An economic analysis of certified organic smallholders in Limpopo Province, South Africa

Abstract

To date, research on organic farming and certification has focused on the production and trade possibilities of the industry. Farmers‟ opinions are underrepresented and this study endeavours to capture their opinions. In this study, the economic problem is to investigate the low participation of farmers in certified organic farming, highlight the economic benefits which are normally not clearly defined, as well as study the often complicated and frustrating certification process. The main objective is to investigate the determinants, which affect the smallholder farmer‟s participation, and to analyse farmers‟ perceptions of certified organic farming in the Limpopo Province of South Africa. The specific focus was on the participation of smallholder farmers in certified organic farming. The dependent variable was participation as measured by a farmer‟s decision to either certify their farm or not. The independent variables included factors that make up farmer and farm characteristics, certification and market related characteristics. The study used a standard questionnaire to obtain information from farmers. The research methodology, analysis and the presentation of the study was quantitative. The study used descriptive statistics (percentages, means, standard deviations, Chi-squares and significance intervals) to evaluate the significance of the variables. These were analysed and described quantitatively by making use of EVIEWS and IBM AMOS software. In estimating the influential factors, a probit model was adopted, and in analysing farmer perception, structural equation modelling was used. v Descriptive statistics indicated that among farmers interviewed, the majority (61%) were female farmers and 39 per cent were male farmers. Among the female respondents, 46% participated in certified organic farming and 15 per cent of female farmers were not certified organic farmers. From the male group, 29 per cent were certified organic farmers and 7% were not. In determining factors influencing farmer participation, three of the variables were positively associated with the probability of participating in certified organic farming, these being: the age of the farmer, membership to a farmer organisation and market premium prices for certified commodities. The other five significant factors were negatively associated with the probability of participating in certified organic production. These factors were: the gender of the farmer, the farmers‟ income, farming experience, information access and certification costs. All these factors tended to decrease the likelihood of participating. With the exception of the farmers‟ income and farming experience, all the significant variables had the expected signs. Farmers‟ perceptions of certified organic farming were analysed and the results showed that a high percentage of farmers had a positive view of certified organic farming. In other words, the perceived benefits of certified organic farming meet farmers‟ expectations. The perceived premium price of certified organic products is the most important factor affecting farmer perception. This is not unusual because South Africa‟s organic production is mainly focused on exportation and targets high value markets. As hypothesized, the costs associated with the certification process, that is: inspection costs (-0.578) and annual certification costs (-0.719), negatively affect farmer perception. In conclusion, a combination of factors influence a farmer‟s decision as to whether or not to participate in certified organic farming. One cannot rely only on specific factors to determine farmers‟ participation in certified organic farming. Farmer perception of certified organic farming is also an important aspect. The more farmers positively perceive the farming enterprise, the higher the rate of participation will be. The same applies to the perceived costs, which have a negative impact on participation. The study finally recommends that government complete and put into practice the South African organic regulations, which may motivate farmers to get involved in certified organic farming and encourage local capacity building in certified organic farming. However, in the meantime, government should place an vi emphasis on self-regulation within farmer groups and cooperatives for organic production, and set up a regulator to monitor the current activities. This would enhance interest from potential farmers, and strengthen consumer confidence. The study further recommends that information on organic farming should be improved by encouraging more research in this area, which will enable farmers, consumers and regulators to access data on socio-economic, production and trade in the industry. Government should support or create a partnership between farmers and processors to establish cost effective processing of organic products and to increase the availability of processed products for market. Government should assist non-certified smallholder organic farmers to become certified, potentially resulting in a price premium for their products and enhancing export capabilities.