Efficiency evaluation of agricultural cooperatives in Mpumalanga

Abstract

Purpose The purpose of this paper is to analyse performance (on efficiency) of agricultural cooperatives in Mpumalanga province, South Africa, using Data Envelopment Analysis (DEA). The empirical investigation is motivated by the dearth of empirical literature on agricultural cooperatives’ performance measurement and its correlates. Design/methodology/approach The study employed DEA and applied the input minimisation constraint. The authors used the data from 19 agricultural cooperatives which had complied with reporting on their annual financial statements (AFS) in the financial year 2014/2015. The input variables were total assets and total expenses, and the output variables were revenue and profit. Findings The average technical efficiency was found to be 72 per cent efficient indicating the presence of 28 per cent resource wastages. Of the 19 decision-making units, only 5 (26 per cent) were 100 per cent efficient. It should be noted that the 26 per cent that were technically efficient were also operating at constant returns to scale (optimal resource allocation). Research limitations/implications Data limitation was with regard to 19 cooperatives, which means that if more agricultural cooperatives could be analysed, the results will be different. Practical implications There are more than 60 agricultural cooperatives in the province, and yet only 19 could report on their AFS. This is an indication that there is a gap in governance, and policy makers and government need to revisit support, over and above funding, and issues of governance have to be strengthened. Social implications Agricultural cooperatives are created as vehicles that can stimulate the economy and contribute towards job creation. If the cooperatives do not perform or are not sustainable, the socio-economic conditions of the communities in which they operate will never realise the economic gains. Originality/value The study was necessitated by the continued focus on government based on the cooperatives, as there is a dearth of empirical literature separating managers’ reports and empirically proven studies/results.