Doctoral Degrees (Agricultural Economics)

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Browsing Doctoral Degrees (Agricultural Economics) by Subject "Agriculture and state -- South Africa -- Western Cape"

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    Structural adjustments in the wheat industry of the Western Cape Province
    (Stellenbosch : Stellenbosch University, 2001-03) Troskie, Dirk Pieter; Vink, N.; Stellenbosch University. Faculty of AgriSciences. Dept. of Agricultural Economics.
    ENGLISH ABSTRACT: The objective of this dissertation was to investigate the structural imbalances of the wheat industry of the Western Cape Province and, with due recognition of a changing environment, to develop an effective strategy for the industry. It was found that the origins of the structural imbalances could be detected in the interaction between policy, technological and demand factors and is not unique to the specific industry. The farm problem provides an explanation for the instability of and downward pressure on wheat prices as well as the sluggish adaptation to environmental change experienced in the wheat industry. Internationally similar problems led to a whole range of policy measures. Relatively unique to South African agriculture, but not only to the Western Cape wheat industry, is the circumstances that gave rise to the current dual structure of the domestic agricultural sector. The origins of these circumstances could be traced back to the Dutch settlement of the Cape in 1652 and the resulting measures was later upheld under British rule. After the commercialisation of the local agricultural sector following the discovery of diamonds in South Africa, certain measures were lobbied for at the end of the 19th Century to protect white farmers. These measures were expanded in the 20th Century and gave rise to the particular duality along ethnic lines of the South African agricultural sector. If it is accepted that the structural problems of the wheat industry are the result of political, policy, technological and demand factors, the question of the potential future role of the sector, and more specifically the wheat industry, can be asked. It was established that agriculture is a natural catalyst for economic development through the provision of food, foreign exchange, manpower, and capital formation as well as a market for industrial produce. Whereas the potential exists, agriculture has not yet fulfilled this role in Southern Africa due to inconsistent domestic policy, adverse trade regimes, inappropriate technology and problems encountered in the management of development. This potential role of agriculture has been quantified for the Western Cape Province. In the development of a strategy for an industry it is imperative to evaluate the future economic and social environment. It was verified that in the next phase of economic development, towards information societies, agriculture would still fulfil the functions previously mentioned. However, a new and more esoteric role relating to identity could be added to this list in an information society. Given the important role of agriculture as described in the previous section, intuition would lead one to expect that government would play an important role in alleviating the structural problems of the Western Cape wheat industry. However, contrary to this intuitive expectation it was found that, in alleviating the problems of the Western Cape wheat industry, government intervention will be largely limited to creating a favourable enabling environment. In getting to this conclusion the theory of welfare economics, public choice and politician - voter interaction were explored. The traditional wisdom has it that in searching for a Pareto-optimal state, or at least a second-best solution, pressure group activities may play an important role. This is seen as important due to the difficulties, as indicated by Arrow's impossibility theorem, in transforming individual preferences into political preference functions. However, numerous examples have shown that pressure group activities may only playa marginal role in influencing the final outcome. The underlying structural characteristics of the national and provincial economies may be a more important determinant. This became more certain as the way politicians perceived agriculture before and after the 1994 political transition was analysed. It follows that a strategy for the wheat industry of the Western Cape will take the global, social, policy, natural and consumer environment into account and both the strategy and the industry will have to be self-reliant. It was argued that a solution would be found in changing the slope (elasticity) of the demand and supply functions for agricultural produce. With the aid of a spatial model developed the impact of the different elements of the strategy on the profitability of wheat production in the Western Cape was evaluated. This model took into consideration the yield potential for wheat, the gross and net margin of wheat production, spatial dispersion, transport costs and also made provision for different intermediate markets. It was found that each of the components of the strategy would substantially contribute to a more profitable wheat industry for the Western Cape. The combined effect of the strategy would result in a 97 percent decrease in the area where wheat production is unprofitable. Profitable production of wheat would be possible on 99,3 percent of the total area that is suitable for rainfed wheat production. The production of wheat would be highly profitable at a margin of more than R200 per ton on more than 1,1 million hectares (77,1% of the total area). It is concluded that, while taking the global, social, policy, natural and consumer environment into account and without relying on government, a strategy could be developed that will rectify the structural problems of the Western Cape wheat industry.