Explaining Farmers’ Income via Market Orientation and Participation: Evidence from KwaZulu-Natal (South Africa)

Abstract

In many sub-Saharan African nations, commercializing smallholder agriculture has recently been seen as a strategy for attaining equitable growth and eliminating poverty in a sustainable manner. Despite the distinction made between market participation and market orientation, their respective impacts on farm income have not been given enough attention in the literature. In this paper, their respective determinants are analysed and each of them is linked to smallholder farmers’ income. The survey was conducted in and around four irrigation schemes in KwaZulu-Natal. Using a sample of 332 farmers, the study estimated the output participation index/market orientation index and employed the two-limit Tobit and OLS regression models. The findings show that socioeconomic, institutional and production factors influence market orientation and participation differently. In addition, market participation is more important in explaining farmers’ income compared to market orientation. Moreover, farmers had a higher rate of market participation index (83%) while their market orientation index was very low (38%). Market orientation is, therefore, not a pre-condition for market participation. In smallholder agriculture, market participation is a function, mainly, of marketed surplus. These realities are valid for smallholder agriculture and in sharp contrast with commercial agriculture. Engaging smallholder farmers more in market participation rather than market orientation would be a better strategy to improve their access to markets and eventually enhance their income. Market orientation will then become the unintended outcome of continuous engagement of farmers with the market.