Agribusiness challenges to effectiveness of contract farming in commercialisation of small-scale vegetable farmers
- Authors: Khapayi, Musa
- Date: 2017
- Subjects: Farms, Small -- South Africa -- Eastern Cape , Agriculture -- Economic aspects -- South Africa -- Eastern Cape , Agricultural industries -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Doctoral , DTech
- Identifier: http://hdl.handle.net/10948/13981 , vital:27363
- Description: The spread of contract farming in South Africa in recent years has provoked an ideological debate in literature. Linking small-scale vegetable farmers with lucrative agricultural markets through agribusiness value chains is seen as one of the foremost emerging agricultural practices to develop the subsistence farming sector into a mainstream economic sector – thereby revitalising the rural economy and alleviating poverty levels in the developing rural areas of South Africa. However, the challenges agribusiness and small-scale farmers experience in contract farming engagement and the prospects for enhancing the inclusion of small-scale farmers into modern value chains remain open to debate – two decades after transition to democracy. Yet the factors and mechanisms influencing the effective application of contract farming in the transition to commercial farming by small-scale farmers have not been thoroughly explored in South African research. Despite the efforts and the substantial investments made and the various policies and initiatives instigated to fast-track the linkages of small-scale farmers into high-value markets, the success stories of previously disadvantaged farmers operating in commercial agri-food chains are rare. Given the millions of small-scale farmers in former homelands alone, the negligible number of small-scale farmers successfully operating in commercial agri-food chains shows that the objectives to enable small-scale farmers to improve their livelihoods through participation in commercial agri-food chains have not yet been met. The broad objectives of the study were therefore to investigate the agribusiness challenges inherent in contract farming and the conditions and incentives required by agribusiness firms to engage small-scale vegetable farmers in contract farming programmes. Furthermore, the study examined the role played by the South African government to reduce the high transaction costs incurred by agribusinesses when engaging small-scale farmers in contractual arrangements. The Amathole and Sarah Baartman (formerly Cacadu) district municipalities in the Eastern Cape Province of South Africa were chosen as the composite survey area for this study. A predominantly qualitative research approach was applied to gather data on the phenomena under study. The following methodologies and research instruments and tools were selected. Firstly – as the secondary component of the research – a systematic review of literature to date was conducted to guide the empirical research and primary methodology. Secondly, the empirical component of the study comprised a questionnaire survey, unstructured interviews and focus group discussions. The questionnaire survey was used to collect data from the agribusiness firms in the area surveyed concerning the following aspects: the significant determinants of contract farming, the incentives required by the agribusiness firms to engage small-scale vegetable farmers in their contract farming programmes and the challenges faced by agribusiness firms in their interaction with small-scale farmers in contractual arrangements. Unstructured interviews were used to gather data from officials at each of the three levels of government – the Department of Rural Development and Land Reform nationally, Department of Agriculture and Land Reform provincially and (at local government level) two district municipalities – on the role played by government to reduce the high transaction costs incurred by agri-firms when procuring agricultural raw materials from small-scale vegetable farmers. Focus group discussions were conducted with small-scale farmers regarding their perspective on working with agribusiness firms and to establish the distinguishing characteristics of small-scale farmers in the area surveyed. Relevant policy documents collected from two of the three representative groups of the study population, i.e. agribusiness personnel and government officials, provided the essential context. The study revealed a limited number of contract farming business linkages between small-scale vegetable farmers and agribusiness firms in the survey area. Those that do exist are problematic to both the agribusiness firms and the small-scale farmers. It emerged that the contract farming environment in the area surveyed is highly polarised and characterised by a fundamental conflict of interest between agribusiness and farmer. Among the divergent key factors inhibiting contract farming engagement were a lack in terms of quality seeds, trust, entrepreneurial skills and formal contract agreements. Asset endowment (both land and non-land assets) was found to be significant pre-selection determinants in the farmer’s capacity to be contracted. Access to innovative technology, as well as government incentives such as production inputs, were found to be critical to agribusiness firms to engage smallscale farmers in their contract farming programmes. Government assistance in terms of high transaction costs to agribusiness firms working with large groups of small-scale farmers was found to be essential but inadequate under current policy. This impacts directly on the effectiveness and promotion of contract farming. Furthermore, the current results corroborate the findings of numerous South African studies in the vast body of worldwide research. Firstly, lack of land and non-land assets continue to be major impediments to the direct participa-tion of small-scale farmers in contract farming programmes and, secondly, the transaction and market information costs incurred by agribusiness prevent the participation of less endowed farmers in contract farming programmes. Conducted within the interpretivist paradigm, the explorative research identified wide-ranging challenges in the relationship between agri-business and small-scale farmers which directly impact the effective-ness of contract farming as a development and agrarian reform strategy. Despite their problematic relationship, however, agribusiness and small-scale contract farmers were in agreement that the government needs to expand its support for agri-firms to incentivise greater numbers of small-scale farmers having the opportunity to achieve commercial status through contract farming. The study therefore recommends a collaborative partnership between private firms and government, with state support through revised policies and development programmes. These amendments are crucial to enhancing the engagement of small-scale vegetable farmers in lucrative agri-food chains.
- Full Text:
- Date Issued: 2017
- Authors: Khapayi, Musa
- Date: 2017
- Subjects: Farms, Small -- South Africa -- Eastern Cape , Agriculture -- Economic aspects -- South Africa -- Eastern Cape , Agricultural industries -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Doctoral , DTech
- Identifier: http://hdl.handle.net/10948/13981 , vital:27363
- Description: The spread of contract farming in South Africa in recent years has provoked an ideological debate in literature. Linking small-scale vegetable farmers with lucrative agricultural markets through agribusiness value chains is seen as one of the foremost emerging agricultural practices to develop the subsistence farming sector into a mainstream economic sector – thereby revitalising the rural economy and alleviating poverty levels in the developing rural areas of South Africa. However, the challenges agribusiness and small-scale farmers experience in contract farming engagement and the prospects for enhancing the inclusion of small-scale farmers into modern value chains remain open to debate – two decades after transition to democracy. Yet the factors and mechanisms influencing the effective application of contract farming in the transition to commercial farming by small-scale farmers have not been thoroughly explored in South African research. Despite the efforts and the substantial investments made and the various policies and initiatives instigated to fast-track the linkages of small-scale farmers into high-value markets, the success stories of previously disadvantaged farmers operating in commercial agri-food chains are rare. Given the millions of small-scale farmers in former homelands alone, the negligible number of small-scale farmers successfully operating in commercial agri-food chains shows that the objectives to enable small-scale farmers to improve their livelihoods through participation in commercial agri-food chains have not yet been met. The broad objectives of the study were therefore to investigate the agribusiness challenges inherent in contract farming and the conditions and incentives required by agribusiness firms to engage small-scale vegetable farmers in contract farming programmes. Furthermore, the study examined the role played by the South African government to reduce the high transaction costs incurred by agribusinesses when engaging small-scale farmers in contractual arrangements. The Amathole and Sarah Baartman (formerly Cacadu) district municipalities in the Eastern Cape Province of South Africa were chosen as the composite survey area for this study. A predominantly qualitative research approach was applied to gather data on the phenomena under study. The following methodologies and research instruments and tools were selected. Firstly – as the secondary component of the research – a systematic review of literature to date was conducted to guide the empirical research and primary methodology. Secondly, the empirical component of the study comprised a questionnaire survey, unstructured interviews and focus group discussions. The questionnaire survey was used to collect data from the agribusiness firms in the area surveyed concerning the following aspects: the significant determinants of contract farming, the incentives required by the agribusiness firms to engage small-scale vegetable farmers in their contract farming programmes and the challenges faced by agribusiness firms in their interaction with small-scale farmers in contractual arrangements. Unstructured interviews were used to gather data from officials at each of the three levels of government – the Department of Rural Development and Land Reform nationally, Department of Agriculture and Land Reform provincially and (at local government level) two district municipalities – on the role played by government to reduce the high transaction costs incurred by agri-firms when procuring agricultural raw materials from small-scale vegetable farmers. Focus group discussions were conducted with small-scale farmers regarding their perspective on working with agribusiness firms and to establish the distinguishing characteristics of small-scale farmers in the area surveyed. Relevant policy documents collected from two of the three representative groups of the study population, i.e. agribusiness personnel and government officials, provided the essential context. The study revealed a limited number of contract farming business linkages between small-scale vegetable farmers and agribusiness firms in the survey area. Those that do exist are problematic to both the agribusiness firms and the small-scale farmers. It emerged that the contract farming environment in the area surveyed is highly polarised and characterised by a fundamental conflict of interest between agribusiness and farmer. Among the divergent key factors inhibiting contract farming engagement were a lack in terms of quality seeds, trust, entrepreneurial skills and formal contract agreements. Asset endowment (both land and non-land assets) was found to be significant pre-selection determinants in the farmer’s capacity to be contracted. Access to innovative technology, as well as government incentives such as production inputs, were found to be critical to agribusiness firms to engage smallscale farmers in their contract farming programmes. Government assistance in terms of high transaction costs to agribusiness firms working with large groups of small-scale farmers was found to be essential but inadequate under current policy. This impacts directly on the effectiveness and promotion of contract farming. Furthermore, the current results corroborate the findings of numerous South African studies in the vast body of worldwide research. Firstly, lack of land and non-land assets continue to be major impediments to the direct participa-tion of small-scale farmers in contract farming programmes and, secondly, the transaction and market information costs incurred by agribusiness prevent the participation of less endowed farmers in contract farming programmes. Conducted within the interpretivist paradigm, the explorative research identified wide-ranging challenges in the relationship between agri-business and small-scale farmers which directly impact the effective-ness of contract farming as a development and agrarian reform strategy. Despite their problematic relationship, however, agribusiness and small-scale contract farmers were in agreement that the government needs to expand its support for agri-firms to incentivise greater numbers of small-scale farmers having the opportunity to achieve commercial status through contract farming. The study therefore recommends a collaborative partnership between private firms and government, with state support through revised policies and development programmes. These amendments are crucial to enhancing the engagement of small-scale vegetable farmers in lucrative agri-food chains.
- Full Text:
- Date Issued: 2017
Agricultural public spending, growth and poverty linkage hypotheses in the Eastern Cape Province of South Africa
- Authors: Ndhleve, Simbarashe
- Date: 2012
- Subjects: Poverty -- Economic aspects -- South Africa -- Eastern Cape , Rural poor -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Rural development -- South Africa -- Eastern Cape , Agricultural industries -- South Africa -- Eastern Cape , Government spending policy -- South Africa -- Eastern Cape , Finance, Public -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Doctoral , PhD (Agricultural Economics)
- Identifier: vital:11157 , http://hdl.handle.net/10353/493 , Poverty -- Economic aspects -- South Africa -- Eastern Cape , Rural poor -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Rural development -- South Africa -- Eastern Cape , Agricultural industries -- South Africa -- Eastern Cape , Government spending policy -- South Africa -- Eastern Cape , Finance, Public -- South Africa -- Eastern Cape
- Description: The adoption of the Millennium Development Goal 1 (MDG1) of reducing the rate of poverty to half of the 1990-level by 2015, the advent of democracy in South Africa, among other things, have raised concerns over the potential role of the agricultural sector. There is a belief that the sector has the capacity to successfully reduce poverty among the rural masses and contribute to addressing the problem of inequality in South Africa. In line with that thinking, South Africa‘s agricultural sector has attracted considerable fiscal policy interest. For instance, South Africa‘s statistics show that public investments in agricultural development programmes have been growing. In spite of this, rural poverty is still a major concern on an overall basis. However, this might not be the case in the Eastern Cape Province and the situation might be different for each district municipality. This study assesses the linkages between public agricultural investment, agricultural growth and poverty reduction in the Eastern Cape Province. The study also addresses the question whether Eastern Cape Province is on course to meet several regional development targets. The study also aims to provide an estimate of the amount of agricultural investment required to attain the agricultural productivity growth rate which is sufficient to meet MDG1. The study reviewed the various theories of public spending, linkages between public investment and agricultural growth and how these components affect the incidence of poverty. The conventional wisdom that public expenditure in agriculture positively affects economic growth and this growth consequently reduces poverty was noted. The reviews also revealed that in many developing countries, the current level of public agricultural investment needs to be increased significantly for countries to meet the MDG1. This study employed the decomposition technique and growth elasticity of poverty concept to estimate the response of poverty to its key determinants. The size of public spending, prioritization of public spending and the intensity in the use of public funds emerged as important in increasing agricultural production. The relationship between government investment in agriculture and agricultural GDP shows iv that public funds were largely behind the province‘s success in increasing agricultural production throughout the period from 1990s to 2010. Agricultural spending went to sustainable resource management, administrative functions and then farmer support programme. Exceptional growth in the size of spending was recorded in respect to agricultural economic function, structured agricultural training, sustainable resource management and veterinary services. Overall output from the agricultural sector fluctuated, and the sector contributed less than 5 per cent to the total provincial GDP. Correlations between growth in agricultural sector and changes in the incidence of poverty in Eastern Cape show that during the period 1995 to 2000, increases in the agricultural GDP per capita may have failed to benefit the poor as poverty increased in all the reported cases.–However, for the period between 2005 and 2010, the situation was different and it was observed that increases in agricultural GDP per capita and were associated with reduction in the incidence of poverty. Growth elasticity of poverty (GEP) estimates reveal that agricultural GDP per capita was more important in reducing poverty in 5 out of the 7 district municipalities. Non-agricultural GDP per capita was only important in two district municipalities. It emerged that most of the district municipalities are not in a position to meet any of the regional set goals. This situation is largely attributable to the province‘s failure to boost agricultural production which is an outcome of low and inefficient public expenditure management, inconsistent and misaligned policies and failure to fully embrace the concept of pro-poor growth. Varied provisional estimates for the required agricultural growth rate and the increase in public spending on agriculture required in order to reach MDG1 were calculated for each district municipalities. All the district municipalities of Eastern Cape will need to increase public investment in agriculture for them to achieve MDG1.
- Full Text:
- Date Issued: 2012
- Authors: Ndhleve, Simbarashe
- Date: 2012
- Subjects: Poverty -- Economic aspects -- South Africa -- Eastern Cape , Rural poor -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Rural development -- South Africa -- Eastern Cape , Agricultural industries -- South Africa -- Eastern Cape , Government spending policy -- South Africa -- Eastern Cape , Finance, Public -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Doctoral , PhD (Agricultural Economics)
- Identifier: vital:11157 , http://hdl.handle.net/10353/493 , Poverty -- Economic aspects -- South Africa -- Eastern Cape , Rural poor -- South Africa -- Eastern Cape , Sustainable development -- South Africa -- Eastern Cape , Rural development -- South Africa -- Eastern Cape , Agricultural industries -- South Africa -- Eastern Cape , Government spending policy -- South Africa -- Eastern Cape , Finance, Public -- South Africa -- Eastern Cape
- Description: The adoption of the Millennium Development Goal 1 (MDG1) of reducing the rate of poverty to half of the 1990-level by 2015, the advent of democracy in South Africa, among other things, have raised concerns over the potential role of the agricultural sector. There is a belief that the sector has the capacity to successfully reduce poverty among the rural masses and contribute to addressing the problem of inequality in South Africa. In line with that thinking, South Africa‘s agricultural sector has attracted considerable fiscal policy interest. For instance, South Africa‘s statistics show that public investments in agricultural development programmes have been growing. In spite of this, rural poverty is still a major concern on an overall basis. However, this might not be the case in the Eastern Cape Province and the situation might be different for each district municipality. This study assesses the linkages between public agricultural investment, agricultural growth and poverty reduction in the Eastern Cape Province. The study also addresses the question whether Eastern Cape Province is on course to meet several regional development targets. The study also aims to provide an estimate of the amount of agricultural investment required to attain the agricultural productivity growth rate which is sufficient to meet MDG1. The study reviewed the various theories of public spending, linkages between public investment and agricultural growth and how these components affect the incidence of poverty. The conventional wisdom that public expenditure in agriculture positively affects economic growth and this growth consequently reduces poverty was noted. The reviews also revealed that in many developing countries, the current level of public agricultural investment needs to be increased significantly for countries to meet the MDG1. This study employed the decomposition technique and growth elasticity of poverty concept to estimate the response of poverty to its key determinants. The size of public spending, prioritization of public spending and the intensity in the use of public funds emerged as important in increasing agricultural production. The relationship between government investment in agriculture and agricultural GDP shows iv that public funds were largely behind the province‘s success in increasing agricultural production throughout the period from 1990s to 2010. Agricultural spending went to sustainable resource management, administrative functions and then farmer support programme. Exceptional growth in the size of spending was recorded in respect to agricultural economic function, structured agricultural training, sustainable resource management and veterinary services. Overall output from the agricultural sector fluctuated, and the sector contributed less than 5 per cent to the total provincial GDP. Correlations between growth in agricultural sector and changes in the incidence of poverty in Eastern Cape show that during the period 1995 to 2000, increases in the agricultural GDP per capita may have failed to benefit the poor as poverty increased in all the reported cases.–However, for the period between 2005 and 2010, the situation was different and it was observed that increases in agricultural GDP per capita and were associated with reduction in the incidence of poverty. Growth elasticity of poverty (GEP) estimates reveal that agricultural GDP per capita was more important in reducing poverty in 5 out of the 7 district municipalities. Non-agricultural GDP per capita was only important in two district municipalities. It emerged that most of the district municipalities are not in a position to meet any of the regional set goals. This situation is largely attributable to the province‘s failure to boost agricultural production which is an outcome of low and inefficient public expenditure management, inconsistent and misaligned policies and failure to fully embrace the concept of pro-poor growth. Varied provisional estimates for the required agricultural growth rate and the increase in public spending on agriculture required in order to reach MDG1 were calculated for each district municipalities. All the district municipalities of Eastern Cape will need to increase public investment in agriculture for them to achieve MDG1.
- Full Text:
- Date Issued: 2012
Analysis of food value chains in smallholder crop and livestock enterprises in Eastern Cape Province of South Africa
- Authors: Muchara, Binganidzo
- Date: 2011
- Subjects: Agricultural industries -- South Africa -- Eastern Cape , Food industry and trade -- South Africa -- Eastern Cape , Food supply -- South Africa -- Eastern Cape , Farms, Small -- South Africa -- Eastern Cape , Stochastic processes , Agriculture -- South Africa -- Eastern Cape , Business enterprises -- South Africa -- Eastern Cape , Livestock -- South Africa -- Eastern Cape , Crops -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Masters , MSc Agric (Agricultural Economics)
- Identifier: vital:11158 , http://hdl.handle.net/10353/d1000983 , Agricultural industries -- South Africa -- Eastern Cape , Food industry and trade -- South Africa -- Eastern Cape , Food supply -- South Africa -- Eastern Cape , Farms, Small -- South Africa -- Eastern Cape , Stochastic processes , Agriculture -- South Africa -- Eastern Cape , Business enterprises -- South Africa -- Eastern Cape , Livestock -- South Africa -- Eastern Cape , Crops -- South Africa -- Eastern Cape
- Description: The study was conducted in Mbozi and Ciko villages in Mbhashe Local Municipality of the Eastern Cape Province of South Africa. Two irrigation projects in the area were studied. Consumers and agricultural commodity traders in Willowvale Town, Dutywa, Butterworth and East London were also interviewed. The major objective of the study is to profile and map cabbage, maize and cattle food value chains broadly, and to understand their nature, constraints and opportunities in smallholder agriculture. A multi-stage random sampling procedure was used in which the first stage involved selecting the local government areas. This was followed by the selection of the district and then the respondents. A total of 168 participants were sampled in the proportion of 82 smallholder farmers, 41 consumers, 26 hawkers and 20 agricultural commodity traders. Focus group discussions and key informant interviews were also used during the data collection process. Value Chain mapping was done using the commodity based approach. All value chains under study indicated that they are short and commodities were transacted in unprocessed form. As cabbages and maize move from the farm to retail outlets, value addition start to take place through transportation to the market and processing in supermarkets. The cattle value chain however does not have a forward linkage beyond the two administrative boundaries of the two communities. Less than 3% of the farmers traded livestock, and this was mostly through private sales to neighbours. The farmers‘ major goal in agricultural production is assumed to be an important aspect in lengthening the value chain. As such, results of a Pearson‘s correlation exercise indicated that there is a significant relationship at 0.05% level between goals of the farmers and the village of origin. Some factors that showed significance (p=0.05) in influencing farmers‘ goals are membership of an irrigation project and household sources of income. An analysis of determinants of technical efficiency at farm level was performed using the stochastic frontier model for cabbage, maize and cattle enterprises. The results showed that rainfall adequacy, input costs, market channels and quantity sold are important determinants of cabbage production efficiency. On the other hand, maize production efficiency is positively determined by market price, area under production and rainfall adequacy. Market related variables are major drivers of the cattle value chain efficiency and these include cattle prices, market satisfaction, market channel and farm labour.
- Full Text:
- Date Issued: 2011
- Authors: Muchara, Binganidzo
- Date: 2011
- Subjects: Agricultural industries -- South Africa -- Eastern Cape , Food industry and trade -- South Africa -- Eastern Cape , Food supply -- South Africa -- Eastern Cape , Farms, Small -- South Africa -- Eastern Cape , Stochastic processes , Agriculture -- South Africa -- Eastern Cape , Business enterprises -- South Africa -- Eastern Cape , Livestock -- South Africa -- Eastern Cape , Crops -- South Africa -- Eastern Cape
- Language: English
- Type: Thesis , Masters , MSc Agric (Agricultural Economics)
- Identifier: vital:11158 , http://hdl.handle.net/10353/d1000983 , Agricultural industries -- South Africa -- Eastern Cape , Food industry and trade -- South Africa -- Eastern Cape , Food supply -- South Africa -- Eastern Cape , Farms, Small -- South Africa -- Eastern Cape , Stochastic processes , Agriculture -- South Africa -- Eastern Cape , Business enterprises -- South Africa -- Eastern Cape , Livestock -- South Africa -- Eastern Cape , Crops -- South Africa -- Eastern Cape
- Description: The study was conducted in Mbozi and Ciko villages in Mbhashe Local Municipality of the Eastern Cape Province of South Africa. Two irrigation projects in the area were studied. Consumers and agricultural commodity traders in Willowvale Town, Dutywa, Butterworth and East London were also interviewed. The major objective of the study is to profile and map cabbage, maize and cattle food value chains broadly, and to understand their nature, constraints and opportunities in smallholder agriculture. A multi-stage random sampling procedure was used in which the first stage involved selecting the local government areas. This was followed by the selection of the district and then the respondents. A total of 168 participants were sampled in the proportion of 82 smallholder farmers, 41 consumers, 26 hawkers and 20 agricultural commodity traders. Focus group discussions and key informant interviews were also used during the data collection process. Value Chain mapping was done using the commodity based approach. All value chains under study indicated that they are short and commodities were transacted in unprocessed form. As cabbages and maize move from the farm to retail outlets, value addition start to take place through transportation to the market and processing in supermarkets. The cattle value chain however does not have a forward linkage beyond the two administrative boundaries of the two communities. Less than 3% of the farmers traded livestock, and this was mostly through private sales to neighbours. The farmers‘ major goal in agricultural production is assumed to be an important aspect in lengthening the value chain. As such, results of a Pearson‘s correlation exercise indicated that there is a significant relationship at 0.05% level between goals of the farmers and the village of origin. Some factors that showed significance (p=0.05) in influencing farmers‘ goals are membership of an irrigation project and household sources of income. An analysis of determinants of technical efficiency at farm level was performed using the stochastic frontier model for cabbage, maize and cattle enterprises. The results showed that rainfall adequacy, input costs, market channels and quantity sold are important determinants of cabbage production efficiency. On the other hand, maize production efficiency is positively determined by market price, area under production and rainfall adequacy. Market related variables are major drivers of the cattle value chain efficiency and these include cattle prices, market satisfaction, market channel and farm labour.
- Full Text:
- Date Issued: 2011
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