6.2.2 Factors affecting profitability
Additionally, the study also uncovered various factors that the Black farmers indicated as problematic during the production process. The infrastructure resource appears to be a hindering factor for the majority of the Black farmers in Gauteng. The most critical one was the ownership and access to land as they make up almost 23% of the sampled farmers. Furthermore, the significant difference in farm sizes amongst the Black farmers was attributed through the government land reform policy that uses different programs to provide land to the previously marginalized, which is mainly black farmers. The majority of the respondents own less than 10ha, which was given to them by the government through land reform programs and those who own less than 2ha, are mostly those who were advised by the government to form cooperatives so that they can be able to access the land. Those who access land as corporative, the piece of land that was given to them was divided according to the members of the cooperative as a result, they end up getting small pieces of land. The land that is normally given to cooperative groups is through permission from the municipality, which may have an effect on their sustainability and farming income because there is no certainty regarding the land that they use and they are unable to make an improvement, which may help them grow to become successful commercial Black farmers.
In addition, availability of access to credit or financial support still problematic for the Black farmers that were interviewed in this study. The Black farmers had a problem of being rejected by the lending institutions. The reason for their rejection is because they are deemed to be high risk and do not have the asset that can be used a surety for those lending institutions. However, their exclusion is commonly associated with them being regarded as lower class in terms of income stratum because Black farmers are regarded as poor and not profitable. This was a grave restriction for the Black farm enterprises concerning their business growth. Moreover, the majority of the Black farmers that were interviewed used transitional and savings product due to the fact that access to formal sector credit is nearly non-existent to them. It also one of the many hurdles that are faced by the small-scale farmers which are mostly Black farmers in Gauteng Province. The fact remains that if Black farmers were given unlimited support financially they can be more successful than they already are without such support. Furthermore, this statement is supported by Anyiro and Oriaku (2011:69) stating that credit access is assumed to have a positive impact on the productivity of vegetable farm enterprises because availability of credit services allows the farmers to purchase the improved input varieties and hence upsurge the productivity and in turn upsurge marketable supply services (Anyiro & Oriaku (2011:69).
However, other variables were discovered to have an influence on profitability. These productivity explanatory variables significantly affect the crop yield. These variables had a significant influence on productivity were shown as follows on the regression model.
Regression analysis=-0.761Age +0.754Gender -0.721Dependencyratio +0.799
Farm size +0.914Income +0.819Farmexperience +1.161Labour -0.597Implements-0.537Distance
The result indicates the result relating to factors that affect the profitability of the crop farm enterprises. The regression analysis was used to determine the factors that had an effect on profitability. The study analyses productivity variables that had that had an effect on profitability by showing their level of significance. These variables proved to be highly significant as indicated by a 1% level of significance. The result indicated that the age dependency ratio, access and distance to market, access to infrastructure, transport and farmers experience clarify the variables of productivity. The age dependency ratio affected crop productivity at 10% level of significance. This, in turn, means that crop farmers will face a great burden when it comes to accessing resource implements an input that may help enhance productivity.
Nevertheless, market access and contract agreement were significant at 1% level of significance. The Black farmers are still had limited accessing market information regarding their product. The other barrier that was uncovered was proper storage for their produce, packaging skills, transport and proximity to market hinders the farmers marketing activities. The farmers that had access to market disclose that the market agents who are supposed to help market and sell their product were not allowing farmers to bargain for prices with their buyers. They end up being exploited and accept any given price for their crop produce .Even if that decision put them at a disadvantage especially those the old generation who are illiterate end up not making enough profit for the product that they send to the market. The other factor that limiting for Black farmers was the availability of proper transportation for their produce to take to the market which results in them having high transaction cost because they have to pay for hiring transport. The proximity of the market also contributes to the troubles that they have regarding the market because the majority of the farmers reside 90km away from the market. The study uncovered that the closer the market for the farmer then the lesser the cost and vice – versa. Further, the small-scale farmers who are mostly Black farmers reside in the rural settings and a few resided in urban areas. Moreover, the lack of fixed contract agreement with the market leads to the Black farmers being unable to have a guaranteed market for their product and run their farming business with uncertainty. Additionally, even those who had contract agreement the majority of them are verbal and quite a few numbers had a written contract with their formal market. The availability of contractual agreements ensures the availability guaranteed market for farmers, thus improving their productivity and profitability.
Further, the other significant variables directly affecting profitability were also analysed. The result revealed that pesticides cost, seeds and transport cost had a negative effect on the profitability of the crop farm enterprises. These variable factors were significant 1%, 5% and 10% level of significance with an R-squared value of 95%. These variables had a significant influence on profitability were shown as follows on the regression model.
Regression analysis=-0.817Age +5.666Education -0.848Seeds -0.004Transort-
-0.899Pesticides +0.784Fertiliser +1.156Labour
The seeds cost are very expensive for Black farmers. Because of that, their expenses end up increasing and lessen the farm enterprise profit. The high prices for input such as seeds were because of the constant increase in inflation rate. In addition, due to these changes in the inflation rate, the companies that sell seeds also increase their prices constantly, making it harder for farmers to purchase seeds at a reasonable price. Additionally, pesticides also pose a huge problem for Black farmers, as they were also highly significant in the crop enterprises profitability as they have a significant p-value of the coefficient that was less than 1. However, there was no interference from the government concerning the assistance of the farmers with affordable input and necessary resource to help increase the farm productivity. However, the government had the power to come up with policies that will favour the farmers in terms of input companies pricing. Nevertheless, there seem to be no such policies that favours small-scale commonly known as Black farmers. In the study conducted by Ahodo et al,2015:2 states that policy instruments have been designed in the agricultural sector to help regulate production, make it more efficient and sustainable by promoting efficient input use or to provide financial support to farmers. However, there is still uncertainty concerning regulation, government intervention or changing policy in agriculture is probably the most critical driver in agricultural land use due to its influence on what and how farmers can produce (Ahodo et al, 2015:2).
6.3 Conclusion of the study
The study discovered that there were commercial Black farmers that exist in Gauteng Province. Though they are not listed in the database of the Department of Agriculture Forestry and Fisheries, they are only listed as small-scale farmers in their database. The reason being that if you are black they only categories you as small scale where else if you are white you are considered commercial according to the Departmental records. Furthermore, based on the studies objective of identifying the level of profitability for commercial Black farmers. The study discovered that the majority of the Black farmers who were listed as small-scale farmers were discovered to be on the level of commercial farmers in terms of the profit that they generate on their farm businesses. The result present that the Black farmers that were sampled were making a good profit, which was more, or a little bit below the benchmark that was stipulated in this study. The successful crop farm enterprises were making an average of more or less, than 150000 per month that was a good turn over for farmers who were categorized as small-scale farmers. However, looking at the profit that they generate on their farms we can conclude that they are indeed commercial farmers.
Additionally, despite the challenges that they face and various hindering factors that were discovered during the production period of 2014/2016 where loss of profit was stagnant due to a decrease in productivity. The findings of this study recognized the fact that output erraticism was another most important source of production risk in small-scale agriculture in addition to high input cost. Especially when the production crops depends solely on favourable weather condition and good technical skills. According to Mwangi and Kariuki (2015:208) improving agricultural productivity in order meet the rising demand is very acute and for that reason, it is instructive to inspect the current performance in the case of modern agricultural technologies. In addition, agricultural technologies include all kinds of improved techniques and practices that affect the growth of agricultural output specifically crops. Further, the most common areas of technology development and promotion of crops include new varieties and management regimes; soil as well as soil fertility management; weed and pest management; irrigation and water management. By virtue of improved input/output relationships, new technology tends to raise output and reduces the average cost of production that in turn results in substantial gains in farm income (Mwangi & Kariuki, 2015:208).
Nevertheless, the Black farmers showed how passionate and dedicated they were by proving that they are able to overcome any hindrances that were affecting their productivity. This was shown during the production period of 2015/2016 where their productivity had increased leading to an increase in profitability. However, this was because Black farmers were using alternative conservative ways of maintaining diseases and soil fertility.
According to Ntshangase et al.(2018:2) conservation agriculture is defined as soil management practices that minimize the disruption of the soil’s structure, composition, and natural biodiversity and that include very little soil disturbance through tillage, permanent organic soil cover, and diversified crop rotations (Ntshangase et al.2018:2). Further, the Black farmers try the adoption of growing their own seeds that as a result help in decreasing the cost of input and they try to adopt new technologies or farming techniques. The study finds that the ones who were able to adapt to new technologies were the ones with some form of education like secondary education who were mostly youth and middle-aged than those who had no form of education.
1) There needs to be a study that must be conducted in order to investigate why the department of agriculture in Gauteng categorize Black farmers as small-scale or subsistence even though the majority of them are producing on a commercial scale.
2) The credit lending institutions need to stop excluding Black farmers from borrowing money. By lending them money, it will improve their capital investment that in turn will help in increasing their productivity.
3) The study suggests that the South African government needs to put more work in subsidizing Black farmers either through input support or through allowing efficient pricing in input and output markets. The funding of small-scale commonly referred to as Black farmers may be worthwhile considering that the farmers who produce crops and maintain profitable enterprise will be beneficial to the farmer and enable the farmer to contribute to the economy of this country. Subsidizing will be key since access to infrastructure, chemical costs, and transport costs were found to influence crop enterprise profitability negatively. I believe that through subsidizing that we can fight poverty and food insecurity.
4) The South African government should put in place policies that will try to lessen the protection on chemical inputs as this can promote close to efficient pricing by the local input producers. Additionally, chemical input and fertilizer prices could be lowered significantly by less protection and this can improve crop productivity and hence profitability. The farmers and other private players who are involved in agriculture should be allowed to outsource input without any restrictions.
5) The government must also encourage small-scale farmers to practice conservation agriculture. It was discovered in the study that the farmers are trying to use this method in order to minimize expenses and increase productivity that in turn increase profitability. According to the study conducted FAO (2007:7-8) find that conservation agriculture can benefit the farmers in terms of increasing profit. The conservation agriculture is an approach that can be used to manage agro-ecosystems in order to improve and maintain productivity and increase profit and ensure food security through preserving and enhancing the resource base and the environment. They describe conservation agriculture as the concept for resource-saving agricultural crop production that strives to achieve acceptable profits together with high and sustained production levels while concurrently conserving the environment. Furthermore, the process of conservation agricultural has determined three key principles of farming which was (continuous minimum mechanical soil disturbance; permanent organic soil cover; and diversified crop rotations). In the economic sense, conservation agriculture practice performs better than conventional farming. Savings on inputs may help to bring benefits forward by decreasing the cost of crop production (Uddin et al.2016: 101-102).
6) The land reform programme when giving the land to Black farmers had to consider the location of that land. Since distance was discovered to be problematic for farmers when they want to take their product to the market. Moreover, the government need to consider giving land to the people who had some kind of education or literate more and they should at least have some kind of agricultural background.
7) The farmers should be allowed to negotiate the market price for their produce with their market agents instead of them deciding the price for the farmers putting them at a disadvantage.
8) The majority of the Black farmers had been getting their knowledge given from generation to generation through the elderly. In order for them to succeed more than they are now. Then new pertains of management and practising agriculture must be re-evaluated and innovative farming practices must be implemented.
9) The importance of extension services was discovered by the study to be lacking. This poses a big problem because extension contact is important in promoting new farming technologies and assist in improving their farming skills techniques. The extension service is of utmost important in terms of helping the farmers adopt especially the old generation with limited formal education are still reluctant to adapt to new ways or technologies that will make their farming journey easy. It not that they don’t want to use these new technologies even though they are willing but their minds are a bit slower for some to grasp all the technical issues of the new technologies. The extension agents need to be trained to deal with such matters because they require patience and understanding. Further, the extension agent’s needs to do need analysis before they give farmers something that they do not need because during the survey it was discovered that the extension agents give farmer things they do not needs. Like giving chickens to someone who had no knowledge of raising chickens, they would not know what to do with them, that setting someone for failer. They also need to do their work diligently by making sure that they provide farmers with more information on the market for their product.