Risk perceptions and management strategies by smallholder farmers in KwaZulu-Natal Province, South Africa

Abstract

Risk is a central issue in rural areas that affects many different aspects of people’s livelihoods in the developing world. Unless well managed, risks in agriculture can slow development and hinder poverty reduction. Farmers’ perceptions of and responses to risk are therefore important in understanding their risk behaviour. This paper examines risk perceptions and management strategies using field data collected from 200 smallholder rural farmers. The relationships between various socioeconomic characteristics and perceived sources of risk were also examined. In general, price, production and financial risks were perceived as the most important sources of risk. Using Principal Components Analysis, seven principal components (PCs) that explained 66.13% of the variation were extracted. Socio economic factors identified to have a significant relationship with the various sources of risk are age, gender, education, location, information access and risk-taking ability. The most important traditional risk management strategies used by the surveyed farmers were identified as crop diversification, precautionary savings and participating in social networks. The result of this study provides useful insights for policy makers, advisers, developers and sellers of risk management instruments.