An assessment of the role of co-operatives in smallholder dairy production and marketing in Swaziland

Abstract

The study investigates the role of co-operatives in smallholder dairy production and marketing in Swaziland. The study was undertaken to determine the effectiveness of cooperatives in improving production and marketing as well as in minimisation of transaction costs. Expectations were that co-operative members perform better than independent farmers in terms of production and productivity, have larger herd sizes, generate a higher income, and also incur lower transaction costs indicated by a higher quantity of milk sold. Results of the survey indicate that co-operatives play a positive role in production and marketing activities of smallholder dairy farmers, although certain developments such as provision of support programmes need to take place in order for them to make a more significant contribution. Co-operative members produce and sell higher quantities of milk (19.3% higher and 24.5% higher respectively), which is mainly attributed to provision of technical inputs. Co-operatives also provide farmers with a reliable market, although price paid is lower (35% lower) compared to that of independent farmers in the same areas. Low income is compensated by the fact that co-operative members incur lower transaction costs indicated by the lower transportation costs per unit of output, adequate access to market information through frequent visits of extension officers and regular training, as well as a lower percentage of losses incurred compared to independent farmers. Results of the study confirm the hypothesis that co-operative members perform better and incur lower transaction costs than independent farmers. Results of the regression model indicate that distance, access to market information, milk output and co-operative participation significantly influence the quantity of marketable milk, and hence contribute to lower transaction costs incurred. The results show that co-operative farmers incur lower transaction costs although they sell their milk at a lower price. Nevertheless, the fixed price effect renders co-operative farmers not susceptible to price fluctuation risks that independent farmers are faced with because of their volatile prices. The study suggests that there is a need for support programmes that will help motivate individual farmers and strengthen co-operatives, as their contribution to smallholder production and marketing is still marginal. Support programmes include provision of a supportive policy environment, infrastructure development, access to financial and credit facilities and improvement of training and extension to provide more extensive dynamic opportunities to farmers. In terms of further research, the study recommends that a similar study be undertaken in other areas of Swaziland so that the study is representative of the whole country. In addition, further research is needed on performance of dairy cooperatives to enable replication of successful co-operatives in the country which will go a long way in improvement of the dairy industry as a whole.