Technical Efficiency of Smallholder Tea Production in South-Eastern Malawi: A Stochastic Frontier Approach

Abstract

Tea production contributes 8.8% of foreign exchange earnings in Malawi. A study was undertaken in South-Eastern Malawi to understand the smallholder tea production system, estimate its technical efficiency and establish sources of technical inefficiency. A multi-stage sampling technique was employed to select 230 smallholder tea farmers, who participated in the study. Data analysis was done using SPSS and STATA. Smallholder tea production was characterised using descriptive statistics. A Cobb-Douglas Stochastic frontier model and Tobit Regression model were run in STATA to determine technical efficiency and sources of technical inefficiency respectively. The study found that the technical efficiency of smallholder tea farmers ranged from 16% to 92% with a mean of 67%. Education, distance to factory and farming experience significantly reduced technical inefficiency at 1%, 5% and 10% level respectively; and inefficiency was relatively low among farmers that utilised hired labour, and high among those that were contracted by government cooperative. Access to non-tea income was not a source of technical inefficiency. The findings of the study imply that various policies on extension and training have to be implemented to increase the knowledge of the smallholder tea farmers to ensure increased technical efficiency. Smallholder tea farmers should also be facilitated to access labour-saving technologies to enable them carry out timely farm operations.