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Agroecological location of farms and choice of drought coping strategies of smallholder farmers in Swaziland
(African Economic Research Consortium, 2023) Khumalo, Temndeni Amnestantia
This study uses data from Swaziland to test whether variations in local agro-ecological regions levels of drought susceptibility and other socioeconomic factors significantly determine farmer selected drought coping and adaptation strategies. This was in response to the policy need to understand how livelihoods of poor, rural, smallholder farming communities can be made more resilient in the face of recurrent droughts. Swaziland’s agro ecological regions were divided into those that were highly susceptible (Lubombo and Lowveld) and those that were relatively less susceptible (Highveld and Middleveld) to drought. Using structured questionnaires and face-to-face interviews, the study compared 115 randomly selected farmers from the former and 50 farmers from the latter region based on the following household level indicators: behavioural responses to perceived long-term changes in temperature and precipitation; the impact and behavioural responses to the most recent drought event; how farmers would have responded if they had ex ante information on the most recent drought event; ex ante private investment in anticipation of future drought events; and finally farmer preferences for ex ante public investments in anticipation of future drought events.
An analysis of farmers’ preferences for crop insurance: a case of maize farmers in Swaziland
(African Economic Research Consortium, 2023) Mbonane, Nobuhle Duduzile
Agriculture is an important sector in sub-Saharan Africa, serving as a stimulus for growth and the provision of food security, and assisting in poverty reduction (Food and Agricultural Organization (FAO), 2000). However, food insecurity and poverty remain pressing issues in the sub-Saharan region. According to Cervantes-Godoy et al. (2013), the reasons for food insecurity and poverty are the susceptibility of agriculture to production, policy and price risks which impact farmers’ income and welfare. The smallholder agricultural sector in many countries is the largest contributor to rural economies and to the livelihoods of the majority of the population (FAO, 2005). Agricultural production is subject to various risks, including drought, outbreaks of disease and floods, among others. Climate change is also one of the predominant sources of production risks (Ramiro, 2009). Such risks are experienced by farmers in both developing and developed countries, but they frequently have different consequences in different places (World Bank, 2005). They can influence production choices, agricultural production or farm incomes and can subsequently affect the livelihood of people dependent on agriculture. Furthermore, they may impede future investments and the growth of agricultural businesses. It is therefore imperative to gain a detailed understanding of how these risks affect agricultural production and how they can be mitigated. Smallholder farmers often face challenges caused by uncertain weather conditions, insecure land ownership and restricted access to capital and other farm inputs. Considering the risks associated with agricultural production, banks are unlikely to lend to farmers in disaster prone areas if the shocks can, potentially, result to loan defaults (The Guardian, 2014). Improving smallholder maize production is a vital strategy in addressing the roots of poverty and food insecurity.
Analysis of main determinants of soya bean price volatility in Malawi
(African Economic Research Consortium, 2018-11) Chimaliro, Aubrey Victor
The study primarily focuses on analysing the extent of soybean price volatility in Malawi. The interest in the study was triggered by the findings from literature noting soybean prices in Malawi as being particularly volatile. Soybean is one of the most important oilseed crops in Malawi and has the potential to become a major export crop. It offers good export prospects to neighbouring countries in Southern Africa, but has also been prioritised for its potential domestic contribution in Malawi. It is regarded as one of the value chains that promotes better nutrition in Malawi since most diets are dominated by maize, which contributes to malnutrition in Malawi. The study empirically estimates soybean price volatility using a GARCH (1,1) model and results indicate that both the lagged squared residual and the lagged conditional variance have an effect on the conditional variance of soybean prices. GARCH terms are significant, indicating some volatility clustering in monthly returns of soybeans in Malawi, South Africa and the world. The study confirms that soybean prices in Malawi have been more volatile relative to South Africa and the USA. To evaluate the extent to which domestic soybean price volatility can be attributed to regional and global market volatility, the Engle-Granger procedure was employed to estimate long-run co-integration between soybean prices in Malawi, South Africa and the world. The prices are categorised into six pairs and testing the long-run co-integration between these pairs involve both directions. Five out of the six pairs of prices exhibit long-run co-integrating relationships. An error correction model (ECM) is also employed to estimate the speed of adjustment to the equilibrium for five co-integrated price series. South Africa is the fastest in responding to the USA price changes, taking two months. Malawi is the second fastest since it takes about four months for soybean prices to respond to shocks in South African markets. However, it takes about seven months for the USA soybean prices to respond to price shocks in the South African markets which is longer than the period that Malawi takes to respond. South Africa takes nine months to respond to the shocks that occur in the Malawian markets. USA is the lowest in terms of the speed of adjustment since it takes about sixteen months to respond to the Malawian market shocks. Therefore, this study agrees with expectation that changes in the international markets affect the domestic markets. This is so because South Africa is a small nation in the international soybean market and Malawi is even much smaller – the volumes traded in these markets are considered too small to have any meaningful impact on world market prices. Lastly, to evaluate the influence of shocks on the South African prices, as well as selected macro-economic variables in Malawi on soybean price volatility in Malawi, the study employs a vector error correction model (VECM) to evaluate the long- and short-run relationship between soybean prices and explanatory variables (South Africa soybean prices, exchange rates and consumer price index). The error correction coefficient of -0.2089 is negative and highly significant which is in line with expectations. The Johansen test points to the possibility of 1 or 2 cointegrated relationships between variables. The Wald test results show that the probability values of the joint F-statistics for South African soybean prices and Malawi exchange rate are significant at 10% and 5% levels respectively. Based on the significance of both the error correction term and the joint F-statistics of the two lagged variables in the Wald test results, the study concludes that South Africa soybean prices and Malawi exchange rate are significant drivers of volatility in Malawi soybean prices.
An assessment of South Africa’s non-genetically modified maize export potential
(2020-02) Mawasha, Joseph Leshasha
The study endeavoured to determine South Africa’s export potential in non-genetically modified maize markets using a three pronged methodological approach. The Genetically Modified (GM) status of South African maize has been observed as a challenge restraining the extent of South Africa's maize exports to major maize importing markets. The study thus sought to quantify South Africa's maize export potential to non-GM maize markets. Firstly, the study identified South Africa’s non-GM maize markets using a growth share matrix. Secondly, South Africa’s non-GM maize export markets with high trade potential were identified using an Indicative Potential analysis. A gravity model was then used to determine potential export markets with trade stimulating and restraining effects. The study finds that Italy, Angola, Zimbabwe, Venezuela, Greece, Zambia and Austria exhibited the highest trade potential among the identified potential non-GM maize markets. Based on the three pronged approach employed by the study, it was concluded that despite the limited scope for non-GM maize market penetration, there are markets which displayed greater potential for expansion as they were part of the most desirable markets, exhibited high trade potential and had trade stimulating effects. These markets include; Italy, Zimbabwe, Kenya and Angola. It was recommended that farmers who choose to engage in large scale non-GM maize production should thus be guided by the forces of demand and supply in the non-GM maize export market and react to favourable opportunities as presented. Moreover, the government of South Africa needs to maintain a regulatory system that enables for segregation of non-GM and GMO maize along the maize value chain to allow for preference for South African non-GM maize by major non-GM maize importers.
Contract farming and access to formal credit in South Africa: A case of small scale sugarcane growers in the Felixton Mill area of KwaZulu-
(African Economic Research Consortium, 2023) Sifundza, Sandile Bongani
Sugarcane farming is one of the most important agricultural enterprises in South Africa and most of the people working in the agricultural sector are employed in the sugar industry. Sugarcane farmers and sugar mills contribute significantly to the economic survival of rural communities and towns where sugarcane is grown, in terms of employment opportunities. However, in the rural areas of KwaZulu-Natal, smallholder sugarcane farmers are faced with a serious problem of low productivity, partially caused by lack of access to formal credit. Formal financial institutions do not adequately provide credit to smallholder farmers, since they are considered to be non creditworthy and lack the required collateral. In the agricultural sector, one of the alternatives in solving the problem of inability to access formal credit is contract farming. Therefore, the main purpose of the study was to investigate the role of contract farming in improving access to formal credit for small-scale sugarcane farmers in the Felixton mill area in the KwaZulu-Natal province. The specific objectives were to (a) determine the status of access to formal credit for smallholder sugarcane farmers; (b) identify factors that determine smallholder sugarcane farmers’ access to credit from formal financial institutions; (c) identify factors that may lead sugarcane farmers to participate in contractual agreements; and (d) determine whether participating in contracts promotes access to formal credit for smallholder sugarcane farmers. In total, 220 small-scale sugarcane farmers were sampled for the survey, using a proportional stratified random sampling procedure. In analysing the data, both descriptive analysis and an econometric model were used in the study. The data were analysed using Statistical Package for Social Sciences software (SPSS 20.0). Two logistic regression models were estimated. One was estimated to identify the factors and characteristics that influence access to formal credit for smallholder farmers. The other was estimated to identify the different factors that influence smallholder sugarcane growers to participate in contractual arrangements with other value chain players. The results of the study indicate that most of the small-scale farmers in Felixton were credit constrained, as only 19% of the farmers had access to credit from formal credit sources. A majority of the farmers (94%) engaged in contractual agreements with other actors in the value chain. The results of the logit model revealed that engagement in contractual agreements by small-scale sugarcane farmers was statistically and positively influenced by farmers’ age, gender and whether or not they had received training in sugarcane production. Engaging in contract farming was also statistically, but negatively, influenced by access to the market and access to formal credit.
Coordination strategies in the South African egg value chain: A review of chain performance and fragility
(African Economic Research Consortium, 2020-07) Setene, Letlama
The chain players in the South African egg industry pursue increased coordination which results in strategies that are lean and vertically integrated. These strategies include contracts specifications, vertical integration, the formation of alliances based on equity and relation. The strategies reduce transaction costs and risks the industry’s value chain to improve its chain performance. These strategies improve chain performance and competitive advantage of business only under certain environmental circumstances. This dissertation argued that under uncertainty the strategies become fragile due to the interdependencies between chain players. The interdependencies expose the industry’s role players to unforeseen disruptive events that are detrimental to business continuity. The events are seemly rising and are associated with uncertainty which has a low probability of occurring but a large impact if it occurs. The uncertainty drives the chain vulnerability which accelerates throughout the whole chain as a harmful stressor, and that is referred to as chain fragility. This study aimed to display the most common strategies of coordination in the South African egg industry and the map of its egg value chain. The strategies were divided into two configurations based on the levels of interdependencies between their chain players, which were either high levels or low levels. Then, the fragility measure of both configurations was performed, together with their comparative fragility analysis. The aim was reached by using the heuristic stress-testing approach, which represented 17 chain fragility factors. A questionnaire was sent to the chain players in the South African egg industry and got completed by a sample size of 73 respondents, mainly retailers, egg producers and pullet rearers. The respondents were required to rate fragility factors as adverse events against their business continuity as they progressively deteriorated. The results showed the fragility scores of each factor and their imperativeness to each chain player. Hence, factors such as information visibility and relationship with the supplier are imperative for retailers, while factors such as training of human resources and chain complexity are imperative to pullet rearers. Additionally, the factor that is imperative for egg producers is quality and safety performance requirements. The fragility scores per factor were combined into a fragility composite index of each chain player. Subsequently, the composite index of fragility per chain players was combined into a final composite index that represents the fragility of each of the two configurations. The comparative fragility analysis of the configurations was performed using unequal variance t-test to determine the significant difference of the fragility means of the strategies. The performed t-test resulted in the rejection of the null hypothesis that statistically, there is no significant difference in the chains’ fragility means of the two configurations. Precisely, the difference between the chains’ strategies is associated with a variety of differences at the factor and chain player level that led up to 21% greater overall chain fragility of the chain with higher levels of interdependency. The results concur with literature that considers lean and highly integrated strategies result in interdependencies due to increased coordination. Which in return act as catalysts or causes of agri-food chains fragility because they expose them to uncertainties that are disruptive and detrimental. The affirmation of the results of the analysis with the literature put down the central point of this dissertation that there is a trade-off between the chain performance and fragility. The practical implication of the trade-off is that strategies of increased vertical coordination improve chain performance by reduction of transaction costs and risks within agri-food chains. However, the strategies multiply the fragility of the chains, under uncertainty. Hence, the important strategic choice for chain players of the South African egg industry and their value chains, is to attain a suitable coordination strategy that balances chain performance and fragility. This study concluded that the increased vertical coordination strategies improve chain performance under certain environment. But as uncertainty increases the strategies become fragile and contribute to the closure of businesses. Therefore, the following recommendations are made for the stockholders in the South African egg industry; First, a chain structure and its coordination strategies be decentralised in an organisation’s value chain management. Second, developing a “layered organisational” structure, which allows for containment of adverse impacts within the system and facilitates learning within and across different layers to drive survivorship. Third, planning for spare capacity. Last, considering which value chain strategy an organisation should pursue to improve chain performance and contain fragility.
Determinants of climate smart agricultural technology adoption inthe Northern Province of Zambia
(African Economic Research Consortium, 2019-02) Lungu, Harad Chuma
Our world, as we know it, is changing faster than what scientific evidence has thus far predicted. Globally, we see an increased occurrence of indeterminate and unpredictable climatic events changing the daily livelihood of people across the planet. Particularly, such impacts include the frequent occurrences of droughts, the increased incidences of pests and diseases in farmer fields (such as the fall army worm in Zambia), the reduced annual rainfall and shrinking freshwater supplies, the increased number of forest wild fires, and the reduction of farmers’ yields. This calls for the need to adapt and build resilience. To support the adaptation and resilience agenda, various global initiatives have been undertaken and include the Intergovernmental Panel on Climate Change (IPCC), the Kyoto Protocol, the Sustainable Development Goals (SDGs), and the Paris Agreement.
Determinants of commercial orientation and the level of market participation by women maize farmers in Eswatini
(African Economic Research Consortium, 2019-07) Dlamini, Lucinda Nosizo
With Sustainable Development Goal 5 focusing on the role of gender in sustainable development, developing countries like Eswatini are promoting the role of women in agriculture to drive their sustainable development agenda. This entails promoting women empowerment through agricultural commercialisation as it has the potential to improve women-led farming households’ income and living standards. Eswatini’s government has initiated programs such as Rural Development Areas programs to assist farmers in agricultural production, especially maize as it is the country’s main staple food. Women’s contribution to the agricultural sector has been limited by several constraints. These range from limited access to credit sources to poor infrastructure and high transaction costs which make it difficult to enter the market. In addition, development polices have been biased against addressing challenges faced by women as well as integrating them into development strategies. As such, women farmers’ access to agricultural markets and commercialisation of their maize operations market, is constrained and scanty. This study aims to highlight agricultural commercialisation activities of women farmers in Eswatini. The specific objective of the study is to identify the factors influencing participation of women farmers in the maize market. The study focused on the Highveld region where six communities, namely, Maphalaleni, Nsingweni, Endlozini, Sitseni, Kasiko and Motjane were purposively selected based on their ability to produce maize surplus. A multi-stage sampling technique was employed to select respondents which resulted in 191 farm households being surveyed. Since the study focuses more on women, the majority (131) of respondents were women farmers with the remaining being men farmers. Men participation was explored and presented as supplementary data. The Heckman two-stage procedure was used to identify the factors that influence commercialisation. In the first stage, the Probit regression model was used to identify factors that influence farmers’ decision to participate in the maize market. The factors; household size, farm size, livestock, radio, off-farm income, savings, credit, farmers’ group, extension services and fertiliser increased the probability to enter the market while age, education and ownership of a mobile-phone reduced the probability of participation. The first stage also generated the Inverse Mills Ratios used to test selectivity bias in the second stage. In the second stage, the Ordinary Least Squares model identified factors that influence the level of commercialisation. Education, household size, farm size, vehicle, off-farm income, extension services, fertiliser and commercialisation index positively influenced the level of market participation, while price had a negative influence. The negative price relationship may underscore women farmer’s risk management behaviour where they could sell less in lieu reducing the cost of purchasing maize meal at higher prices. Evidence from the study shows that women farmers in Eswatini face several market barriers when participating in commercial agriculture. This study, therefore, recommends the need for effective and efficient policies and programs to encourage and improve participation of women farmers in maize marketing. Policies should be geared towards improving rural infrastructure, prices, extension and financial services which will help overcome barriers to market participation thus improving engagement in the sector.
The determinants of participation in savings groups and the impact on input investment among smallholder farmers in Sironko district, Uganda
(African Economic Research Consortium, 2022-12) Emmanuel, Bukuwa Nambale
To promote savings groups (SGs), which are important in promoting financial inclusion among smallholders, it is imperative to understand the factors that affect participation in these SGs and the associated impact in the context of Uganda. This study determined the factors influencing participation in SGs. The study put particular emphasis on the use of SGs as a form of fully-fledged financial services provision to access agro-inputs. The study, therefore, additionally, determined the impact of these SGs on the expenditure on agro-inputs. The study used data collected through a cross-sectional survey from 249 participants. These participants were drawn from Sironko district, Uganda, East Africa. The study employed a Probit model to investigate the determinants of participation and intensity of participation. To estimate the impact of SGs on expenditure on agro-inputs, average treatment effects on the treated (ATT) were calculated after discounting the selection bias between the SGs’ members and non members. Averagely, SGs incurred 40% of all expenditure on Agro-inputs by SGs’ members. SGs’ members were significantly higher than non-members as regards total expenditure on agro inputs, per capita expenditure on agro-inputs, and proportion of income spent on agro-inputs. ATT was insignificant and tends to be negative.
An econometric analysis of spatial market integration and price formation in the Namibian sheep industry
(African Economic Research Consortium, 2017-12) Ijambo, Bertha Deshimona
The Namibian government introduced the Small Stock Marketing Scheme (SSMS) for the sheep market in 2004. The SSMS is a quantitative export restriction. Quantitative export restriction policies decrease the tradable quantity of a commodity, and increases domestic supply of a commodity, causing a lack of equilibrium in spatial markets. This, therefore, has the capacity to hinder market integration. Moreover, a quantitative export restriction disrupts the domestic supply and demand, and ultimately the equilibrium prices. A policy such as the quantitative export restriction therefore determines the domestic price levels. The effect of the SSMS on spatial market integration and price formation remains unclear. A lack of empirical evidence on spatial sheep market integration and domestic price levels can create challenges for policy makers. This is because a lack of evidence could prevent policy makers from implementing evidence-based policies, which might buffer poor consumers and producers from adverse price shocks, and lead to improved resource allocation.
Economic returns of the Agricultural Research Council’s Table Grape Cultivar Development Programme in South Africa
(African Economic Research Consortium, 2019) Mazwane, Sukoluhle
The table grape industry, in line with national policy imperatives such as the National Development Plan (NDP), plays an important role in the South African (SA) economy through employment creation, rural development and foreign currency earnings. The industry has continued to expand over the years. The yields of table grapes have increased considerably in South Africa. For continued growth and sustainability, research and development (R&D) initiatives, among other factors, are important. The Agricultural Research Council’s (ARC) Table Grape Cultivar Development Programme (TGCD) is an R&D initiative that supports the industry with breeding of table grape cultivar varieties suitable for SA conditions. It was established in 1952, and has successfully bred 37 table grape cultivar varieties. However, the impact of the programme on yields and contribution to the economy remains unknown. Therefore, the study sought to estimate the economic returns of the ARC’S TGCD to the South African economy. The impact of the ARC TGCD programme was estimated using a two-stage approach. In the first stage of analysis, the impact on yield of table grapes was estimated using the Just-Pope production function. The first stage of analysis addressed two specific objectives: to determine the yield gains attributable to the ARC’s TGCD Programme; and to determine whether attempts to increase yields and quality of table grapes has compromised yield stability. The second stage of analysis employed a benefit-cost analysis to quantify the benefits in monetary terms. Specifically, BCR and MIRR were estimated. Expert advice was used to select seven ARC popular varieties for which data was available in complete form, for the period 2008 to 2017.
The effect of access to finance on commercialisation of smallholder maize farmers in Eswatini
(African Economic Research Consortium, 2020) Phiri, Isaac
Agricultural commercialisation is defined as the increase in the amount of produce sold relative to the amount produced. Therefore, agricultural commercialisation leads to more efficient production, economic growth, food security, and urbanisation in the agricultural sector. Agricultural commercialisation plays an important role in the sustainability of any country’s economy. However, financial investment and support is necessary for commercialisation to be achieved. Finance is one of the major key economic factors that can boost agricultural commercialisation. Understanding the effect of finance on the commercialisation of the agricultural sector is important for all relevant stakeholders; and specifically among smallholder farmers who produce under difficult conditions. The study determined the effect of finance on the commercialisation of rural smallholder farmers in Eswatini. The main focus was on agricultural finance and the commercialisation of smallholder farmers. The main hypothesis of the study was that access to finance positively influenced the commercialisation decision of smallholder farmers. The data used in this study was collected from 150 households in the Hhohho and Lubombo regions of Eswatini. Due to the simultaneous causality of the financial variables, the study faced a potential endogeneity bias problem. There were other smallholder farmers who chose not to access any form of finance, but still managed to commercialise. This attribute revealed the endogeneity bias problem; thus it was important to address it using the endogenous switching regression method.First, the analysis of variance (ANOVA) results suggested that only farmers who accessed credit and household savings were significantly associated with a commercialisation decision. Further analysis using the endogeneity switching model revealed that credit was not significant; off-farm income, household savings, and insurance were significant in the commercialisation decision. When financial instruments were combined, the effect of finance on commercialisation became weaker and not statistically significant enough to influence the commercialisation activities of smallholder farmers. The key findings of the study showed that financial instruments were partially correlated and interdependent, and affected the commercialisation of smallholder farmers. This implied that finance alone could not bring about agricultural commercialisation, and it might not be enough to make agriculture sustainable and resilient. Any financial investment in agriculture needs to be accompanied by other factors – such as adequate farm size, conducive climate, adequate farm training, available and affordable labour, and smaller households – to significantly influence the commercialisation of smallholder farmers. The study also identified the problem of endogeneity and how it could produce false results if not considered. The study recommends that different combinations of financial instruments should be implemented when stimulating commercialisation of smallholder farmers. The financial instruments should be implemented together with other non-financial interventions.
The effects of outdated data and outliers on Kenya's 2019 Global Food Security Index score and rank
(African Economic Research Consortium, 2023) Atieno, Prisca
The availability of updated and complete data is one requirement for building a robust composite indicator (Freudenberg, 2003b). However, outdated data and the presence of outliers in databases challenge the process of building robust composite indicators (Nardo et al., 2005). Outdated data and outliers can occur when using data constructed from surveys or when data is obtained from national or international statistical sources (Giovanni, 2014). Outdated data are barriers to disclosing knowledge, while outliers can act as unintended benchmarks in composite indicators (Leys et al., 2013; Solaro et al., 2017). When not correctly handled, outdated data and outliers may affect findings and lead to biased results in benchmarking exercises (Santeramo, 2017; JRC-EC, 2008). A composite indicator's ability to represent multidimensional concepts is mainly determined by the quality and accuracy of the indicators used in its construction (Nardo et al., 2005). The indicators for constructing a composite index should be specific, measurable, achievable, relevant and time-bound (Santeramo, 2015b). However, the selection of indicators is often affected by the lack of updated data due to missing current data values at the national or global level for specific countries (Thomas et al., 2017). Outdated indicators could be updated or replaced while outliers must be identified and removed statistically, for example, by winsorisation (JRC-EC, 2008; Santeramo, 2015a). Over time, several indicators have been used to measure the concept of food security. Some indicators measure food security determinants, such as the sufficiency of supply. In contrast, other indicators measure food security outcomes such as an individuals' nutritional status or the mortality rate of children under five years of age (Jones et al., 2013; Coates, 2013). Significant variations exist among the food security indicators. Some indicators are used for monitoring or evaluation processes, while others are used in early warning systems (Carletto et al., 2013). Moreover, some indicators only measure a single dimension of food security, such as access or food availability, as isolated contributing factors to food insecurity (Barrett, 2010). However, food security dimensions (access, availability, stability and utilisation) are hierarchal (Barrett, 2010). Food availability is necessary but not sufficient to guarantee access, while access to food (economically, physically or socially) is also necessary but does not guarantee food utilisation (Barrett, 2010). Overall, stability cuts across the access, availability and utilisation dimensions and is essential at all times to ensure food security in a country (Carletto et al., 2013; Thomas et al., 2017). The heterogeneity of the food security indicators raises the need for composite indicators to synthesise the information from different indicators (Santeramo, 2015b). Composite indicators can summarise information from different indicators and give a comprehensive representation of a country's food security status. Composite indicators can also integrate large amounts of data into a summarised unique score, which is essential to rank countries in benchmarking exercises (Freudenberg, 2003b). Moreover, composite indicators are a useful tool in policy making processes and public communication due to their ease of interpretation (Nardo et al., 2005). However, the robustness of a composite indicator can be affected by the subjectivity of methods used in its construction process, such as the weighting methods (JRC-EC, 2008). Some of the methods used when constructing composite indicators are easily manipulated to support desired policies (Freudenberg, 2003b; Mazziotta and Pareto, 2013). Therefore, a composite indicator's construction process must be transparent not to offer misleading information to its users (Freudenberg, 2003b). Research on how to improve the methodologies used in constructing a composite indicator and precise documentation of the steps is necessary to ensure transparency, especially the methods of handling outdated data, outliers, missing data and the weighting methods (Saisana and Saltelli, 2011). The Global Hunger Index (GHI), the Global Food Security Index (GFSI) and the Coping Strategy Index (CSI) are some examples of composite food security indicators (IFPRI, 2019; Pangaribowo et al., 2013; EIU, 2012).
Estimating the value of natural characteristics of a National Park: the case of Mokala National Park in South Africa
(African Economic Research Consortium, 2023-01) Kriek, Carel Johannes
Due to the extreme decimation of species worldwide, there is a need to conserve and protect more natural areas and biodiversity. A way to ensure species' survival across areas, is to rewild a protected area or nature reserve by reintroducing regionally extinct fauna and flora, or removing invasive species. In developing countries, these protected areas are generally underfunded and underdeveloped, and therefore may have limited capacity to conserve the wildlife, and/or rewild the park to its previous natural state. This study utilised a discrete choice experiment to determine the preferences and ‘appreciative value’ tourists place on different natural characteristics of the park, in the context of rewilding. This study analysed the responses of 288 tourists from Mokala National Park in the Northern Cape, South Africa, using online questionnaires. The respondent's preferences were drawn from the completed questionnaires by the tourists who have visited the park since its inception in 2007. The natural characteristics ranged from (1) reintroducing carnivores such as lions or cheetahs back into the park, (2) removing non-native species, whether threatened or non-threatened, and (3) boosting endangered species populations such as roan antelope, black rhino and tsessebe. A latent class model was created to identify heterogeneity in the preferences amongst the sampled population. It was determined that there is heterogeneity and that the sampled tourists had varying preferences to rewild the national park to its previous biological state. Respondents of the four classes, strongly preferred reintroducing cheetahs back into the park above a pride of lions. All classes had significant preference for boosting the numbers of endangered black rhinos compared to the status quo. Only 11.20% of the respondents wanted to completely rewild the park by removing the non-native species and reintroducing all the other species identified. Thus, 88.20% of respondents did not support removing the non-native species regardless of their status, either threatened (sable antelope) or non-threatened (impala, nyala and waterbuck). The results provide a basis that rewilding improvements could be initiated, and better park management policies could be implemented, to attract tourists and more successfully rewild the park . Yet, tourists had an affinity for more species diversity in the park above protecting the natural ecosystem. Further research can be done to expand on whether there is a preference for species based on their status, such as being endangered, iconic, carnivore, or megafauna.
Evaluating the prospect to hedge maize price risk against the Johannesburg Stock Exchange Commodity Derivatives Market prices: The case of Eswatini
(African Economic Research Consortium, 2023) Sihlongonyane, Lindokuhle Nicholas
Maize production remains low in Eswatini. The small country is still unable to meet the local demand through local production. Maize1 is Eswatini’s staple food but the country has not yet reached self-sufficiency. This deficiency or shortfall in local maize production has been a persistent problem since the country’s independence. To fight this shortfall and reach self sufficiency, the National Maize Corporation (NMC) was formed in 1985. The main purpose of the NMC is to keep the local demand satisfied. The NMC, as the only importer of white maize into Eswatini, does this by importing the deficit demand from South Africa. Stability of the local white maize price is also one of the responsibilities of the NMC. This study’s overarching aim was to determine whether or not a significant relationship exists between the maize prices as quoted on SAFEX2 and the local maize price in Eswatini. This is done to see if the importer of maize in Eswatini, the NMC, can hedge the price risk on SAFEX. The study also maps the Eswatini imported and local maize value-chain through the current price discovery mechanism. Secondary data offered by the NMC and data from the Ministry of Agriculture in Eswatini and educational journals were used in the study. Econometric time series methods were used along with monthly data from 2008 to 2019. Two hypotheses were tested during the study. The first hypothesis tested for the existence of a significant relationship between maize prices as quoted on SAFEX and the local maize price in Eswatini. The second hypothesis follows the first, determining whether or not hedging on SAFEX could be used as a tool to minimise price risk on the domestic price market in Eswatini. The study confirms that a long-run relationship exists between the South African maize market and the Eswatini maize market. The study showed that a 1% increase in the South African price led to a 0.67% increase in the local Eswatini prices. This indicates a slow rate shift in prices. Short-run dynamics indicated a 12.5% adjustment to equilibrium per term, which is a slow adjustment as a result of market conditions in Eswatini.price transmission and that the Eswatini prices only respond to positive changes (price increase) in the South African prices. This reveals that the two markets are poorly integrated. Due to the significant relationship between the two markets, it can be acknowledged that SAFEX could be used to hedge price risk by Eswatini through the NMC. Through mapping down the maize value-chain, the study discovered that the Eswatini maize market is not a liberalised one and value addition to maize through the chain is minimal. The relationship between the two maize markets, as well as the maize market of Eswatini, could still improve if means to liberate the market were to be exercised by the NMC and local government. This study can serve as the basis for understanding how risk management tools could be used by the Eswatini maize market and how the market could be improved or liberalised.
Evaluation of the prospects of hedging Botswana's maize prices against the Johannesburg Stock Exchange Commodity Market Derivative
(African Economic Research Consortium, 2022-07) Ofentse, Goetswamang Phankie
Maize is an important source of food consumed in Botswana and it helps the country to achieve food security status. Food security refers to everyone always having access to healthy, dependable, and adequate food to meet their dietary requirements and live a healthy life. Botswana imports maize primarily from South Africa and is a net importer. The study evaluated how maize prices in Botswana are linked with maize prices in South Africa. To explain hedging opportunities in minimising price risk in Botswana, cointegration and vector error correction models were used in this study. Secondary data on monthly white and yellow maize prices from 2008 to 2019 were used in this study. The empirical data show that maize prices in South Africa and Botswana have a long-run equilibrium relationship. In the short run, results indicate that the previous years’ maize prices in the Botswana market positively impact all Botswana maize prices at a 1% significance level on average ceteris paribus. South Africa’s maize market does not respond to any market changes in Botswana for white maize prices lagged for one and two periods. The Botswana maize market, on the other hand, reacts to price fluctuations in the South African market for both white and yellow maize. The adjustment speed in the Botswana maize market ranged from 17% to 29% while the adjustment speed in the South African market ranged from 13% to 17%. Overall, the empirical data show that the two markets have a positive long-run equilibrium relationship and a short run asymmetric relationship. The empirical findings prompted the Botswana maize value chain assessment to understand how it operates as well as the existence of relationships among the actors. The study ascertained that Botswana’s maize value chain faces an array of challenges that limit the country’s food sufficient. The assessment of the Botswana maize value chain was vital to promote policy formations that will promote the development of the Botswana maize sector. The study focused on the interaction between smallholder farmers and the intermediaries focusing on the challenges and opportunities therein. The Agency and Social Network theories were used to assess the economic behaviour of the two farmers and middlemen. The investigative methods used included a thorough assessment of the literature and key informant interview. The challenges identified from the investigation included poor coordination, lack of trust, information asymmetry, lack of cooperatives, and inadequate access to finance. The study thus recommended contract farming, prioritisation of training programmes for farmers and extension workers, third-party enforcement of regulations, and revival of cooperatives to improve the quality of the relationship between the middlemen and the smallholder farmers, and thus improve the overall performance of the chain.
Factors affecting adoption of mobile money by farming households in Lomahasha Inkundla of the Lubombo Region, Eswatini
(African Economic Research Consortium, 2023) Dlamini, Theophilus Lusito
The conventional banking system has not been meeting the needs of the mass market in Eswatini, which is mostly made of the unserved and underserved farmers in rural areas. Mobile money and other recent innovations in fintech present the potential to address the financial exclusion amongst financially marginalised groups in Eswatini. Only 44% of adult Emaswati are formally banked. In a mission to improve financial inclusion, Eswatini MTN introduced mobile money to provide formal financial services for financially excluded groups. This study was carried out to determine the factors which influence mobile money’s adoption by farming households in rural areas of Eswatini. Knowledge of such factors is crucial in formulating policies geared towards financial inclusion in the country. The study used survey data collected from 160 randomly selected rural farmers from the Lomahasha Inkundla in the Lubombo region of Eswatini. The results of the descriptive statistics show that 93.1% of sampled farmers have knowledge of mobile money, 80% were registered mobile money users, whilst 67% of the non-registered farmers indicated a positive intention to open a mobile money account. A majority (61.3%) of respondents were male. The typical farmer’s age was 43 years old. Farmers without formal education accounted for 16.9% of the sample. About 58.8% of respondents owned bank accounts, whilst 40% were members of a Savings and Credit and Cooperatives (SACCOs). Trust as an informal institution against moral hazard is quite strong across the mobile money value chain. Most farmers trust that the system is safe and secure. Interpersonal trust between agents and customers is very strong. Users perceive the financial service to be useful, with a majority of the registered users utilizing mobile money for settling utility bills and executing peer to peer transactions. The study uses the binary logistic regression models to determine the factors that significantly influence the decisions of farmers to adopt mobile money. Evidence from the results show that, socioeconomic characteristics of farmers have significant influence on the decisions for adoption of mobile money. Gender, Education, Ownership of a formal bank account and farming experience were found to significantly influence the decisions for mobile money adoption. The odds of mobile money adoption were higher for female farmers than male farmers. The odds for mobile money adoption were also found to be higher for farmers with formal education beyond Primary school. So were the banked farmers as compared to unbanked farmers. The mobile money innovation has evidently shown some prospects to significantly improve the level of financial inclusion in Eswatini. In the study sample, the overall result of financial inclusion was 61.3% before accounting for mobile money adoption, thisimprovesto 80% when we account for mobile money. The results also show that the fintech is complementary to the conventional banking system. The study recommends that the Mobile Network Operator (MNO) incorporates financial literacy training in their strategy to capacitate mobile money users and prospective adopters. It is also recommended that formal financial institutions leverage potential linkages with informal finance organisations and self-help groups i.e. SACCO’s, ASCA’s and ROSCA’s. However, it’s imperative to approach this with caution and avoid any over-formalization would threaten the existence of the informal sector.
The financial inclusion status of rural households in Eswatini
(African Economic Research Consortium, 2022-07) Nkambule, Maxwell Banele
Financial inclusion has become a focal point in nation building. It facilitates inclusive growth, which contributes significantly to the economic development of the rural poor. However, the existing financial inclusion dimension used by some researchers does not address the financial inclusion problem in a multidimensional manner in Eswatini. Researchers mostly measure financial inclusion using the access component, which does not provide a complete picture of financial inclusion. Some studies have investigated financial inclusion in Eswatini, but overlooked certain key factors that have been proven to assist in achieving a higher degree of financial inclusion for rural people. The determinants of financial inclusion in Eswatini, especially in rural households, have not been sufficiently addressed in the previous studies. To address the above shortcomings, this study assessed the financial participation, financial capability and financial well-being of rural households, and determined their contribution to financial inclusion. The study also examined the determinants of the financial inclusion of rural households. A stratified two-stage sampling procedure was utilised to sample 2148 rural homes, headed by both genders, from a Metadata of 2928 Eswatini FinScope Consumer Survey respondents. The Alkire-Foster method was used in this study to develop a multidimensional financial inclusion index. The study found that the financial exclusion rate for rural households is 69%, with financial adequacy among rural people being 37.24%. This indicates that not every rural household that has access to formal financial services is financially secure. The study also found that, the financial well-being domain contribute the most (59%) to the financial inclusion of the rural households as compared to financial participation (37%) and financial capability (46%). The study also found that there is lower contribution in the usage, consumer protection, financial situation, and financial resilience indicators when compared to formal access. The study also determined that age, marital status, source of income, education level, ease of access to formal financial services, and access to land were all positively associated with the financial inclusion status of rural households. Gender and association membership of the rural household, on the other hand, were not statistically significant, implying that these factors gave fewer opportunities for rural households to participate in financial inclusion. It is on that score that this study recommends measuring financial inclusion not only by formal bank account ownership, but also by the level of financial participation, financial capability, and financial well-being among rural households. There is also a need to examine financial literacy as a policy tool for encouraging rural households, particularly those of marginalised groups such as rural youth and women, to participate in the access and use of formal financial services. There is also a need for a robust approach to ensure that all women residing in rural areas are financially included by simplifying the requirements for accessing formal financial services.
Identifying possible misspecification in South African soybean oil future contracts
(African Economic Research Consortium, 2021-01) Nordier, Jean-Pierre
Soybean crushing¹ plants operate on a crush margin, which is the monetary difference between the combined sales value of mainly soybean meal and soybean oil and the cost of raw soybeans. However, given the high volatility in the prices of these three products, crushing plants normally secure these prices simultaneously. If not, they are vulnerable to the relative price variation between these three products.
Impact evaluation of conservation agriculture on smallholder farmers’ livelihood in Zambia and Tanzania
(African Economic Research Consortium, 2021-01) Sankhulani, Linda
Based on cross-sectional data drawn from 135 treated and 68 control farmers in Tanzania, and 133 treated and 71 control farmers in Zambia, this study uses propensity score matching to test whether conservation agriculture (CA) improves smallholder farmers’ welfare, in response to the policy objective of enhancing their resilience in the face of climate change. Farmers in Tanzania assess CA as having statistically significant impacts on increasing total agricultural yield, adaptation to climate change impacts, resilience to droughts, increasing maize production, enhancing household food security, increasing number of meals per day, increasing household income, accumulation of productive assets , addressing gender disparity and social cohesion, and improving soil health . However, CA had no impact on reducing the forest area cleared per year and total agricultural costs. Farmers in Zambia assess CA as having statistically significant impacts on increasing total agricultural yield , adaptation to climate change impacts, resilience to droughts, increasing maize production, enhancing household food security, increasing number of meals per day, decreasing number of food insecure months, increasing household income, accumulation of productive assets, addressing agricultural calendar bottlenecks, increasing total agricultural costs, addressing gender disparity and social cohesion, and decreasing soil health. However, CA had no impact on reducing forest area cleared per year. Policy could use such evidence to leverage CA adoption in support of the sustainable development goals (SDGs) and Africa Agenda 2063, although its potential to sequester carbon and provide ecosystem services comes into question.

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