Agricultural Market Participation of Small Holder Farmers in South Africa

The need for promoting smallholder market participation has been increasingly recognized in efforts to bring about agricultural transformation in developing countries and is nowhere as evident as in Sub-Saharan Africa. In South Africa subsistence or the so called smallholders face several barriers that make it difficult for them to gain access to markets and productive assets. In marketing their agricultural produce, smallholder farmers find themselves at a major disadvantage. Many do not well understand the market, how it works and why prices fluctuate; they have little or no information on market conditions and prices; they are not organized collectively; and they have no experience of market negotiation. This book investigates the underlying factors behind farmers' market participation decisions and level of commercialisation of South African small scale farmers with a particular emphasis on transaction costs using econometric modelling approach. The result show that while both transaction costs and output prices are equally important for market entry, institutional innovations -such as belonging to farmers group, cooperating with white commercial farmers and owning transport facilities are also emerging to mitigate the costs of accessing markets. Moreover, access to extension services and production and liquid assets, such as land and non farm income, are the major determinants in increasing the level of commercialization. The policy requirements include: dissemination of market information to the small-scale farmers, strengthening of Farmers Organization and co-operatives, investment in Physical and institutional infrastructure and speed up or accelerating sustainable land reform, consider the possibility of increasing livestock production scale and expansion of livestock identification equipments for small-scale farmers.