New institutional arrangements for rural development : the case of local woolgrowers' associations in the Transkei area, South Africa

Abstract

Until recently, smallholder farmers in the Transkei area had very limited access to a profitable market outlet for their wool. In response, the South African wool industry built shearing sheds, managed by a local association that sells directly to the brokers. This article investigates the effect of joint wool marketing through the shearing shed on the farmers’ revenue from wool. A three-step regression model of the revenue from wool indicates that the farmers selling through the shearing shed obtain better financial results as compared to those who use alternative channels. This analysis shows how new institutional arrangements may contribute to economic development.