The financial sustainability and socio-economic contribution of small-scale sugar-cane growers in Mpumalanga Province

Abstract

Small-scale sugar-cane farming came to Mpumalanga Province in the 1990s. As result of the Nkomazi Irrigation Expansion Programme, 34 projects with farms of on average size of seven hectares were initially allocated by Government to potential farmers in rural areas. This was done to enable them to generate income from sugar-cane to support their families. The initial expectations for the success of the programme were high, but they did not realise as anticipated. The yield results for the first decade of the 21st millennium showed a declining trend. Over the same period the large-scale sugar-cane growers (LSGs) performed better. This added impetus to the on-going debate on the relationship between farm size and efficiency in South Africa. It also raised the question whether small-scale farming has a future. Four hypotheses were formulated and tested with regard to the Mpumalanga sugar-cane growers’ land productivity. Regression analysis on land productivity, stakeholders’ inputs, production budget analysis and macro-economic analysis, by applying the Social Accounting Matrix of Mpumalanga, were used to address the hypotheses. The first hypothesis states: ‘There exits an inverse relationship between farm size and land productivity amongst sugar-cane growers in Mpumalanga.’ It was rejected but qualifications were added. For the sugar-cane cultivated until farm size groups of 4 000 ha in the 2009 season, there was a direct relationship between farm size and land productivity which was highly significant. If this study only focussed on farm sizes up to 7 ha, the hypothesis would have been accepted as there was a high significance of an inverse relationship of the small-scale growers (SSGs) until 7 ha. Despite the inverse relationship of certain larger farm size groups, of which regression analysis suggested no evidence of such a relationship, the LSGs average yield was still approximately 25 t/ha higher than SSGs yield of about 64 t/ha. The second hypothesis, namely, that land productivity has declined amongst SSGs and not so amongst LSGs, was tested by observing partial productivity over different time periods. The LSGs had a negative growth rate during 2001–2005 but showed positive growth during 2005–2009. The whole period of 2001–2009 showed marginal positive growth for the LSG while the SSGs growth rate declined by 4.6%. For the SSGs the land productivity was about 20 t/ha lower compared to the LSGs, at the data points, 2002, 2007 and 2011, as well as over the period 2002–2011. This confirmed the second hypothesis. The third hypothesis, namely that the performance of SSGs in the 2009 season indicated financial sustainability, was evaluated by means of production cost analyses for SSG farm size groups, individual farmers and a breakeven point scenario. If the net farm income (NFI) per hectare was the only consideration to measure financial feasibility, the hypothesis would have been accepted. The analyses however showed that the SSGs had much difficulty to cover their living costs from a farm of less than 6.29 ha, resulting in a rejection of the hypothesis. Testing of the fourth hypothesis, namely that SSGs are an important and essential part of the Mpumalanga economy, and make a critical economic contribution to the region, revealed that SSGs’ direct contribution in terms of agricultural production represents 20% of the involvement in the sugar-cane industry and 0.03% of the economy of Mpumalanga Province. Its economic contribution consisted of about R110 million of total GDP, about 2 800 total employment opportunities, and income distribution to households of almost R50 million. The fourth hypothesis can be rejected when considering the magnitude of the SSGs’ production only constitutes 0.03% of the total economy of Mpumalanga. However, to assess the real importance of the SSGs, other factors besides production magnitude should also be considered. A major contribution of the SSG sector is the amount of labour opportunities they offer. If this is taken into account, there is reason enough to accept the hypothesis. When the focus shifts from Mpumalanga as a whole to the Nkomazi region, the contribution of the SSGs is substantial. It is therefore possible to confirm the hypothesis, especially due to the contribution to the Nkomazi region. This study found that SSGs on the whole did not perform as well as LSGs. It however found that some of the SSGs performed sufficiently, and have potential for a sustainable future. Continued support from institutions such as local, provincial and national government, Tsb Sugar, the Cane Growers’ Association and Akwandze Agricultural Finance will remain indispensable. With such aid it can be anticipated that the SSGs contribution to society will continue and should be with co-operative ventures as implemented at the irrigation project, Langeloop II, assist the SSGs in being more financially sustainable and providing an even greater economic contribution.