporating a salt mass balance and flow), and b. Agronomy (crop growth in the presence of salinity model) 4. To determine and prioritise best management practices at: a. Micro level, (i.e. per hectare and irrigation block level) and at b. Regional level. 5. Through a better understanding of the multi-dimensional interactions, to enhance water use efficiency as the quantity and quality of water available for agriculture inevitably decreases 6. To develop policy guidelines to ensure social, environmental and economic sustainability 7. To achieve all these aims based on using the complex OVR convergence system as a study area, but developing a method and models that can be applied elsewhere with relative ease. This thesis however only covers the micro-economic aspect of the WRC project conducted by the author, and how it is driven by the hydrological and bio-physical processes and how it links and translates to the macroeconomic (regional) impact. Model: The economic base model of the integrated model uses hydrology and biophysical data and algorithms as input into the monthly time-step, per hectare Crop Enterprise Budget based, MSExcel simulation model (SMsim) to generate the base data. The resulting stochastic and spatially differentiated data set of per hectare total gross margin above specified costs data is then converted to sub-WUA, WUA, combined WUA and regional area level data for comparison and interpretation at these various levels and for input into the macro-economic regional level model (ISIM) and the index for socio-economic welfare (ISEW) for sustainability evaluation between alternative scenarios. Results: The results of this thesis inter alia show that the installation of irrigation drainage to facilitate leaching is a far better option than planting more salt tolerant crops. In the WRC project on which this thesis is based the results of a macro-economic analysis based on the micro-economic results from this thesis show that although at sub- WUA level it may not be financially feasible to install drainage in some sub-WUA areas, the secondary and regional socio-economic and environmental impacts justify the spending of government grants for drainage installation as the secondary benefits on the regional economy exceed the costs of the drains.
Open Access
The potential impact of trade on the economy of Lesotho
(University of the Free State, 2007-05) Bahta, Yonas Tesfamariam; Groenewald, J. A.; van Schalkwyk, H. D.
The potential impact of trade on the economy of Lesotho was assessed using the Lesotho Social Accounting Matrix (SAM) 2000 as a data base to construct a Computable General Equilibrium (CGE) model, to design trade policy scenarios, and to simulate the impact of trade policy scenarios on the Lesotho economy Since the Lesotho SAM was unbalanced, it was necessary to balance the initial matrix, using the cross-entropy optimization procedure with the aid of GAMS software. Four simulation sets were carried out. Results from two sets (duty-free access (DFA) and a +10% increase in world prices) indicate significantly increased textile exports and decreased prices for imported commodities. DFA will also be associated with increased textile imports, while a +10% increase in world prices will lead to increased crop imports. Demand and supply prices of textile commodities produced and sold domestically will decrease, as will composite goods prices in the textile sector. Average output price of textiles will decrease with DFA and with a 10% increase in world prices; the aggregated marketed commodity quantity for textiles will increase. Output prices of fruit and vegetable processing and intermediate aggregate inputs for the textile sector decrease with DFA. An increase of 10% in world prices will lead to increased water service prices. The textile sector will experience increased value added prices in both scenarios. Gross domestic product (GDP) for the textile sector will increase significantly. Lesotho will gain in welfare, measured in terms of equivalent variation (EV). Effects on labour categories depend on changes in productive activities. In the textile sector, labour demand, labour income, and capital income will increase significantly. Lesotho’s net commodity exports and gross government expenditure will also increase. Erosion of existing preferential access (EEP) and common external tariffs for non-SACU member states (CET) will reduce the quantity of textile products exported; with EEP, the price of imported textiles will increase and the quantity decrease. CET will have similar effects on the skins and hides sector. Demand and supply prices of textile commodities produced and sold domestically (with EEP) and pharmaceutical products (with CET) will increase. Prices of composite textile goods will increase slightly. Average output price for textiles at EEP and pharmaceutical products at CET will increase, and the aggregated marketed commodity quantity for the textile sector will decrease in both scenarios. With EEP, prices of output and intermediate aggregate outputs of textiles and micro industry outputs will increase. CET effects will be smaller. The textile sector at EEP and accommodation-catering services at CET will experience decreased prices of value added. Gross domestic product (GDP) of the textile sector will decrease. Welfare or equivalent variation (EV) will decline. Employment in the textile sector will decline with a concomitantly small decrease in labour and capital income. The EEP regime will lead to decreased total government consumption expenditure, while CET will cause a slight increase; this translates into decreased net commodity imports. Effects vary among economic sectors. Performance in U.S. markets indicates that Lesotho’s textile exporters have been competitive under MFA/ AGOA arrangements. This competitiveness can, however, be jeopardized by lower costs in some Asian countries. The policy makers should develop permanent comparative advantage to avoid the risk of losses when temporary tariff preferences are discontinued. Lesotho’s export trade is highly concentrated, both in terms of products (textiles) and markets. Diversification of products and markets is prerequisite for avoiding failure and for sustainable development of the country; considerable manufacturing potential for export diversification exists in furniture, bricks, sandstone and ceramics, wool and mohair products, pharmaceutical products, and the recently revitalised diamond industry. Export trade development and market penetration to non-US destinations should receive attention. In this process, the government should strengthen the capacity of the private sector to deal effectively with rapid change and growing competition by means of, for example, knowledge dissemination, technological transfers, and negotiations for improved market access for textile and other potential export products.
Open Access
Stochastic efficiency optimisation analysis of alternative agricultural water use strategies in Vaalharts over the long- and short-run
(University of the Free State, 2007-11) Grové, Bennie; Oosthuizen, L. K.
The main objective of this research was to develop models and procedures that would allow water managers to evaluate the impact of alternative water conservation and demand management principles in irrigated agriculture over the long-run and the short-run while taking risk into account. One specific objective was to develop a generalised whole-farm stochastic dynamic linear programming (DLP) model to evaluate the impact of price incentives to conserve water when irrigators have the option to adopt more efficient irrigation technology or cultivate high-value crops over the long-run. The DLP model could be characterised as a disequilibrium known life type of model where terminal values were calculated with a normative approach. MOTAD (Minimising Of Total Absolute Deviations) was used to model risk. Another specific objective was to develop an expected utility optimisation model to economically evaluate deficit irrigation within a multi-crop setting while taking into account the increasing production risk of deficit irrigation in the short-run. The dynamic problem of optimising water use between multiple crops within a whole-farm setting when intraseasonal water supply may be limited was approximated by the inclusion of multiple irrigation schedules into the short-run model. The SAPWAT model (South African Plant WATer) was further developed to quantify crop yield variability of deficit irrigation while taking the non-uniformity of irrigation applications into account. Stochastic budgeting procedures were used to generate appropriately correlated inter- and intra-temporal matrixes of gross margins necessary to incorporate risk into the long-run and short-run water use optimisation models. A new procedure (standard risk aversion) was developed to standardise values of absolute risk aversion with the objective of establishing a plausible range of risk aversion levels for use with stochastic efficiency analysis techniques. A procedure was developed to conduct stochastic efficiency with respect to a negative exponential utility function using standard risk aversion. The standardised risk aversion measure produced consistent answers when the risk premium was expressed as a percentage of the range of the data. Long-run results showed that the elasticity of irrigation water demand was low. Overall risk aversion and the individual farming situation will have an important impact on the effectiveness of water tariff increases when it comes to water conservation. Although the more efficient irrigation technology scenario had a higher net present value when compared to flood irrigation, the ability to pay for water with the first mentioned scenario was lower because the lumpy irrigation technology needs to be financed. Failure to take risk into account would cause an over- or underestimation of the shadow value of water, depending on whether water was valued as relatively abundant or scarce. The conclusion was that care should be taken when interpreting the derived demand for irrigation water (elasticity) without knowing the conditions under which they were derived. Cognisance should also be taken of the fact that higher gross margins per unit of applied water would not necessarily result in greater willingness to pay for water when the alternatives were evaluated on a whole-farm level. The main conclusion from the short-run analyses was that although deficit irrigation was stochastically more efficient than full irrigation under limited water supply conditions, irrigation farmers would not willingly choose to conserve water through deficit irrigation and would be expected to be compensated to do so. Deficit irrigation would not save water if the water that was saved through deficit irrigation were used to plant larger areas to increase the overall profitability of the strategy. Standard risk aversion was used to explain the simultaneous increasing and decreasing relationship between the utility-weighted premiums and increasing levels of absolute risk aversion and was shown to be more consistent than when constant absolute risk aversion was assumed. The modelling framework and the models that were developed in this research provide powerful tools to evaluate water allocation problems that are identified while busy implementing the National Water Act. Only through the application of these type of models linked to hydrological models will a better understanding of the mutual interaction amongst water legislation, water policy administration, technology, hydrology, human value systems and the environment be gained to enhance water policy formulation and implementation.
Open Access
The macro economy and irrigation agriculture in the Northern Cape Province of South Africa
(University of the Free State, 2007-12) Taljaard, Pieter R.; Van Schalkwyk, H. D.; Louw, D. B.
English: The overall objective of this study was to develop a model capable of quantifying the economywide impacts of market risk and other exogenous factors, with specific reference to efficient irrigation water use along the banks of the middle and lower Orange River in the Northern Cape Province (NCP). The study is based on the second of two parts of a larger Water Research Commission (WRC) funded project, titled: “Market risk, water management and the multiplier effects of irrigation agriculture with reference to the NCP”. One of the sub-objectives was to simulate the effects of selected market change(s), i.e. a change in the world price of fruit, on the provincial economy as well as to quantify the economy-wide impact of selected regional shocks and structural changes. A second sub-objective includes recommendations on institutional responses that will increase effective water management for regions where irrigation agriculture makes a major contribution to the economy such as the NCP. The ability to quantify and/or simulate the economic-wide effects of different exogenous shocks or risk factors influencing agriculture and specifically irrigation agriculture therefore contributes to the group of already existing decision support systems available to role-players and decision makers in South Africa. In order to reach the first specific sub-objective, two sets of economic linkages between the micro and macro economic models were applied, i.e. one bottom-up or micro-to-macro and the other a top-down or macro-to-micro. The top-down linkage, utilizes the simulated results from a static Computable General Equilibrium (CGE) model, calibrated to a Social Accounting Martix (SAM), as inputs into a Dynamic Linear Programming (DLP) model on farm and irrigation regional level. A 20% reduction in the world price of fruits was used as simulation in the CGE model, with the main linkage between the macro and micro economic models being the changes in the local prices of fruits. Some of the key results from the micro analysis include amongst others the level of structural adjustments and other influencing factors, including the impact on farm and regional level profitability for example. With the bottom-up linkages, simulated results (i.e. the changes in the objective function values) from the regional DLP model was multiplied by three sets of economic multipliers (production, value added and labour) in order to quantify the economy-wide impacts thereof. Despite numerous shortcomings of economic multipliers, this analysis was performed to quantify in broad terms the direct, indirect and induced economy-wide impacts resulting from amongst others a 20% decrease in the local price of table grapes under various water trade and crop deviation allowances specified in the DLP model. As hypothesised, the simulated results explained above proved that significant economy-wide impacts can result from market risks or other exogenous factors influencing local irrigation agriculture, especially in a region where irrigation agriculture plays such an important role as in the NCP. It is believed that the current South African water law is comprehensive and wellwritten compared to international standards and benchmarks. The implementation thereof, in many aspects however remains a challenge. Recommendations on required institutional responses to improve the effectiveness of irrigation water utilization were made to reach the second specific sub-objective. The main conclusion from this study is that South Africa is relatively under-developed in the management of water supply and demand. In this regard, innovative technological development combined with cutting edge research in this field, is the only way in which effective water use will ultimately advance and thereby optimise the net benefit of society as a whole. It therefore calls for an integrated water resource management approach, with commitment from all role players involved. Government should provide an enabling environment, within which all levels from the private sector and communities can participate in the form of Public-Private-Partnerships (PPP) to enhance prosperous economic growth and development.
Open Access
Price transmission in a deregulated Ethiopian coffee market
(University of the Free State, 2008-05) Worako, Tadesse Kuma; Van Shcalkwyk, Herman D.; Alemu, Zerihun Gudeta; Goshu, Gezahegn Ayele
English: Ethiopia’s coffee industry has undergone numerous structural changes and deregulation measures as a result of changes in the political and economic landscape of the country since early 1992. The state-controlled marketing system has been replaced with markets run by the private sector. Such changes may have an influence on price transmission, the dynamics of shocks through marketing channels, and the performance of the industry. The principal questions addressed by the study are whether the deregulation of the Ethiopian coffee market has resulted in closer interrelationships among producer, auction and world or FOB prices in the vertically related coffee markets and whether it has improved dynamic interrelationship amongst spatially separated domestic coffee markets. Towards this end, the long-run and short-run dynamics between vertically and spatially related coffee markets were assessed employing the threshold vector error correction (TVEC) modelling approach extending the technique developed by Hansen (1999) to deal with inferential biases occurring as a result of specification errors that have been overlooked till to date by applied studies in the field. This study attempts to measure both vertical and spatial price transmission in two separate sections. In the first part, vertical price transmission is analysed by considering six separate markets, each of which has producer, auction, and world prices. This includes five major categories of Ethiopian coffee by origin of production (Sidama, Yirgachefe, Jimma, Wollega and Harar) and the national average price as representative of all coffee types in the country. The second part measures spatial price transmission between six selected pairs of spatially distinct local coffee markets. Monthly price data from the Central Statistical Agency and the Agricultural Market Promotion Department in the Ministry of Agriculture and Rural Development, as well as cross-sectional data from the 2006 coffee market survey, are used. The following salient results were obtained: Firstly, market deregulation in general has induced strong long-run interrelationship between vertically and spatially related markets. Secondly, of the six categories of vertically related market prices in the four groups (Sidama, Yirgachefe, Jimma and national average prices), auction prices are directly affected by world prices (exhibiting dynamic interrelationships) while producer prices are affected by world prices indirectly through auction prices (i.e. weak interrelationship with world prices). Hence the causality flows from world to auction price and then from auction to producer price. In general, producer prices lack direct interrelationship with world prices and are weakly responsive to shocks in world prices, whereas auction prices are highly interrelated with world prices and are responsive to shocks in world prices. Thirdly, in the case of Harar coffee, neither producer nor auction prices show interrelations with world (FOB) prices, which partly accounts for the high concentration of market power and malpractices in the Harar coffee auction and export markets. Fourthly, asymmetries were also found in price transmission where producer prices fell persistently within the equilibrium band from 1998 through 2006 despite unfavourable world prices. This may be partly ascribed to the high local coffee demand, which plays an important price stabilisation role. Fifthly, with regard to spatial price transmission, producer markets located adjacent to each other show clear short-run price dynamics and integration, while others show weak interrelation. As a result, of the six pairs of spatially separated markets, only three pairs show strong integration while the others do not. In general, evidence from vertically related market analysis reveals that coffee growers remain segmented from the world and benefit less compared to participants in the auction and export markets. Similarly, most spatially separated local markets either totally lack short-run dynamics or are weakly integrated. This segmentation and lack of short-run dynamics is partly explained by the current organisational structure of the Ethiopian coffee market system where coffee farmers lack strong producer cooperatives, which might enhance their capacity to bargain for a proper share of the market price. Hence, dismantling market parastatals and deregulation only is a necessary but not sufficient condition for efficient private markets to evolve. In the absence of appropriate infrastructure and institutions at grassroots level, smallholders remain at the mercy of traders. Thus it is important to shift from merely ‘getting prices right’ to ‘getting institutions right’ so as to address market failures arising from imperfect information, contract enforcement and property rights, as well as insufficient provision of public goods, in order to improve the lives of primary producers and thereby reduce poverty.
Open Access
Governance, natural resources and local development in Mozambique
(University of the Free State, 2008-12) Massuanganhe, Israel Jacob; Van Schalkwyk, Herman; Groenewald, Jan
The role that agriculture should play in economic development has been recognised for years. In recent years, concern has been expressed over rising agricultural and food prices. The world market prices for major food commodities have risen sharply to historic highs of more than 60 percent above levels just two years ago. Many factors have contributed to the rise in food commodity prices. Some factors reflect trends of slower growth in production and more rapid growth in demand that have contributed to a tightening of world balances of grains and oilseeds over the last decade. Other factors that have added to global food commodity price inflation include the declining value of the US dollar, rising energy prices, increasing agricultural costs of production, growing foreign exchange holdings by major food-importing countries, and policies adopted recently by some exporting and importing countries to mitigate their own food price inflation (Trostle, 2008). Mozambique has a vast extension of land and diversity of natural resources. Resources are inadequately used, the rural income continues to fall, and poverty is increasing. The rural standard of living has been deteriorating year by year. To date, estimations reveal that between 60 and 80 percent of cultivated land in all the provinces is concentrated in areas between 0.2 and 1 ha. For a sample of 192 farmers, using a translog stochastic production frontier like that of Bravo-Ureta and Pinheiro (1993), who estimated a Cobb-Douglas total value product frontier for analysis purposes, the study found that the average economic efficiency (EE), technical efficiency (TE) and allocative efficiency (AE) for the sample were 11.6%, 83.0% and 13.7% respectively. These results suggest that there is considerable room to maximise resource usage and increase agricultural output without additional input and given the existing technology. The adoption of new technologies designed to enhance farm output and income has received particular attention as a means to accelerate economic development. However, output growth is not only determined by technological innovations, but also by the efficiency with which available technologies are used in the absence of inefficiency factors. As Bravo-Ureta and Pinheiro (1993) noted, the evidence presented in this study suggests that there is much room for improving the efficiency of natural resource management in general. The results based on frontier methodology are generally consistent with the notion that local actors play an important role in the management of local resources; consequently, public investments designed to enhance human and social capital at local level can be expected to generate additional skills and output even in the absence of new technologies. The participation of citizens in all stages is crucial. It is recognised that qualitative variables have influence and potential importance in efficiency. Governance is considered within the framework of power, process and practice and how these have shaped peasant access to and control and use of natural resources. Over the years, state visions of appropriate agriculture development have largely been extended to the peasant sector through a centrally directed structure and process. Pioneering efforts at decentralising entrustments over the use and management of resources to the peasant communities have largely resulted in recentralisation at the district level, where such efforts are still practised in the trickle-down mode. This is in part because the policy thrust seeking to empower the peasant communities is supply-led, and thus defined according to the terms and processes of external agents, including funders and central governments. The research found that by improving institutions’, citizens’ and communities’ capacity to address local governance and decision-making through prominent, decentralised natural resources management policies, they could participate more effectively in local development, gain experience in democratic processes, and hold local officials responsible for their decisions. The study concluded that natural resources play a strategic role in rural economies both as a potential source of long-term development and as the essential contributor to sustained food security. Access by the poor to natural resources (land, forests, water, fisheries, pastures, etc.) is essential for sustainable poverty reduction. Many rural communities are dependent on natural resources in one way or another. Decentralising natural resource management and using local decision-making power is critical to improve the revenue generation of citizens and local authorities. Local representative bodies need power over the resources that affect rural sustainable livelihoods in order to become legitimate actors around which civic organisations and citizens rally for justice, sustainable livelihoods and economic improvement. Decentralising natural resource management (NRM) can give local governments allocative powers over lucrative opportunities, both of which can help build local government legitimacy. In short, local development can emerge.
Open Access
Capacity building strategies for sustainability farming SMMEs in South Africa
(University of the Free State, 2009-11) Mmbengwa, Victor Mbulaheni; Groenewald, J. A.; Van Schalkwyk, H. D.
English: South Africa’s land reform programme is faced with many challenges associated with its sustainability. It is widely believed that one of the major causes of the collapse/failure of farming SMMEs is lack of capacity in many aspects of running farming as a business. Critical success factors for these SMMEs are capacity, market accessibility, business management skills, effective extension services, adequate support programmes as well as adequate financial injection. Therefore, any entrepreneur in this business must have skills in both marketing and management, coupled with adequate support systems. To address the above-mentioned problems, a comprehensive study of farming small, micro, medium enterprises (SMMEs), pre- and post-settlement support, the involvement of youth and women, accessibility of markets, linkages, small, micro, medium enterprises (SMMEs’) institutional structures and other support services, was carried out. An intensive desktop study which included amongst others reports from government, consulting agencies, development and training institutions was used. Workshops with experts, farming stakeholders, agricultural economics departments from universities, government officials and farming small, micro, medium enterprises (SMMEs) were conducted. Participatory action research methodologies were employed during workshop sessions. Empirical evidences were drawn from eighteen case studies and surveys conducted by both Land Bank and National Department of Agriculture. Various tools of analysis were used to analyse different data sets used in this study. For instance, case studies used narrative coupled with strength, success, weakness, failure, opportunities and threats (SSWFOT) and ridge regression (RR). The data set from the Land Bank survey was analysed using GENMOD, MEAN, frequency (FREQ) and multiple logistic regression models. The data set from National Department of agriculture was analysed using frequency (FREQ) and multiple regression analysis. Case studies revealed that micro and small scale farming enterprise severely lack important key success indicators such as sustainable markets, input supply; increased income, sustainable production, skills development and professional business operation. On the contrary, it was found that medium sized enterprises have adequate levels of important key success factors that are lacking in micro and small scale farming enterprise, but also shows a need to improve on sustainable markets and input supply. These cases also revealed that financial capacity depends on marketing capacity. Consequently unit increases in marketing capacity have a corresponding increase in financial returns. The Land Bank survey revealed that perceptions of emerging farmers portray a lack of capacity and exposure. It also showed that skills, financial support, and infrastructure are important requisites for sustainable farming small, micro, medium enterprises (SMMEs). Extension support and sustainable production were found to be crucial for farming success in the emerging farming sector. It was also found that lack of understanding of the importance of formal markets; benefit of training and extension support may be the main contributors to the unsustainable nature of the emerging farming sector in South Africa. Therefore, this sector requires access to formal markets, extension support services and training in order to be profitable. The National Department of Agriculture data set revealed that there are many more micro enterprises compared to their small and medium counterparts. In addition, women are most beneficiaries for agrarian development; their involvement surpasses that of men, youths and disabled people. The results also indicate the training received to be insufficient, with much of the training being inappropriate for farming. There is a need to devise strategies to convert micro enterprises into small and medium enterprises with since a high conversion rate to small and medium levels can help to reduce poverty, unemployment and above all increase women’s empowerment and thereby improving the socio-economic impact of these farming enterprises. The results have good implications for the present and future owners of small, micro, medium farming enterprises. The study has formulated comprehensive and sustainable strategies as a guideline for agribusiness entrepreneurs, with the overall objective of eradicating poverty in rural areas and commonages through increased agricultural production.
Open Access
Implications of trade liberalisation and economic growth for South African agricultural industries
(University of the Free State, 2009-12) Teweldemedhin, Mogos Yakob; Van Schalkwyk, H. D.;
The main aim of this study is to examine the impact of trade liberalisation on agriculture’s ability to contribute to economic growth and poverty reduction in South Africa. Several secondary objectives were examined that address: (i) the impact of trade liberalisation on the South African agricultural international trade performance; (ii) the relationship between trade liberalisation and poverty alleviation; (iii) the impact of trade liberalisation on Total Factor Productivity (TFP) in agricultural industries, and (iv) the short-term source of agricultural adjustments. Different methodologies were applied to achieve the specified sub-objectives, including calculation of the Intra-Industrial Trade (IIT) coefficients’ (with its key determinants) Gravity model, the Error Correction Vector Model and the Exact Maximum Likelihood method. The Gini coefficient of exports and imports was calculated as 0.55 and 0.62, respectively. The aggregate, with respect to the South African agricultural IIT, was higher than the average attributed to advanced countries. This shows that South Africa needs to reinforce the position of a bilateral agreement, which should be accompanied by regional or even multilateral liberalisation. The econometric analysis conducted on determinants of high IIT, gives a more magnified effect of the coefficients of export to import ratios and the TIMB (trade balance). If the South African industries implement and increase trade liberalisation on the diversified level of industrial specialisation, the IIT level would remain high, and significant economic gain might be achieved. The gravity model finding shows that all variables were significant at one percent, and carried the expected sign. Only the EU dummy variable had an inverse relationship, implying that the EU trade agreement creates a negative impact on export capacity for South African farmers. Essentially, South African farmers are not in a position to compete with the subsidised farmers of the development involved. These results have several important policy implications for South Africa. Firstly, trade agreements, whether implemented unilaterally or bilaterally, will enhance potential trade flows between South Africa and other countries or regions. Secondly, from an export promotion standpoint, the distance variable in the model’s results shows that importing countries’ per capita income is elastic and significant in determining export. Therefore, it is important for South Africa to maintain trade links and, in order to realise export potential, to extend these to high per capita income countries or regions. On the other hand, to avoid vulnerability and potential crises in EU regions or countries where the largest proportion of South Africa’s export is directed, it is important that South Africa continues to concentrate its export promotion efforts in other regions of the world. The study has also tested the impact of trade liberalisation using both the cross-sectional and time series approach, covering nine agricultural commodities; the cross-sectional approach covered the period of 1995-2007, and the time-series covered the period of 1970- 2007. Both approaches validate the above proposition with a high degree of statistical reliability. Finally, the study identified the main sources of agricultural economic growth by categorising the variables into five main areas: cyclical reversion, structural policies and institutions, stabilisation policies, cyclical volatility and external conditions. The components of the structural policies and institutions category were found to be statistically significant, and were positive at the specified significance level (only RDGDP was related negatively). This implies that the growth was achieved with improved education, financial depth and trade openness. However, the negative relationship of RDGDP shows that the sector is suffering from debt crisis. Subsequently, farmers need to follow an effective debt management system.