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.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nmmu/vital:27363 |
| Date | January 2017 |
| Creators | Khapayi, Musa |
| Publisher | Nelson Mandela University, Faculty of Science |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis, Doctoral, DTech |
| Format | 425 leaves, pdf |
| Rights | Nelson Mandela University |
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