ENTREPRENEURSHIP AND THE BOTTOM LINE: HOW MUCH OF AGRICULTURE'S PROFITS IS DUE TO CHANGES IN PRICE, HOW MUCH TO PRODUCTIVITY?

van Zyl, J.; van Schalkwyk, H. D.; Thirtle, C.

ENTREPRENEURSHIP AND THE BOTTOM LINE: HOW MUCH OF AGRICULTURE'S PROFITS IS DUE TO CHANGES IN PRICE, HOW MUCH TO PRODUCTIVITY?

2018

van Zyl, J. | van Schalkwyk, H. D. | Thirtle, C.

Conventional financial analysis shows that profit comes from the difference between revenues and costs. A sector can generate profit growth through productivity growth or price over-recovery, or both. The course that is taken, however, has important implications for its longer-term competitive positioning. The South African agricultural sector showed a steady decline in its performance since 1973. The decline is attributed to the cost-price squeeze; increases in productivity did not compensate for decreases in price recovery. The decline reached its lowest in 1983 when the growth in productivity overtook the negative effect of the terms of trade.

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