Original Research

The impact of social grant dependency on smallholder maize producers’ market participation in South Africa: Application of the double-hurdle model

Sikhulumile Sinyolo, Maxwell Mudhara, Edilegnaw Wale
South African Journal of Economic and Management Sciences | Vol 20, No 1 | a1474 | DOI: https://doi.org/10.4102/sajems.v20i1.1474 | © 2017 Sikhulumile Sinyolo, Maxwell Mudhara, Edilegnaw Wale | This work is licensed under CC Attribution 4.0
Submitted: 09 September 2015 | Published: 26 May 2017

About the author(s)

Sikhulumile Sinyolo, Economic Performance and Development, Human Sciences Research Council, South Africa
Maxwell Mudhara, Discipline of Agricultural Economics, University of KwaZulu-Natal, South Africa
Edilegnaw Wale, Discipline of Agricultural Economics, University of KwaZulu-Natal, South Africa


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Abstract

Background: Social grants have become an increasingly popular means of improving the welfare of poor households in South Africa and beyond. While the goals of these transfers are to alleviate current poverty as well as to improve human capital capacity, they also have unintended effects, positive or negative, on beneficiary households. A question that has not been adequately addressed in the literature is the role that social grants play in the efforts to commercialise smallholder farming.

Aim: The aim of this study was to examine the impact of social grant dependency on the incentives of smallholder maize producers to participate in the market.

Setting: The study was done in the rural areas of four districts (Harry Gwala, Umzinyathi, Umkhanyakude and Uthukela) in the KwaZulu-Natal province, South Africa.

Methods: The study adopted a quantitative research design. A total of 984 households were randomly selected from the four districts, of which 774 had planted maize in the previous season. The analysis was done on the 774 farmers who had planted maize. The double-hurdle model was used for statistical analysis.

Results: The results show a negative association between social grant dependency and market participation, suggesting that social grant-dependent households are more subsistent, producing less marketable surplus. Moreover, households with access to social grants sold less quantities of maize in the market, indicating reduced selling incentives.

Conclusion: The study indicates that social grants reduce the incentives of smallholder farmers to commercialise their production activities. The results suggest that, while policies aimed at reducing transaction costs would increase smallholder market participation, attention should be paid on how to reduce social grants’ dis-incentive effects. To reduce spill over effects to unintended household members, the study recommends offering part of the grant as ‘in-kind support’, which is specific to the intended individual beneficiary.


Keywords

social grants; maize markets; smallholder commercialisation; double-hurdle model; KwaZulu-Natal; South Africa

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Crossref Citations

1. The role of social grants on commercialization among smallholder farmers in South Africa: Evidence from a continuous treatment approach
Sikhulumile Sinyolo, Maxwell Mudhara, Edilegnaw Wale
Agribusiness  vol: 35  issue: 3  first page: 457  year: 2019  
doi: 10.1002/agr.21601