An economic evaluation of South Africa's peach and nectarine research

Abstract

The Agricultural Research Council Institute for Deciduous Fruit Technology (ARC–Infruitec) has played a significant role in the growth and development of the peach and nectarine industry in South Africa. This institute’s peach and nectarine research programme has developed 96 cultivars since 1937 that have been extensively used in the local industry. The programme accounted for two thirds of the stone fruit cultivars bred at ARC–Infruitec between 1996 and 2012. Based on the number of cultivars released between 1990 and 1996, the research programme was ranked 7th in the world. The Institute’s various research outputs have led to farmers reaping higher yields and the expansion of the industry’s production area, which used to be restricted to the Western Cape Province. The research outputs have also enabled industry stakeholders to explore new lucrative marketing windows and increase the production capacity in the canning sector. Despite these contributions, there still remains an inadequate understanding of the benefits of research for the industry stakeholders who are expected to provide the financial resources that are required for the delivery of this research service. In addition, the rate of decay of research investment benefits is also unknown thus, investors fail to appreciate the full effect of their research investment in the peaches and nectarine industry. Therefore, this study serves to supplement the aggregate level rate of return studies that have been done in the past. It is envisaged that the accurate attribution of research benefits at this level will bring a better appreciation of the rate of return on the industry stakeholder’s investment in research and will end the continued decreasing trend of research investment in the Institute, a trend that is threatening research and research benefit generation. The study has approached this task by reporting on the degree of use of the technologies that the Agricultural Research Council has released into the industry through its peach and nectarine research programme, and also by performing a rate of return calculation. The relationship between the stakeholders’ research investment and the industry output has been modelled using a supply response function. This econometric model uses a 41–year time series that stretches from 1971 to 2012. The results of the regression analysis show that the magnitude of production increase associated with a ten percent increase in research investment, ranges from 3.1 percent to 12.5 percent. A Marginal Internal Rate of Return of the programme of 55.9 percent is estimated. The analysis also shows that the returns of investment in peach and nectarine research reach their maximum benefit level in the 13th year after investment and thereafter continue being positive and of increasing significance for an undefined period of time. The calculated peach and nectarine research programme’s rate of return is relatively high and shows that the investment is valuable. This figure lies within the range of other rate of return calculations which have been done for similar South African research programmes. It is advisable for industry stakeholders to increase their research investment in order to ensure future profits in the industry.