Estimating the economic rate of return to plum research in South Africa

Abstract

Several studies have shown that investing in agricultural research and development (R&D) has enhanced global agricultural productivity by a great deal. Continued investments in agricultural research have led to the development of over 26 successful plum cultivars since 1945 at the Agricultural Research Council’s Infruitec/Nietvoorbij in South Africa, and more continue to be developed to meet the specific needs of both producers and consumers. Yet very little is known about the returns on any of these research initiatives. The objective of the study was to show what the rate of return to plum research investments at Infruitec/Nietvoorbij is. This was done by providing a comprehensive understanding of the role Infruitec/Nietvoorbij and its predecessor institutes have played in making the sector productive and competitive internationally, and the changes in R&D investments as well as the institutions that influence plum production and exports. Secondary data collected from the industry representatives and Infruitec were used in estimating how research at Infruitec has contributed to changes in production output. The production function approach was used as an analysis tool and the rate of return (ROR) to investments since 1980 was found to be 14.23 percent with a 10 year lag. The rate of return being this high is indicative of underinvestment in plum research.