Assessing farmer perceptions about the available financing mechanisms and financial services – the case of the seed potato industry in South Africa

Manuel, Jaime (2017-03)

Thesis (MScAgric)--Stellenbosch University, 2017.

Thesis

ENGLISH SUMMARY : Farmers lack the opportunities to increase levels of production and improve efficiency for a number of reasons. The lack of a fully functioning financial services market is often identified as a primary constraint in this context. Owing to a supply-led market, financial services in rural areas are both inadequate and costly. Recent policy developments in South Africa note the strategic importance of intensive agriculture in creating employment and stimulating rural economic activity. However, unlocking the potential of the agricultural sector requires an investigation into alternative financing arrangements for agribusinesses. Potatoes form part of the major staple food groups and are a more efficient producer of calories per hectare farmed than both rice and wheat. In South Africa, potatoes account for more than 50% of the value of all vegetable sales at fresh produce markets; the industry is considered to be one of high export potential and strategic in terms of food security. This thesis uses the seed potato industry as a case study to investigate the demand-side perceptions of the available financing mechanisms and financial services. The seed potato industry is highly concentrated, thus it was appropriate to use a convenience sample to conduct interviews and request questionnaire responses. The result was a rich database, representative of approximately 40% of the seed potato industry in terms of production area. However, the limited number of responses offers little in the way of statistical inference. The investigation develops an understanding of the current financial services environment in the industry. Access to financial services is identified as a major hindrance to new entrants while unique financing mechanisms are used to limit reliance on Financial Service Providers (FSPs). The findings indicate that contract enforcement is not necessarily important to agricultural businesses as transactions tend to consider a long-term view and are often concluded without traditional intermediaries. Further, financial advisory services like tax planning and management are important considerations for these farmers but are inadequately provided to the case study group. These findings could be used as a basis for future work in the design of alternative financial services and products for farmers.

AFRIKAANSE OPSOMMING : Lanbouprodusente ondervind ‘n gebrek aan geleenthede om produksievlakke te verhoog en doeltreffendheid te verbeter as gevolg van 'n aantal redes. Die gebrek aan effektiewe finansiele dienste mark wat doeltreffend funksioneer word dikwels geidentifiseer as 'n primere beperking in hierdie konteks; finansiele dienste in landelike gebiede beide onvoldoende en nie bekostigbaar nie. Onlangse ontwikkelinge in beleid in Suid-Afrika beklemtoon wel die strategiese belangrikheid van intensiewe landbou in werkskepping en die stimulering van landelike ekonomiese aktiwiteit. Die ontsluiting van die potensiaal van die landbousektor vereis egter 'n ondersoek na alternatiewe finansieringsopsies vir agribesighede. Aartappels vorm deel van die vernaamste stapelvoedselgroepe en is 'n meer doeltreffende produsent van kaloriee per hektaar geboer as beide rys en koring. In Suid-Afrika neem aartappels meer as 50% van die waarde van alle groente verkope op varsproduktemarkte in beslag; die bedryf word beskou as een wat hoe uitvoerpotensiaal het. Hierdie tesis gebruik die saadaartappelbedryf as 'n gevallestudie om die persepsies van die beskikbare finansieringsmeganismes en finansiele dienste te ondersoek vanuit ‘n vraag-perspektief. Die saadaartappelbedryf is hoogs gekonsentreerd, dus was dit geskik om 'n gerieflikheidsteekproef te gebruik om onderhoude te voer en antwoorde op vraelyste te versoek. Die gevolg was 'n ryk databasis, verteenwoordigend van ongeveer 40% van die saadaartappelbedryf in terme van produksie-area. Die beperkte aantal terugvoere bied egter min sover dit statistiese inferensie aangaan. Die ondersoek ontwikkel 'n begrip van die huidige finansiele dienste omgewing in die bedryf. Ons het opgemerk dat toegang tot finansiele dienste 'n groot hindernis is vir nuwe toetreders, terwyl unieke finansieringsmeganismes gebruik word om afhanklikheid van Finansiele Dienste Verskaffers (FDV's) te beperk. Ons het gevind dat kontrakbedinging nie belangrik is vir landboubesighede nie aangesien transaksies geneig is om 'n langtermyn-siening te neem en dikwels gebaseer word op lojaliteit eerder as die mees gunstige terme beskikbaar in die mark. Ons het gevind dat finansiele adviesdienste soos belastingbeplanning en bestuur belangrike oorwegings vir hierdie produsente is maar dat die gevallestudie groep nie voldoende ondersteuning of leiding ten opsigte hiervan ontvang nie. Hierdie bevindinge kan gebruik word as 'n basis vir toekomstige werk in die ontwerp van alternatiewe finansiele dienste en produkte vir produsente.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/100808
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