CHAPTER 4 DETERMINANTS OF COMMERCIALISATION IN SMALLHOLDER FARMERS
4.1 Introduction
CHAPTER 4 DETERMINANTS OF COMMERCIALISATION IN
GDP such that agricultural development precedes economic development (World Bank 2008, FAO 2010). Studies in Zimbabwe have shown a positive association between agricultural value of production and economic growth (Dekker 2011, Mapfumo 2015). The historical context of the Zimbabwean agrarian sector was dualistic with commercialisation on the large-scale farms and subsistence farming in the smallholder sector (Shumba and Whingwiri 2006). However, the new agrarian sector in Zimbabwe promotes the commercialisation of smallholder sector as the farmers account for about 95% of the farming population (Dekker 2011). Common characteristics among subsistence farmers are their dependency on family labour, limited use of high value inputs and limited participation in the produce markets (Von Braun 1994).
Commercialisation is a progression towards the use of high value inputs and increased degree of participation in the produce market. This is achieved through different pathways including increased production of cash crops such as tobacco and soybeans and realisation of surplus food crops. The degree of market participation can be measured using a Household Commercialisation Index (HCI). Von Braun (1994) postulated three main ways of measuring commercialisation. The first is the output-input specialisation, which is the measure of agricultural output sold to the market and input acquired from the market as a proportion of value of agricultural production (Ele et al. 2013). The second index is the extent of household integration into cash economy, which is measured by the value of goods and services acquired through market transactions to the total household economy (Jaleta et al. 2009). The third index, which has been extensively used in most crop commercialisation studies, is the proportion of volume of crop marketed by a household. It is the ratio of the gross value of all crop sales per household per year to the gross value of all crop production (Kiriti & Tisdell 2002, Govereh and Jayne 2005, Ele et al. 2009, Kamoyo et al. 2015, Osman and Hassain 2015).
The last index is adopted for this study.
Govereh and Jayne (2003) highlighted the importance of cash crop farming and found out that under conditions of market failure farmers who commercialised increased their food productivity. In that study, cotton farmers who participated in input schemes generated surplus inputs, which were used in maize production. Furthermore, production of cash crops allowed crop rotation between cash crops and food crops thus naturally improving soil fertility. Despite such empirical evidence of positive economic gains of growing cash crops in Sub Saharan Africa, the proportion of subsistence farmers remains high as very few smallholder farmers participate in the markets (Devereux et al. 2003). There is a lack of appropriate instruments to
inform policy makers on how to increase commercialisation in the smallholder sector.
Although several studies have been carried out on commercialisation (Govereh & Jayne 2003, Ele et al. 2009, Jaleta et al. 2010, Umar 2013). Von Braun et al. (1994) warned against generalisations of commercialisation as it is context specific especially due to differences in agro-ecological conditions. Furthermore, most of the studies focused on commercialisation of one particular crop at a time, especially food crops (Ele at al. 2013, Justus et al. 2016, Zamasiya et al. 2016). It is from this background that this paper intent to contribute towards the understanding of household specific factors affecting extend of commercialisation of field crops. The analysis accounts for aggregate commercialisation of all the crops produced taking into consideration that farmers usually grow more than one crop in a particular season (Mutami 2015). The objective of the study is therefore to analyse the extent of commercialisation in smallholder farmers and determinants thereof.
Theoretical framework
Following Jaleta et al. (2009), it is postulated that farmers’ decision to participate in the output market is utility maximisation rather than profit maximisation under risky conditions. The risks emanating from imperfect markets or non-existent markets at all a common feature in Sub- Saharan Africa (Devereux et al. 2003). The agricultural household model is used considering that smallholder farming households consume a certain proportion of their produce (Ellis 2000). Consequently, they have to make the production and consumption decision simultaneously. In making the decision to commercialise or not to, and the levels of commercialisation, farming households compare the utility derived from each of the decisions.
Therefore, commercialisation decisions are affected by a set of explanatory variables.
Previous studies on determinants of commercialisation identified various explanatory variables. Govereh et al. (1999) found out that in cotton growing smallholder farmers of Gokwe in Zimbabwe commercialisation was synonymous with expanding cotton production and was mainly determined by farm size. Okezie et al. (2012) found labour and fertilizer to be significant factors determining commercialisation. Using the Tobit regression, Ele et al. (2013) identified that off farm income, age, household size, gender, level of education and membership of an association were positively associated with the commercialisation of food crops in Cross River state, Nigeria. Justus et al. (2015) also found farm size together with agricultural services such as extension, markets and credit being positively associated with commercialisation in Rwanda. When assessing the impact of cooperatives on commercialisation, Bernard et al.
(2008) found group membership to be positively associated with commercialisation. Kabiti et al (2016) found out that commercialisation of maize in smallholder farmers of Munyati area, Zimbabwe was positively affected by labour, age and off farm income. However, communal land holding was found to negatively influence commercialisation in the same study.