The objective of this research is to investigate whether agricultural cooperatives can facilitate smallholder farmer access to input and product markets. Farmers in two case study communal areas of KwaZulu-Natal face high transaction costs as reflected primarily in their low levels of education and literacy, lack of market information, insecure property rights, poor road and communication infrastructure, and long distances to markets. Analysis of the reasons why cooperatives were originally established in various parts of the world suggests that most of the causes (such as poverty, market failure and high transaction costs) also apply to the study farmers, as do the seven international principles of cooperation. Smallholder farmers in both case study regions have the potential to grow high-value crops such as vegetables, fruit and cut flowers. In the supply chain from farm to market, the optimum boundary for each organization involved in the chain (e.g. cooperative and investor-oriented firm) depends on the minimum operational and transaction costs for each business.
Bibliographical noteFunding Information:
The senior author gratefully acknowledges funding from the National Research Foundation (NRF) in South Africa and the Centre for International Food and Agricultural Policy (CIFAP) in the Department of Applied Economics at the University of Minnesota. Opinions expressed and conclusions arrived at in this document are those of the authors and do not necessarily reflect those of the NRF or CIFAP.
- Agricultural cooperatives
- High-value crops
- Small-scale farmers
- South Africa
- Transaction costs