The impact of capital endowment on smallholder farmers’ entrepreneurial drive in taking advantage of small-scale irrigation schemes : case studies from Makhathini and Ndumo B irrigation schemes in KwaZulu-Natal, South Africa.

Master of Science in Agricultural Economics. University of KwaZulu-Natal, Pietermaritzburg 2016.

Smallholder irrigation has been taken across the developing countries as a means of poverty reduction. However, irrigation schemes have failed to meet these goals for various technical and institutional reasons. The South African government has invested a significant amount of funds into projects that are meant to link smallholder farmers into commercial agricultural market value chains. Despite this huge investment on smallholder irrigation infrastructure, the performance of South African smallholder farmers remains unsatisfactory. Smallholder farming has shown very little change in the number of farmers actively participating in commercial agricultural markets. This study was started with the identification of several barriers to the development of agricultural businesses at small production scale. One of the key challenges is the misconception related to visualising smallholder farmers as homogeneous. Many studies in the development economics literature have shown that they are diverse in terms of preferences, resource endowments, capabilities, entitlements, constraints, and opportunities. Given this reality, considering them as a homogenous unit is inaccurate and it hinders the process of action, research and development for policy and management interventions. For farmers to survive the increasingly competitive environment they operate in, it is imperative that they possess entrepreneurial skills. The purpose of this study, therefore, was to evaluate the impact of the capital endowment on on-farm entrepreneurial skills to take advantage of small-scale irrigation schemes and enhance rural livelihoods. The first objective of this study was to evaluate the impact of human, physical, financial, social, natural and psychological capital assets on unlocking on-farm entrepreneurship in Makhathini and Ndumo B irrigation schemes. This was done using descriptive analysis, Analysis of Variance (ANOVA), Principal Component Analysis (PCA) and two-limit Tobit regression. The second objective of the study was to examine the impact of on-farm entrepreneurship and capital endowment on enabling small farmers to productively use the scheme infrastructure. This was done using ANOVA and a one- limit Tobit regression estimation of cabbage production function. Production functions were estimated to find out the impact (at the margin) of on-farm entrepreneurship on the productivity of individual farmers in each category of the respondents. Cobb-Douglas production functional form was chosen for this analysis. A stratified random sampling technique was used to obtain a sample comprising of 114 scheme irrigators, 46 independent irrigators, 24 home gardeners, 15 community gardeners, and 22 non-irrigators in Makhathini and Ndumo B irrigation scheme areas. The results suggest that the number of days the farmer was available for labour per week, level of education, distance of household to the irrigation scheme, total size of land operated, crop income, number of years the household had been receiving child grant and recipient of foster child grant were all statistically significantly different within farming groups. The on-farm entrepreneurship competency index generated using PCA was dominated by motivated farmers who perceived their farms as a means of making a profit and ambitious farmers who also understand how to motivate people. The econometric models revealed that the estimated coefficients for farmer gender, farming experience, education level, psychological capital, scheme irrigators, main occupation and irrigation scheme distance from homestead statistically and significantly explained on-farm entrepreneurship competencies.