Determinants of smallholder farmer market participation in the broiler industry of Gauteng province in South Africa

Abstract

The broiler industry is considered an essential sub-sector of the agricultural industry for the stimulation of economic growth in South Africa. This subsector consists of a vibrant largescale component, and together with other participants, dominates the peripheral markets. However, smallholder broiler producers find it difficult to participate in formal markets. This is due to numerous constraints and barriers which impede entry of these resource-poor farmers. In addition, there is a general reluctance of buyers in formal markets to engage with the numerous smallholder farmers. The overall purposes of this study were to investigate the extent of smallholder farmer market access and establish reasons for the limited formal market access of smallholder farmers in the broiler industry in Gauteng Province. The study examined the broiler subsector in the province by using a holistic approach. It was, therefore, not restricted to smallholder farmers but also included other participants, such as retail supermarkets, various poultry associations, and government, all of which play a crucial role in broiler production and marketing. The specific objectives of this study were to: 1. Determine the size of the smallholder broiler sub-sector in Gauteng, with reference to the number of farmers involved and the quantities of broilers supplied; 2. Assess the economic viability of the smallholder broiler enterprise; 3. Determine the level of market participation of smallholder broiler farmers, with particular reference to the quantity of broilers sold in formal markets; 4. Identify farmer-related determinants of market participation - this included farming experience, level of education, economic status, and the gender of participants; and 5. Identify external determinants of smallholder broiler market participation, such as barriers to entry, actual market requirements, transaction costs and infrastructure required to start a broiler enterprise approved for formal markets. The results of the study indicated that smallholder broiler farmers in Gauteng dominated informal markets. These farmers lacked the land and financial capital essential for starting the extensive operations required to subcontract to the vertically integrated operators. Furthermore, access to information on business management and expansion, and broiler project management were restricted. The stringent sanitary requirements for broiler supply by supermarkets further prevented participation by smallholder farmers in these retail outlets. As such, smallholder farmers were inclined to congregate together and competed only in informal markets. It was recommended that the South African government should consider participating in a public private partnership (PPP) with established businesses in the broiler sub-sector to support the development of smallholder farmers. This could take the form of “soft loans” to enable the smallholder broiler farmers to have the capital and infrastructural requirements to be contract producers to the established broiler operators. To ensure success of this business enterprise, it is essential that there is thorough screening of prospective candidates. Additionally, support should ensure that smallholder farmers have increased access to training in business management, broiler management and business expansion. In addition to promoting formal market participation by smallholder broiler producers, government should also support the informal broiler market to ensure both its expansion and improved standards of service for the customers. This is a growing market with a loyal customer base for both live birds and fresh broiler meat. With more awareness and marketing, the turnover of this market could increase substantially in the future.