Land and water use rights in smallholder farming : impacts on productive use of irrigation water and entrepreneurial spirit in KwaZulu-Natal.

Master of Science in Agricultural Economics. University of KwaZulu-Natal, Pietermaritzburg, 2017.

The increasing pressure on land and water resources in developing countries due to population growth has led to the need for improvement of the regulations that control the use of these scarce resources. However, the impact of those regulations and institutional issues therein are little understood, especially in the communal rural areas of South Africa. Recently, entrepreneurship has come to be recognized as a major engine for job creation and economic development in countries around the world. The South African 2012 National Development Plan suggests that agricultural development needs to be based on successful land reform, employment generation through establishment and expansion of agri-businesses, and ensuring strong environmental safeguards. Yet, policy makers have very little information on how the policies they develop and adopt affect smallholder farmers’ entrepreneurial spirit. Moreover, very little is understood about whether smallholder farmers are interested in expanding their farming operations or not and if so, what factors influence their willingness and ability to expand. Not much research has empirically analyzed the impact of land use rights and water use rights on the productive use of irrigation water and entrepreneurial spirit of smallholder farmers. Previous studies have mainly focused on the impact of land tenure systems on agriculture investment. This study differs as it classifies customary land tenure system to identify which of the bundle rights have a significant impact on the productive use of irrigation water and entrepreneurial spirit, while taking into account water use rights which have not been accounted for in those studies. Moreover, no research has empirically analyzed the factors that influence the willingness and ability of smallholder farmers to expand their farming operations. Yet, government has been making efforts in trying to move smallholder farmers into commercial farming by expanding existing irrigation schemes and creating new ones. The study was conducted in three areas, namely, Msinga, Nongoma and Jozini. The data was collected from 242 smallholder farmers using a combination of purposive and stratified random sampling methods. The study purposively selected farmers who are engaged in food crop farming to allow for comparison across different smallholder farmers. A stratified random sampling technique was then employed to select the respondents. Households were categorized into four strata: scheme irrigators (166), non-irrigators (23), community gardeners (27) and home gardeners (26). The study made use of key informant interviews, focus group discussions and household surveys to gather the data. To analyze the data, descriptive statistics, gross margin analysis, Principal Component Analysis (PCA), Univariate General Linear Model (UGLM), Multivariate General Linear Model (MGLM), ordered probit regression model and Heckman selection model were used. The descriptive analysis was performed to compare socio-economic characteristics of smallholder farmers’ typologies. The study made use of the PCA method to develop land use right indices (right to use & exclude others, land transferability and land use decision making), water use right indices (secure access to water, effective scheme management and access to irrigation equipment), psychological capital indices (mainly capturing risk taking, open mindedness, self-confidence and ambition) and entrepreneurial spirit indices (business mindset, self-confidence, innovation and risk taking). The Keiser-Meyer-Olkin and Bartlett’s sphericity tests were employed to test the assumptions underlying the use of PCA. The gross margin analysis was used to compare variations among crops and smallholder farmer typologies. The UGLM was used to analyze the factors that influence the gross margin per hectare (proxy for productive use of irrigation water). The MGLM was used to analyze the factors that influence smallholder farmers’ entrepreneurial spirit. The oprobit and Heckman model were used to explain the factors affecting smallholder farmers’ willingness and ability to expand. Based on the findings of this study, smallholder farmers face many challenges like drought, pests and crop diseases, scarce arable land with water, market availability, old age, low level of education, availability of quality infrastructure like good roads within the schemes and good cellphone network connections, and access to quality inputs. Due to these challenges, agriculture contribution to total household income is low and social grants are the major contributor. This study found that the existing land tenure system is in line with the communal land tenure policy in the irrigation schemes with land related matters being handled by scheme committees who report to traditional leaders and they, in turn, report to government. The findings indicated that education level hinder productive use of irrigation water, while access to input markets, land transferability and scheme management enhance productive use of irrigation water. To encourage smallholder farmers’ entrepreneurial spirit, there is a need to take into account their mode of water supply, output market information, right to use & exclude others from land, land transferability, access to irrigation equipment and on-farm income. To change smallholder farmers’ subsistence mindset, investments need to be made in output markets and irrigation equipment. The findings suggest that there are three statistically significant variables that deter the smallholder farmers’ willingness and ability to expand, namely, age, gender and household size. From this study, it’s not clear what benefits privatization of individual land title would bring to improve productivity or investments in land when commons are governed collectively and effectively. This is especially the case as smallholders were not willing to use their land as collateral and also did not have credit records or proof of income which is required by banks to get credit. Therefore, customary tenure system was found to be favorable in this study as it was inclusive, ensured sustainability of land and accountability of leadership. The communal land tenure policy was found to be consistent with what was happening at local level. Therefore, the study recommends that the roles and responsibilities of scheme committees be reflected in both the communal land tenure policy and the national water resource strategy as a body that is responsible for land and water in the irrigation schemes for smallholder farmers. Agency control tenure systems need to be more inclusive in decision making as it affects smallholders’ production level. A provincial body of scheme committees is needed whereby smallholders will capacitate each other to collectively address the challenges they face related to water, land and markets. This body would also need to be represented in the policy formulation and can aid in policy implementation. When agriculture and other livelihoods fail, smallholder farmers depend mainly on social grants to survive. Therefore, the study recommends that when developing irrigation projects, departments like social development and economic development should also be part of the consultation to improve smallholder farmers’ livelihoods. Moreover, the study recommends that in new irrigation schemes young people must be given priority and there must be proper incentive schemes targeted specifically for them. Furthermore, it must be ensured that they receive necessary training and exposure to be able to participate meaningfully in the whole value chain.