AN ANALYSIS OF ECONOMIC EFFICIENCY IN AGRICULTURE: A NONPARAMETRIC APPROACH

A nonparametric analysis of technical, allocative, scale, and scope efficiency of agricultural production is presented based on a sample of Wisconsin farmers. The results indicate the existence of important economies of scale on very small farms, and of some diseconomies of scale for the larger farms. Also, it is found that most farms exhibit substantial economies of scope, but that such economies tend to decline sharply with the size of the enterprises. Finally, the empirical evidence suggests significant linkages between the financial structure of the farms and their economic efficiency.Farm Management, Industrial Organization,

Should subsistence agriculture be supported as a strategy to address rural food insecurity?

At first glance South Africa’s black farming sector appears to contribute rather minimally to overall agricultural output in South Africa. However, despite the complexity involved in this sector and the often marginal conditions in which agriculture is practised it appears to be important to a large number of black households. Furthermore, the significance they attach to subsistence agriculture as means of supplementing household food supplies seems to heavily outweigh other reasons for engaging in agriculture. Some South African researchers have indicated the contribution subsistence production makes to household food security, despite the prevalent complexities and the low input nature of this production. Statistics South Africa’s Labour Force Survey data from 2001 to 2007 and a case study of subsistence farming in Limpopo Province are used to support the argument that, despite the complexity of this sector, the more than 4 million subsistence farmers, need and merit greater support. Such support should be based on the local context, build on and, where appropriate, improve existing local practices, while addressing various existing threats to this type of production. Recommendations are made as to what policy makers need to consider when considering how best to support subsistence production.subsistence production, Labour Force Survey, traditional crops, local agricultural practices, Consumer/Household Economics,

INDIRECT EFFECTS OF DIFFERENT AGRICULTURAL TRADE SCENARIOS: A SOUTH AFRICAN CASE STUDY

One of the most important policy measures used by government to influence agricultural production and trade patterns are tariffs. A substantial depreciation in the exchange rate will not be enough to compensate for the negative effects of removing tariffs if the playing field is not level for producers in South Africa. Although the import multiplier show that less inputs will be imported, this saving on foreign exchange is not big enough to outweigh the total impact of imports on the balance of trade. The value-added multiplier clearly indicate that reinvestment and consumer spending (buying power) in agriculture will receive a severe blow. Employment will be reduced, thus increasing the supply of labour into other sectors.International Relations/Trade,

Strategies to support South African smallholders as a contribution to government’s second economy strategy. Volume 2: Case studies

This second volume of Strategies to support South African smallholders as a contribution to government’s second economy strategy contains sixteen case studies that comprise the main data for the analysis detailed in Volume 1. This collection of case studies provides a useful resource on its own, providing a rich and diverse repository of narratives depicting various types of smallholders in diverse circumstances and environments. As researchers were given the latitude to deviate from a standardised approach, this volume reveals the authors’ different styles, different emphases, and indeed different disciplinary strengths. The ‘unit of analysis’ also differs across case studies: some are studies of single individuals, others focus on particular schemes or projects, and still others involve a comparative analysis of individuals or projects. Due to the complexity of categorising the case studies they have been simply grouped by province, and are ordered, roughly, from southwest to northeast

How can we promote a range of livelihood opportunities through land redistribution?

This position paper sketches an approach to improving land redistribution in South Africa in which the broad aim is to use redistribution to create a range of livelihood opportunities, in meaningful numbers, in proportion to the understood need. The approach laid out in the paper is informed first and foremost by a reflection on South Africa’s land reform to date, which among other things requires contemplation of the respective strengths and limitations of government and other role-players, and market-based versus other mechanisms. The main argument is that government can and must play an active role to ensure that land reform caters to the demand for small farms on which to create opportunities for commercially-oriented smallholders, and for small plots for those whose primary need is tenure and food security. Somewhat different mechanisms can serve the interests of those seeking help through land reform to expand into large-scale farming. The paper illustrates/estimates how these diverse needs could be addressed in a balanced manner, and met in significant numbers given a larger budget for land redistribution, which is not unimaginable given the current budget’s negligible size

Thematic study: Conceptualising finance to support labour-intensive land redistribution

This paper seeks to provide an overview and understanding of how South Africa’s smallholder farmers and small-scale black commercial farmers (‘SFs & SSBCFs’) presently finance their agricultural operations (excluding land acquisition), with a view to identifying where the current system could be improved so as to support an employment-intensive land reform premised on these types of farmers. As such, the paper seeks to identify what are the main sources of loan and grant finance to farmers, and to indicate what is known about the reach and effectiveness of these various institutions / products / programmes. The paper also briefly considers what we know about self-financing, while also touching on sundry other financial services and issues, in particular input subsidies, e-money and insurance. While doing so, the paper traces recent policy discussions and debates regarding the provision of agricultural finance. The most salient policy development in recent years is the emergence of a consensus that grant finance should be reduced in favour of loan finance, which has been followed by an abortive attempt to introduce ‘blended finance’. While it is difficult to develop a precise picture of the funding landscape on account of lack of or contradictory data, and the current flux within the sector, some patterns do emerge. First, it is indeed the case that grant finance is almost on a par with loan finance, however there is an evident division of labour whereby loan finance is channelled more towards larger-scale black farmers, and the majority of beneficiaries of grant finance are towards the subsistence end of the spectrum. (Having said this, while subsistence producers are more numerous as beneficiaries of grant funding, it is not clear that, collectively, they receive most of this funding.) There is a logic to this state of affairs in that, to the extent government renders material support to subsistence farmers, it would not make sense for it to be in the form of loans unless the idea is for them to commercialise. On the other hand, much of the support to subsistence producers in principle is in fact meant to promote commercialisation, but appears unable to do so, suggesting that at least some of these grant programmes are ill-conceived. Moreover, among commercially oriented smallholder farmers, there is a woeful absence of both grant and loan finance, and arguably it would make sense to upscale the loan finance aspect. Where SFs & SSBCFs are concerned, a particular problem is the absence of short-term production finance. MAFISA had tried to fill the vacuum, but at present is operating at an extremely low level and, it has been argued, its management challenges have not warranted recapitalisation. The Land Bank, meanwhile, has struggled to do business at scale with SFs & SSBCFs, and has struggled in particular to provide production credit, especially unsecured production credit. Of course, these concerns extend well beyond land reform. Overall, the paper demonstrates that, while there are many financing tools in place to support black farmers in general as well as land reform beneficiaries in particular, their collective footprint is modest-to-small relative to current needs, and grossly inadequate relative to the needs implied by a significantly scaled up redistribution programme aiming to support meaningful numbers of SF and SSBCF beneficiaries

Study of the incidence and nature of chronic poverty and development policy in South Africa: An overview

The purpose of this study is fourfold: first, to summarise the current state of knowledge about chronic poverty in South Africa; second, to describe the range of existing governmental and civil society initiatives which address chronic poverty; third, to identify challenges to addressing chronic poverty in South Africa; and fourth, to identify themes for further research. For the purposes of this study, house- holds or individuals are understood to be in chronic poverty when their condition of poverty endures over a period of time. Different researchers propose different time periods as characteristic of chronic poverty (for example, six months, ten years); this is usually taken to mean that the household or individual remains beneath the poverty line for all or virtually all of this period. Alternatively, and perhaps more meaningfully, chronic poverty can be understood as the inability of households or individuals, perhaps for lack of opportunity, to better their circumstances over time or to sustain themselves through difficult times. Chronic poverty can be a function of an individual’s characteristics (for example, elderly, disabled), or of the environment (for example, sustained periods of high unemployment, landlessness), or of a combination of the two. Indeed, a common scenario in South Africa involves the coincidence of poor health, meagre education, and fractured families, on the one hand, with skewed resource distribution, inadequate infrastructure, and scarce employment opportunities, on the other. The combination is more than sufficient to trap many people in poverty. To date, there has been only one set of data collected in South Africa which allows an inter-temporal comparison among the same households. This is the KwaZulu-Natal Income Dynamics Study (KIDS) which, as the name implies, covers only one of South Africa’s nine provinces. Because this data set and the analyses based upon it are unique, we discuss it at length. One of the important findings from the KIDS data is that 22 per cent of the 1 200 African households that were sur- veyed were poor in both 1993 and 1998. This represents about two thirds of all households that were poor in 1993, and one half of those that were poor in 1998, showing that at least half of those households that are poor, are chronically poor. Another interesting finding is that ‘ultra- poverty’ is not synonymous with chronic poverty. In other words, a household that is just below the poverty line in one period is no more likely to move above the poverty line in the next period than a household that started off much further below the poverty line. A key determinant of whether a household stays in poverty, escapes from poverty, or falls into poverty, is how that household fares in terms of employment. One of the surprising findings from the KIDS data set was the degree of employment volatility experienced by households. Notwithstanding the contribution of household income sources other than formal sector employment, employ- ment apparently makes the difference between survival and total destitution, but less commonly associated with the difference between being poor and not being poor. Income sources outside the formal sector may make the difference between survival and total destitution, but are less likely to determine whether an individual or household is poor or not. The KIDS-based studies as well as other poverty analyses allow us to identify groups especially likely to be chronically poor. These include rural households, households headed by women, households effectively headed by elderly people, and households headed by former (retrenched) farm workers. Over the next 10 years, however, AIDS orphans and households directly affected by AIDS will probably figure as the most prominent category of people trapped in chronic poverty

Rural jobs: Commodity sector possibilities and constraints – the case of smallholder irrigation schemes in the Eastern Cape

• NDP – 1 million new jobs in agriculture; largely premised on expanding the area under irrigation • Cousins – “The evidence from Tugela Ferry and other irrigation schemes shows that where [small-scale farmers] have access to fertile soils, irrigation water and markets, small-scale farmers can be highly productive and earn reasonable returns” (2012

The interaction between the land redistribution programme and the land market in South Africa: A perspective on the willing-buyer/willing-seller approach

The debate rages on, in South Africa and elsewhere, about the desirability and efficacy of the willing-buyer/willing-seller approach to land redistribution. In South Africa, the willing-buyer/willing-seller approach is frequently blamed for the fact that the government’s redistribution programme has thus far fallen well short of expectations. To what extent is this judgement justified? Moreover, if the willing-buyer/willing-seller approach has indeed contributed to the unimpressive rate of delivery of the land redistribution programme, is this on account of certain aspects of the approach i.e. which could be selectively remedied ñ or is the willing-buyer/willing-seller approach fundamentally unsuited to the task allocated to it? The objective of this paper is to provide a partial answer to these questions. In short, the paper argues, on the one hand, that the willing-buyer/willing-seller approach is not as fundamentally ill-suited a mechanism to effect state-supported land redistribution as is commonly claimed. On the other hand, the paper suggests that the unimaginative manner in which the willing-buyer/willing-seller approach is being applied is definitely contributing to the slow pace of redistribution, and reflects a lack of vision and ambition among policy-makers. The development of the argument involves examining the interaction between the land market and the redistribution programme from different angles. In one angle, we seek simply to gauge the magnitude of the land redistribution programme relative to the level of normal activity in the rural property market (Section 4). A second angle involves an econometric exercise to determine whether or not the redistribution programme affects market prices of rural land (Section 5). And from a third angle, we review the experiences and perceptions of estate agents and staff of the Department of Land Affairs, so as to shed light on some of the specific allegations as to how the land market may be inhibiting redistribution (Section 6). We begin, however, with two sections by way of background, the one offering a synopsis of the debate around the willing-buyer/willing-seller approach (Section 2), and the other reporting recent trends in the land market (Section 3). We conclude with an examination of a number of specific policy issues, some of which suggest promising avenues for policy development and some of which do not (Section 7)

Development of evidence-based policy around small-scale farming

How to support small-scale and larger commercial farmers, and to make sure that they are productive and contribute effectively to the rural economy and to national food security