CHAPTER ONE
INTRODUCTION
1.1 Background
of the study
Agriculture
plays an important role in uplifting the economy of South Africa. South
Africa is characterized
by very prominent dualism in its agricultural production. On one hand, there is
very well developed commercial agricultural sectors characterized by a
relatively small number of producers (about 60 000 commercial farmers) owning 87%
of the total agricultural areas and producing more than 95% of the marketed
output. On the other hand, a subsistence or small-scale agricultural sector
characterized by a very large number of producers, whose majority is settled in
the communal areas, making up about 13% of the agricultural land area (Kirsten
and Van Zyl, 1998 as cited by
Ngqangweni,
2000).
Various efforts to
promote small-scale farming have been made in the past decade. It remains
clear, however, that much more needs to be done to make a positive difference
in terms of the political objective of an integrated agricultural sector.
Integration will only happen when small-scale farmers fully participate in the
market (Azan and Besley, 1991; Makhura, 2001).
According to Makhura
(2001), small-scale farmers in the less-developed rural areas of South Africa
are generally poor and not entirely part of commercial agriculture
as a result the contribution of Gross National Product (GNP) is limited.
Small-scale
farmers residing in Limpopo Province are associated with poverty (Mpandeli, 2006).
According to a discussion on food security by the Department of Agriculture and
Land Affairs (DALA) and the Ministry of Agriculture and Land
Affairs (MALA), many
households are vulnerable to food insecurity including those in the Limpopo
Province (FIVIMS, 2003; Mpandeli, 2006).
The disadvantaged farmers
practise subsistence agriculture in overcrowded semi-arid rural areas.
Subsistence farming is characterized by low production, less opportunities of
owning land, limited access to inputs and credit. Farmers tend to engage in
off-farm or non-farm activities in order to generate enough income (Makhura,
2001).
The process of
agricultural transformation in South Africa involves moving small-scale farmers
from subsistence production to producing for the market. The latter provides a
number of benefits and advantages, including rural employment and income
generation (Ngqangweni, 2000). Furthermore, several studies (Delgado et al.
1998; Ngqangweni, 2000) had shown positive and strong multiplier effects of
investing in agriculture, in other words, agriculture has an important role to
play in fostering rural development and poverty alleviation. There are
constraints, like poverty and limited access to agricultural inputs which
affect small-scale farmers in the Limpopo Province.
The
small-scale sector is divided into three categories: net food buyers,
intermediate farmers and net food sellers. Net food buyers are those farmers
with less than 0.7 hectares who cannot produce food to satisfy their
subsistence needs given the technology they use. Resultantly they remain
dependent on off-farm activities. Intermediate smallholder farmers are those
with land holding between 0.7 and 1.5 hectares who produce just enough for
their survival but have very little for sale. Net food sellers are those
farmers with land holdings of more than 1.5 hectares who produce more than
their subsistence needs for survival during the year (Alwang and Siegel, 1999 as
cited by Baloyi et al. 2011).
According to Coetzee
(1998) as cited by Hlongwane and Belete (2005), there is a challenge in the
exact definition of a small-scale farmer and the author further argues that it
should be based on agricultural activity in whatever form. Small-scale is often
equated with a backward, non-productive, non-commercial subsistence agriculture
that is found in parts of the former homeland areas. The production level is
generally low due to a traditional land tenure system, lack of physical
infrastructure, lack of credit facilities and lack of extension services.
Maize is the most
important grain crop and is widely produced by small-scale famers (NDA, 2004).
South Africa is the main maize producer in the South African
Development Community (SADC), with an average production of about 9,6 million tonnes per
year over the past 10 years. Maize has a wider range of uses because of its
worldwide distribution and relatively lower prices. It is used directly for
human consumption in developing countries, as livestock feed and also as non-food products such as starch, acid and alcohol.
Recently there has been interest in using maize for production of ethanol, a
substitute for petroleum based fuel (NDA, 2004).
According to Elsamma
and George (2002) production is defined as the transformation of goods and
services into finished products (that is input-output relationship). The
efficiency of a farm is based on its ability to produce the greatest amount of
output possible from a fixed amount of inputs. In other words an efficient farm
is the one that can produce a given quantity of goods by using the least units
of inputs possible. In fact, the concept of efficiency is derived from a
particular interpretation of the notion of production frontier. Production
efficiency can be measured by two components called technical and allocative
efficiency (Torkamani and Harder, 1996).
Technical efficiency is
defined as the ability of a farm to obtain maximum attainable output from a
given set of physical inputs. Following the classical definition of Farrell
(1957), a firm is considered to be technically efficient if it obtains the
maximum attainable output given the amount of inputs used and technology.
Allocative efficiency on the other hand is defined as the ability of a farm to
use inputs in optimal proportions given their respective prices (Rukuni,1994).
The appropriate measure of technical
efficiency is input saving, which gives the maximum rate at which the use of
all the inputs can be reduced without reducing output.
Allocative
efficiency deals with the extent to which farmers make efficient decisions by
using inputs up to a level where their marginal contribution to production
value is equal to the factor cost (Rukuni, 1994). Allocative efficiency is
evaluated from the producer’s maximization point of view. The study of
efficiency focuses on the possibility of increasing output while conserving
resource use. Efficiency measurement provides information which is potentially
useful in the formation and analysis of the agricultural policy (Wang et al.
1996 as cited by Baloyi et al. 2011).
Technical inefficiency
arises when less than the maximum output is obtained from a given package of
factors. It is generally assumed to reflect inefficiency due to timing and
method of application of production inputs. Allocative or price inefficiency arises
when factors are used in proportions which do not minimize the cost of
producing a given level of output. There is failure to equate the ratio of
marginal products of inputs to the ratio of market prices. Allocative
inefficiency can be a reflection of unobserved differences in prices or
producers’ objectives other than profit maximization e.g. utility with risk
within utility function which cause different marginal conditions to hold
(Farrell, 1957).
Small-scale
farming can potentially contribute to agro industrial development.
Hence increasing the
number of small-scale farmers can increase the demand for agricultural inputs
such as fertilizers, pesticides, etc. Strategies to develop small-scale farming
and linking them to rural enterprises could reduce rural poverty and
limit-urban migration.
The importance of
sustaining agricultural production to improve the standard
has been recognized by all countries throughout the world (Ankomah, 2000).
The role of agriculture
in development was considered ancillary to the modern industrial sector where
most of the accumulation and growth was expected to take place. Subsequent
theoretical investigations and the very disappointing performance of agriculture
in many developing countries have led to the belief that the role of
agriculture in development should be re-examined (Ankomah,2000).
This study focuses on
technical and allocative efficiency because it is an important subject in
developing agriculture where resources are limited with high population growth
being common. The food balance sheet in Africa has shifted from positive to
negative. For example, between 1970 and 1980’s food production grew by 1.5%
while population growth was 3%. This has led to a decline in per capita food
consumption making Sub-Saharan Africa the only region in the world where
average calorific intake has declined over time. This problem of stagnation in
food production is reflected in growing reliance of food imports, food aid,
rising poverty and increasing degradation of the natural resource base
(La-anyami, 1986).
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