Abstract
Orientation: Participating in the agriculture and agro-processing chain has the potential to enhance the competitive advantage of small-scale agricultural enterprises in South Africa.Research purpose: The study empirically investigated the extent to which agro-processing participation is determined by human and social capital factors, while accounting for the moderating effects of transaction costs.Motivation of the study: Research is required that examines levels of human and social capital of small-scale agripreneurs, as these act as major constraints towards improved competitiveness of agribusinesses.Design: To test the study hypotheses, a structured questionnaire was administered to 166 small-scale agripreneurs at farmer gatherings across regions in South Africa.Findings: Based on the survey results, both human and social capital factors showed a positive and significant influence on agro-processing participation. The findings further highlight the importance of market access and transaction costs to small-scale agripreneurs.Practical implications: Policy-makers need to be aware of how human capital factors such as previous education and experience impact participation in agro-processing activities and help to mitigate transaction costs.Contribution: Study findings are highly relevant to South Africa as agro-processing and value-adding activities are not always scale dependent, and hence, a focus on human and social capital is valuable.
Highlights
It is increasingly recognised that the exploitation of agro-processing entrepreneurial opportunities has the potential to enhance the competitive advantage of agribusinesses (World Bank 2016:14)
Several benefits of integrating the primary agriculture and agroprocessing industries have been noted in the literature which include among others, local economic growth and development via backward and forward linkages through providing opportunities for earning income in food production, processing, distribution, retailing and job creation encouraged by increased productivity from lower transaction cost (Dorosh & Thurlow 2013:450; Fan, Brzeska & Halsema 2013:141)
Despite the potential benefits that might accrue from participation in agro-processing and value addition activities, in South Africa (SA) small-scale agripreneurs are mainly confined to the informal sector and focused on primary agriculture, whereas participation in agro-processing and value addition activities requires agripreneurs to be flexible in production methods, and at the same time, they must pay attention to cost elements (Kaikkonen 2006:3; Jari & Fraser 2009; Urban & Xaba 2016:223)
Summary
It is increasingly recognised that the exploitation of agro-processing entrepreneurial opportunities has the potential to enhance the competitive advantage of agribusinesses (World Bank 2016:14). Despite the potential benefits that might accrue from participation in agro-processing and value addition activities, in South Africa (SA) small-scale agripreneurs are mainly confined to the informal sector and focused on primary agriculture, whereas participation in agro-processing and value addition activities requires agripreneurs to be flexible in production methods, and at the same time, they must pay attention to cost elements (Kaikkonen 2006:3; Jari & Fraser 2009; Urban & Xaba 2016:223) Several challenges face these small-scale agripreneurs, which include information asymmetry, lack of access to finance, lack of access to markets, inadequate and insufficient infrastructure, low human capital and low investments in technology (Louw et al 2008:288; Uchezuba, Moshabele & Digopo 2009:173). Research finds that transaction costs significantly affect agricultural activities (Makhura 2001), and in general, high costs incurred by small and medium enterprises (SMEs) in the self-provision of infrastructure and distribution of finished goods are problematic (Mabuza, Ortmann & Wale 2014:208; Obokoh & Goldman 2016)
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