Estimation of technical, economic and allocative efficiencies in sugarcane production in South Africa : a case study of Mpumalanga growers

Abstract

There have been a number of support initiatives rendered to the small-scale sugarcane farmers in Mpumalanga but the sugarcane production there has remained low. This raised some questions on the efficient use of available resources and the fruitfulness of the Producer Development Initiatives (PDIs). Justification for further assistance to the small-scale farmers requires empirical evidence of efficient resource use. This study employed the stochastic frontier production function to calculate the technical, allocative and cost efficiency. This study provides insight into three issues: the levels of technical, economic and allocative efficiencies of small-scale sugarcane farmers; the relationship between efficiency level and various farm/farmer specific factors; and implications of policy and strategies for improving small-scale sugarcane production. The technical, allocative and economic efficiencies of small-scale sugarcane farming were estimated in order to identify the potential increase in production without incurring additional costs. The study used data obtained from a field survey covering 231 small-scale sugarcane farmers in the Nkomazi region for the 2009/2010. sugarcane production season. According to the stochastic frontier production function using the Cobb-Douglas model, labour, herbicides and fertilizer showed significant positive effects on sugarcane production. The results also indicated that the small-scale sugarcane farmers suffer from considerable lack technical, allocative and cost efficiency. The mean technical, allocative and cost efficiency estimates are 68.5%, 61.5% and 41.8% respectively. A Tobit regression was used to analyse the impact of the farm/farmer characteristics on efficiency. The impact analysis revealed that age, level of education and gender are significant determinants of technical efficiency. On the other hand, level of education, off-farm income, land size and experience are significant determinants of allocative efficiency. In so far as cost efficiency is concerned, the significant determinants are level of education, land size and experience in sugarcane farming. The findings of the study justify the need for improved agricultural partnerships between the sugar mills and the sugarcane farmers. An example of such collaboration would be if millers were to not only give credit to the farmers, but also give technical guidance to small producers in return for the delivery of a specific quantity and quality of cane at a stipulated time. The collective efforts of these farmers and millers, once harmoniously co-ordinated, can enhance production efficiency and economic prosperity. Also, appropriate policy formulation and implementation is an effective instrument to improvement in farm efficiency and productivity which promotes overall growth of the economy. Therefore, there is need for all stakeholders (both private and public sector) to make combined efforts to remove the bottlenecks that have constrained effective policy implementation in, and its accrued benefits to, South African agriculture.