- Title
- Elicitation of risk preferences of smallholder irrigation farmers in the Eastern Cape Province of South Africa
- Creator
- Modjadji, Mathlo Itumeleng
- Subject
- Irrigation farming -- South Africa -- Eastern Cape Risk-return relationships -- South Africa -- Eastern Cape
- Date Issued
- 2017
- Date
- 2017
- Type
- Thesis
- Type
- Doctoral
- Type
- PhD
- Identifier
- http://hdl.handle.net/10353/4846
- Identifier
- vital:28534
- Description
- Although several studies have investigated commercial farmers’ risk preferences, there is still lack of information on the risk attitudes and risk preferences of smallholder farmers in South Africa. Risks associated with the adoption of new agricultural technology need to be explored in order to address the transition from homestead food gardening to smallholder irrigated farming. This study seeks to understand risk perception of smallholder irrigation farmers by linking constraints to commercialisation, adoption of new agricultural technologies and risk preferences of smallholder farmers in the Eastern Cape Province of South Africa. The overall objective of this research is to determine risk preference patterns and attitudes that influence the transition from homestead food gardening to irrigated farming of smallholder farming systems in the Eastern Cape province of South Africa. Specifically the study was to pursue the following objectives: (i) describe the demographic and socio-economic characteristics of smallholder farmers; (ii) describe existing farming systems among smallholder farmers in the study area; (iii) analyse the adoption of new agricultural technology by smallholder irrigation farmers; (iv) assess the risk perception of smallholder irrigation farmers and elicit farmers risk preferences, and (v) empirically analyse farmers sources of risk and risk management strategies. The outcome of this will inform policy formulation that have implications for technology adoption, increase smallholders capacity to bear risk and enable government and other role players have a clear understanding of smallholder farmers decisions. A total of 101 respondents were surveyed, consisting of 38 smallholder farmers and 63 homestead food gardeners in the Eastern Cape. Questionnaires were used to record household activities, socio-economic and institutional data as well as household demographics through personal interviews. The ordered probit model was applied due to the ordered nature of the dependent variable. The analysis was used to empirically analyse the determinants of farmers ‘risk preference status. The ordered probit model successfully estimated the significant variables associated with the farmer‘s adoption decisions. These were the farmer‘s age, household size, land size, locational setting, risk attitude, number of livestock (goats and chicken) and asset ownership. Homestead food gardeners were less risk averse that the smallholder farmers. Farmers who reside in the sub-wards Binfield and Battlefield were more likely to take risk than those who reside in Melani. This suggests the presence of local synergies in adoption which raises the question about the extent to which ignoring these influences biases policy conclusions. The negative correlation between land size and adoption implies that smaller farms appear to have greater propensity for adoption of new agricultural technology. This finding is supported by several studies reviewed in the literature that allude to the fact that homestead food gardeners tend to be smaller than smallholder farmers. By means of the Principal Component Analysis (PCA), seven principal components (PCs) that explained 66.13 percent of the variation were extracted. According to the loadings, the factors 1 to 7 can best be described as ‘financial and incentives index’, ‘input-output index’, ‘crop production index’, ‘labour bottleneck index’, ‘lack of production information index’, ‘lack of market opportunity index’, and ‘input availability index’ respectively. In general, price, production and financial risks were perceived as the most important sources of risk. Socio economic factors having a significant effect on the various sources of risk are age, gender, education, location, information access and risk taking ability. The most important traditional risk management strategies used by the surveyed smallholder farmers in Eastern Cape are crop diversification, precautionary savings and participating in social network. The findings are consistent with economic theory which postulates that in the absence of insurance markets, poor farm households tend to be risk averse and are reluctant to participate in farm investment decisions that are uncertain or involve higher risk.
- Format
- 238 leaves
- Format
- Publisher
- University of Fort Hare
- Publisher
- Faculty of Science & Agriculture
- Language
- English
- Rights
- University of Fort Hare
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UFH Department of Agricultural Economics and Extension
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