cattle commercialization in rural south africa: livelihood...

© Kamla-Raj 2014 J Hum Ecol, 45(3): 207-221 (2014)

Cattle Commercialization in Rural South Africa:Livelihood Drivers and Implications for Livestock

Marketing ExtensionJorine T. Ndoro1*, Maxwell Mudhara2 and Michael Chimonyo3

1Department of Agricultural Extension and Rural Resources Management, 2African Centre forFood Security, 3Department of Poultry and Animal Sciences, University of KwaZulu-Natal,

P/Bag X01 Scottsville, 3209, Pietermaritzburg, South Africa*E-mail: [email protected]

KEYWORDS Market Participation. Sustainable Livelihood Framework. Double-Hurdle Model. AgriculturalExtension. South Africa

ABSTRACT Commercialization of livestock farming systems remains a challenge in rural South Africa. Recentempirical evidence places agricultural extension at the forefront of policy strategy to address this challenge. Thisstudy applies the sustainable livelihood framework (SLF) to quantitatively analyze the factors confoundingparticipation in cattle markets for the purpose of informing agriculture extension programming. Based on a datasetcompiled from a household survey of 230 randomly selected smallholder cattle farmers in Okhahlamba LocalMunicipality (OLM), a Double-Hurdle econometric estimation technique is used to determine factors within theSLF influencing market participation and supply volumes decisions. The results reveal that the low rate of marketparticipation could be explained by the broader aspects of livelihoods of smallholder cattle farmers, includinglimited access to financial, social and natural capital, as well as the difference in livelihood strategies and motivations.Based on these findings, the study draws the implications for the design of livestock extension programs in OLM,and South Africa in general.

INTRODUCTION

Background of the Study

Market participation is an important ingredi-ent for agricultural and rural development. Com-mercialization of smallholder farming systemsthrough active participation in cattle markets hasthe potential to exploit developing regions’ com-parative advantages and transform rural econo-mies (Boughton et al. 2007; Rios et al. 2009;Mathenge et al. 2010). Commercializing small-holder farming systems leads to increased pro-ductivity and improved quality of produce, there-by contributing to improved incomes. Hence,market participation by smallholder cattle farm-ers has the potential to lead to specialized, mar-ket-oriented farming systems (Rios et al. 2009).

In South Africa, the recent growth in live-stock markets brought about by high popula-tion and income growths, urban migration, glo-balization, and their associated changes in life-styles and consumer preferences, has present-ed new opportunities for smallholder livestockfarmers to be integrated into the market econo-my (Delgado et al. 2001; Coetzee et al. 2005;Uzchezuba et al. 2009). Cattle production con-tributes between 25% and 30% per annum to

South Africa’s national agricultural GDP(Musemwa et al. 2008). In addition to its impor-tance in the national economy, cattle produc-tion is a key livelihood strategy of the resource-poor smallholder farmers in South Africa, wherearound 40% of the total cattle herd size is ownedby communal and emerging farmers (NationalDepartment of Agriculture 2011). Cattle produc-tion by smallholder farmers constitutes a majorlivelihood strategy particularly for farminghouseholds living in marginal areas with degrad-ed lands, and meager economic opportunities,and hence acute poverty, food insecurity andunemployment (Machethe 2004).

The appeal of cattle as a viable agriculturalinvestment option has influenced rural devel-opment policies in South Africa. Several strate-gic intents have been devised to transform therural livestock sector towards a commercialisedindustry. The National Livestock DevelopmentStrategy proposes to support smallholder andemerging farmers to be competitive and profit-able (National Department of Agriculture 2006).The strategy proposes to support smallholderlivestock farmers through creation of an enablingpolicy environment, investment in rural commer-cial and cooperative infrastructure, market de-velopment, training and research, and equitable

208 JORINE T. NDORO, MAXWELL MUDHARA AND MICHAEL CHIMONYO

participation, and integration into sustainablerural development (National Department of Ag-riculture 2006). In addition, for the livestock sec-tor, the agricultural marketing strategy has setout to develop commodity groups/associationsfor ease of smallholder farmers’ access to marketinformation and agricultural marketing infrastruc-ture (National Department of Agriculture 2010).These incentives have opened up a variety ofmarket channels for livestock farmers, includingauctions, speculations, abattoirs, butcheries, aswell as farm-gate sales (Nkosi and Kirsten 1993).

Despite the congruence of incentive struc-tures and processes, the cattle markets in SouthAfrica remain characterized by low participationrates of smallholder farmers. Recent studiesfound the levels of cattle commercialization tobe directly proportional to the holding, with ratesof 33% for herd of 10 or less cattle, 52% for 11-20cattle owners, and 85% for 20 or more cattle keep-ers (Coetzee et al. 2005; Lehloenya et al. 2007;Musemwa et al. 2007; Groenewald and Jooste2012). These studies have documented off-takerates ranging between 5% and 10 % among com-munal lands/smallholder farmers compared to 25% for commercial farmers (Musemwa et al. 2010).

As studies in the agricultural economics lit-erature explain, lower levels of smallholder farm-ers’ participation in agricultural markets can beexplained by the incidence of costs or/and non-commercial motives. The transaction costs con-sist of fixed transaction costs arising from im-perfect information, such as the search cost forcustomers with good terms and conditions, ne-gotiations and bargaining, screening, enforce-ment, and the costs proportional to the level ofactivity encompassing per unit costs of marketaccess such as transportation and imperfect in-formation (Key et al. 2000). As Barrett (2008)explains, the extent of these costs largely de-pends on the household’s capability, as definedby its endowment including education, physi-cal infrastructure, social networks and access topublic goods such as agricultural extension ser-vices, roads, information and communication.Also, there is another body of literature con-tending that in southern African, cattle are keptfor wealth storage rather than income genera-tion (Doran et al. 1979). The asset accumulationand ownership benefits such as security andprestige outweigh market incentives (Jarvis1980).

Agricultural extension is one aspect thatshould be strengthened to reduce the transac-tion costs faced by smallholder farmers in thelivestock markets (Bahta and Bauer 2007; Uche-zubal et al. 2009). This realization is emergingeven as agricultural extension approaches areundergoing paradigm shifts, from a top-down,technology transfer model of extension deliveryto multifunctional, farmer-centered, participatoryand systems–based approaches to rural devel-opment (Duvel 2000; Coetzee et al. 2005; Anan-dajayasekeram et al. 2008; Swanson and Rajalah-ti 2010). The new approaches are supposed toaddress the real needs of the farmers and en-courage their innovativeness.

Research Problem and Objective

Empirical studies in agricultural marketing inSouth Africa consider agricultural extension onlyas a discrete ingredient whose access can offsetor moderate high transaction costs and otherchallenges. Such studies do not explore the vary-ing degrees to which agricultural extension canplay an integrative role that fosters agriculturalmarket participation. This leaves a vacuum inthe understanding of the relevance of differentagricultural extension models and methods inaddressing the complexity of farmers’ issues re-lated to livestock markets participation.

For a more practical approach to analyzingcattle commercialization and addressing the roleof extension in livestock market participation,an application of the sustainable livelihood frame-work (SLF) has two unique advantages. First,the framework gives an explicit consideration ofboth aspects of challenges and barriers to mar-ket participation, that is, transaction cost andfarmers’ motivations (Department for Interna-tional Development 1999). Second, it offers anintegrative programming framework for povertyalleviation in a sustainable manner (Krantz 2001).In line with appropriate extension models forSouth Africa (Duvel 2000), the SLF is a respon-sive and participatory programming frameworkthat builds on people’s strengths, and at thesame time attempts to overcome their challeng-es and barriers at multiple levels, thus ensuringthat micro-level challenges inform policy devel-opment and macro-level environment enablespeople to build on their strengths (DFID 1999).

Leveraging on this appeal, the objective ofthe study is to empirically investigate the ef-

CATTLE COMMERCIALIZATION IN RURAL SOUTH AFRICA 209

fects of factors under different SLF componentson market participation decisions among small-holder cattle farmers, for the purpose of recom-mending appropriate agricultural extension mod-els and methods.

The remainder of this paper is sub-dividedinto five sections. The subsequent section over-views the key findings of previous empirical stud-ies in the domain of livestock market participa-tion in South Africa. It is followed by a method-ological section outlining the empirical strategyadopted by the study, and a section discussingthe empirical findings. The last two sectionsconclude and draw the implications for agricul-tural extension in South Africa.

Literature Review

Market participation cannot be explained bya single factor (such as price incentives) since itstands out to be both a consequence and a causeof development (Barrett 2008). Farm households’market participation requires access to technol-ogy, private and public (institutional and phys-ical) productive assets, which entails varioussunk and fixed costs, coordination problems, andliquidity constraints at all decision-making lev-els (Barrett 2008). The costs associated withmarket transactions (customer search, negotia-tion, bargaining, screening, etc.), in particular,determines difference in market relations amongsmallholder farmers (Key et al. 2000). These trans-action costs, which are largely dependent onhousehold-specific factors, can push smallhold-er farmers’ livelihoods into low-level equilibriumtraps of semi-subsistence farming systems (Dor-ward et al. 2003; Barrett 2008). In this line ofanalysis, a number of empirical studies in thedomain of cattle market participation withinSouth Africa have documented various con-founding livelihood factors. This section pre-sents an overview of these findings, with a sus-tainable livelihoods lens.

On the livelihood vulnerability context, cat-tle mortality and thefts were found to be signif-icant factors explaining positive livestock mar-ket participation decisions in Limpopo, EasternCape and Northwest Provinces (Montshwe2006).

With regard to livelihoods assets, empiricalstudies have documented the significance ofhuman, physical, financial, and natural capital.With regard to human capital, Makhura (2001)

found that female-headed-households are morelikely to participate in the Northern Province’slivestock market. In the Northern Cape Province,Uchezubal et al. (2009) found that householdswith few and experienced members have highchances of engaging in livestock markets, where-as shorter distances to market and market infra-structure enhanced participation. The findingthat smaller household sizes could explain pos-itive market participation decisions was sharplycontrasted by Monthswe (2006) who revealedthat, in Limpopo, Eastern Cape and NorthwestProvinces, larger households in terms of thenumber of members are more likely to participatein livestock market. He further found that trainedfarmers and those who live within shorter dis-tances to market had more probabilities of par-ticipating in livestock markets. These resultswere vindicated by Bahta and Bauer (2007) inthe Free State Province. The significance of ac-cess to extension services has been commonlyevidenced in the literature, including studiessuch as Uchezubal et al. (2009) and Bahta andBauer (2007). Access to market information isalso constantly revealed as a key market partic-ipation factor (Bahta and Bauer 2007).

The endowment in natural resources, partic-ularly the herd sizes, has also been found toinfluence market participation rates among small-holder livestock farmers (Makhura 2001; Mont-shwe 2006; Bahta and Bauer 2007). The signifi-cance of the influence of financial assets hasalso been documented. For instance, indebted-ness was found to be a significantly negativefactor of market participation among small-scalelivestock farmers in the Northern Cape (Uche-zubal et al. 2009).

On the structures and processes, however,important processes in the livestock industryhave been overlooked by empirical studies. Yet,qualitative studies have pointed out that com-pliance with livestock management regulations(such as the Livestock Identification Act) fig-ures among livestock marketing constraints facedby small-scale farmers in South Africa (Coetzeeet al. 2005; Groenewald and Jooste 2012).

The motivational aspect of livestock market-ing has also been investigated. Non-commercialmotives in the keeping of livestock include eco-nomic functions (for example, wealth storage),agro-economic functions (for example, provisionof draft power), agro-ecological functions (forexample, provision of manure), nutritional (for


example, provision of milk) as well as socio-cul-tural functions (for example,, dowry) (Nkosi andKirsten 1999; Lehloenya et al. 2007; Groenewaldand Jooste 2012). Makhura (2001) showed thatthe more unearned incomes (pension) the house-hold receives, the less the probability of its mar-ket participation, suggesting the predominanceof non-commercial motives. However, these find-ings were in contrast with the findings of Mont-shwe (2006) showing that, in the Limpopo, East-ern Cape and Northwest Provinces, householdwho received unearned incomes had morechances of participating in livestock markets.

Notwithstanding the important insight ofthese studies, none of them analyse transactioncost and motivational aspect in an integratedmanner, which the objective of this study.

METHODOLOGY

Study Area

This study was conducted in OkhahlambaLocal Municipality (OLM), a 344,000ha munici-pality in the UThukela District of the KwaZulu-Natal Province (see Fig. 1). The 2007 populationcensus indicates that the municipality is inhab-ited by 151,414 people (or 28,508 households),mainly traditional households (56%), illiterate(38%), and communal lands dwellers (OLM 2012).Vast majorities of these people are deprived ofpublic infrastructure (with only 39%, 63%, and44% having access to electricity, water in theirdwellings, and transportation, respectively)(OLM 2012). As reported by the municipality,the harsh economic conditions are such thataround 36% of household do not receive anyincome, whilst 37% earn less than R9,600 (aroundUS$1,100) per annum (OLM 2011).

In this area, commercial and subsistence farm-ing coexist, although geographically separated(a legacy of the segregationist regime of theapartheid era). Smallholder farmers, mainly en-gaging in maize, vegetable, and livestock pro-duction, occupy the marginal areas, mainly thefoothills of the Drakensberg mountain rangechain, characterized by low-fertility lands (Elle-boudt 2012). Although only 22% of the econom-ically active population engages in crop farming(OLM 2012), 55% of households living on com-munal land engage in livestock farming, mainlyconsisting of cattle, goats and sheep (Elleboudt2012). Mixed livestock-crop farming system is a

special feature of agriculture in the foothills ofDrakensberg region, where grazing is scheduledsuch that cattle are sent to uphill areas duringthe cropping season in summer, while all the landbecomes grazing land off-season in winter (Elle-boudt 2012). This creates overstocking tenden-cies among locals with the associated environ-mental consequences, and the situation is rein-forced by the lack of property rights and en-forcement mechanisms such as fencing. The areais also know to experience harsh climatic condi-tions, characterized by an interchange ofdroughts conditions in summer and heavy snowin winter, making the palatability of the naturalgrasslands very seasonal, and farmers have toprovide supplementary feeding (Elleboudt 2012).

Empirical Framework

Following the prescriptions of Bellemare andBarrett (2006) and other previous studies suchas Winter-Nelson and Temu (2005) and Alene etal. (2008), this study uses a sample selectionmodel to unpack market participation behavioramong smallholder farmers. Hence, to estimatethe influence of livelihood factors in explainingparticipation and supply decisions among cat-tle farmers, this study adopts the Double-Hur-dle (DH) econometric technique, as initially pro-posed by Cragg (1971).

Under this empirical strategy, a cattle farmerhas to cross two hurdles to become a partici-pant in a cattle market. First, the farmer becomesa “potential participant” after crossing the firsthurdle, i.e. after making a positive decision toparticipate in the livestock market. A potentialparticipant, capability factors will determine hisactual/observed level of participation in the sec-ond hurdle. Therefore, the DH model is a two-equation framework (Matshe and Young 2004;Moffatt 2005; Ground and Koch 2008), as de-picted in the equation 1.

Considering *iI as a binary choice variable,

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iii QIQ ), Z and ábeing the vectors of factor explaining the deci-sion of participation and their influences respec-tively, and X and â being the vector of factorsexplaining the intensity of participation and theirinfluences respectively; the DH model can bewritten as follow (Matshe and Young 2004;Moffatt 2005; Ground and Koch 2008):


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The analysis of marginal effect helps to as-sess the impact of the exogenous variables onthe dependent variables. To do so, the uncondi-tional mean is decomposed into the effect onthe probability of participating and the effect onthe conditional level of participation and differ-entiating these components with respect to eachexplanatory variable. The unconditional meancan be written as:

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Sampling and Data Collection

The above-outlined model was fed withhousehold-level data collected in two phases.The first phase, the researchers conducted par-ticipatory rural appraisals (PRA) during the pe-riod of June to October, 2012. Over the course ofthis period, key informant interviews with exten-sion personnel were conducted, followed byfocus group discussions with knowledgeablemembers of various dip-tank users associations(DUAs), through their mother cooperative, theOkhahlamba Livestock Cooperative (OLC). Thisphase was meant to picture key challenges andbarriers around cattle marketing in OLM, as per-ceived by OLC members1. The information gath-ered during this phase was used to device astructured household survey questionnaire thatwas pilot-tested and administered by trainedfield enumerators during the second phase, span-ning from November, 2012 to February, 2013. Farmhouseholds were randomly selected for struc-tured interviews based on a two-stage randomsampling technique. In the first stage, 12 out of

31 DUAs were randomly selected using simplerandom selection technique, that is, with a ran-dom number generator. In the second stage, 20members of each pre-selected DUA were select-ed randomly based on a systematic random sam-pling procedure. In total, 230 heads of cattle farmhouseholds were interviewed at their home-steads.

The information gathered during the surveywas on the various livelihood characteristics ofthe farm household, based on various compo-nents of the SLF, including the vulnerability con-text, the livelihood assets, structures and pro-cesses, livelihoods strategies, and livelihoodoutcomes. Furthermore, the questionnaire cap-tured key market participation behaviors, as wellas farmers’ perceptions about market participa-tion challenges and barriers.

Empirical Estimation and Sample Description

To estimate the effect of livelihood factorson the market participation decisions (first hur-dle), the Probit regression was used. The inten-sity of participation levels, the second stage (sec-ond hurdle) was estimated using a truncated re-gression model (Wooldridge 2002). Prospectivevariables were first shortlisted based on the in-formation gathered during the PRA phase as wellas key factors unveiled by previous empiricalstudies. Thereafter, a prospective variable wasselected for the regression based on the signif-icance of its contribution to the improvement ofthe model’s fit that is, the Log-Likelihood ratio(LR) test (Wooldridge 2002). This techniqueguaranteed that the selected variables would givethe best fit.

Multicollinearity was tested using a correla-tion matrix presented in Table 4 (appendix), theresults of which suggest that multicollinearitywas not a serious problem in the data. To curbthe potential heteroskedasticity in the model,the study used the heteroskedasticity-robuststandard errors for parameter estimates.

For the model on the first hurdle, that is, thedecision to participate in livestock markets, theself-selection bias was corrected for each par-ticipating household by generating the InverseMills Ratio (IMR) from the predicted probabili-ties of the probit model and subsequently in-cluding it as an explanatory variable in the trun-cated regression of level of participation (Wool-dridge 2002). Although theory does not point to

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In consideration of the above-mentionedtechnicalities, and following the design of theSLF, the sample statistics describing the vari-ables used in the empirical model are presentedin Table 1. As the table shows, nearly 48% ofinterviewed farm households had participatedin cattle markets. Vulnerability to climatic condi-tions was more pronounced among the inter-viewed households, with staggering proportionsof 40-50% and 20-26% reporting cattle loss fol-lowing severe winters and droughts, respective-ly. However, the rates were not statistically dif-ferent between market participants and non-par-ticipants groups. With regard to human capitalindicators, the majority of interviewed house-hold heads were born in between 1953 and 1955,and household heads in the market participantsgroup were significantly younger than their coun-terparts. The majority of interviewed farmers (50-65%) had recently benefited from extension train-ing organized by the provincial Department ofAgriculture. Households in market participantsgroup, however, had relatively and significantlyreceived more T&Vs than farmers in the non-participants group.

Regarding social capital, the majority of in-terviewed farmers were members to the Okhahl-amba Livestock Cooperative (OLC), although therate of membership was significantly higher inthe market participants group. The rates of par-ticipation in farmer-to-farmer extension programswere, however, lower, ranging from 12% in theparticipants group to 6% in the non-participantsgroup. The difference in the participation ratesbetween groups was however not statisticallysignificant. The rates of participation in the sav-

ings groups (stokvels) ranging from 34% (non-participants groups to 42% (participants) wererecorded.

For physical capital, about 11% of inter-viewed households owned a tractor and stayedwithin 21 km distance to the Dukuza cattle mar-ket. With regard to natural capital, the averageherd sizes ranged between eight for non-partic-ipants, and 14 for participants, and the differ-ence was statistically significant. The walkingdistance to the nearest source of water was sta-tistically different between the two groups, withthe majority of households in the participantsgroup walking 20 min, while their counterpartswalk 14 minutes. With regard to the transform-ing structures and processes, the majority inboth groups had tagged their cattle althoughthe participating group recorded a significantlyhigher tagging rate.

For the livelihood outcomes, incomes fromlivestock sale were significantly more importantin the livelihoods portfolio among interviewedmarket participant than in the non-participantgroup, whereas the importance of remittanceswas significantly more pronounced amonghouseholds in the non-participants group. Theexpected cattle price was about R5, 500.

RESULTS AND DISCUSSION

The results of the participation and supplymodels are presented in Table 2 and Table 3. Thevariables are presented based on the compo-nent of the SLF to facilitate their discussion.

Livelihood Assets

The results of both regressions show thatamong human and social capital factors, the co-efficient of farmer-to-farmer extension variableis significant for the supply model. This findingallows inference that, given positive participa-tion decision, potential participants that receivedextension trainings and information sharing ses-sions through their groups tend to supply morecattle to the market. Therefore, this result sug-gests that farmers do capitalize on the informa-tion networks when deciding the amount of cat-tle to be sold. This finding vindicates the con-tention that what matters for positive economicoutcomes among the poor is not membership ingroups, but the quality and quantity of resourc-es (information) flowing within those networks(DFID 1999; Kirsten et al. 2009).


On household’s financial capital, participa-tion in saving groups turns out to be a majorpredictor of the decision to participate as a cat-tle seller. Other livelihood factors remaining un-changed, opening an account in a local savinggroup (or a stokvel) significantly increases theprobability of participating in cattle market as aseller by 13.4%. Arguably, smallholder farmersthat belong to saving groups have access tocredit that enables them to increase the produc-tivity and market value of their herd, therebyincreasing the prospect of market participation.

On natural capital, the regression results in-dicate that cattle market participation and sup-ply decisions are significantly and positivelygoverned by the cattle herd size. Adding onecattle to the herd significantly increases thechances of participating in cattle market as aseller by 1.8%, ceteris paribus. These findingsvindicate the hypothesis that agricultural mar-ket participation is associated with its produc-tivity (Lapar et al. 2003; Rios et al. 2009) and theempirical evidence that shifting to commercialcattle farming systems in Southern Africa re-quires growth in herd sizes (Behnke 1987).

The results of the Probit model also showthat the cattle breed has a significant effect onmarket participation decisions. All other factorsin the model remaining constant, shifting froman exclusively indigenous breed (Nguni) herdto mixed/crossbred herds, towards exotic breedsignificantly reduces the farmer’s prospect ofcattle market participation, implying that farm-ers who keep indigenous breed are more likelyto participate in market as sellers. This suggeststhat farmers do take into account the breed whendeciding to sell their cattle. This is probably dueto the fact that the indigenous breed of the east-ern and northern South Africa is more fertile,matures earlier, is well adapted to low qualityfeed, and therefore easily replaceable comparedto other breeds (Bayer et al. 2004). This findingsuggests that both the quantity and quality ofcattle herd are important for a pro-poor marketdevelopment strategy.

Lastly, the coefficient of walking distance tothe nearest water source also has a significantpositive effect, and it can be inferred that OLMcattle farmers staying far from water sources suchas rivers and dams have more chances of partic-ipating in cattle market as sellers. This findingsignals the potential of distress sales amongsmallholder farmers, particularly during adverseperiods of prolonged drought (Elledoubt 2012).

Transforming Structures and Processes

The empirical results of the participationmodel yield a positive and significant coefficientfor cattle tagging. These results suggest thatcompliance with the Livestock Identification Actis a key factor in cattle marketing, and perhapsthe most important constraint to the cattle mar-ket participation in the empirical model. Ceterisparibus, registering (branding and marking) thecattle herd increase market participation propen-sity by 21%. This finding vindicates the asser-tions of Coetzee et al. (2005) and Groenewaldand Jooste (2012) that livestock registration leg-islation is an important factor for a pro-poor cat-tle market development policy in South Africa.

Livelihood Strategies

The results of the participation model showthat the coefficient of the rank of cattle income,among other income generation strategies, isnegative and significant. This result means thathouseholds whose primary income earner is cat-tle farming are more likely to participate in cattlemarket, suggesting that the portfolio of liveli-hood strategies explains the differences in cat-tle market participation rates among smallholderfarmers. This implies that the degree of special-ization in cattle farming is an important predictorof cattle market development.

Livelihood Outcomes

The results in Table 2 show that the coeffi-cient of the rank of remittances in the incomeportfolio is significantly positive, suggestingthat cattle farmers who regularly secure moreunearned incomes such as remittances from theirfamily members and friends are not likely to par-ticipate in cattle market. This result is in line withthe walking-bank hypothesis of livestock mar-keting (Bellemare and Barrett 2006), suggestingthat market participation decisions are drivenby the need to cater for immediate householdneeds when cash is not otherwise available.

The results also show that the coefficient ofthe expected price variable is only significant inthe supply model. Consistent with the findingsof previous studies done in developing coun-tries such as the study by Alene et al. (2008),this empirical finding reveals that smallholderfarmers do not necessarily consider informationon prevailing price incentive when deciding to

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sell their cattle. Nonetheless, the evidence sug-gests that given positive participation decisions,smallholders will consider price signals whendeciding upon the number of cattle to be soldon the market. These results possibly suggestthat market participation and volume decisionsare not taken simultaneously, that is, althoughpredisposed to selling their cattle, livestock farm-ers do not pre-commit the number of cattle to besold before learning information about the pre-vailing market conditions, especially the price.However, the negative sign indicates that thereis a considerable scope of non-commercial moti-vations such as wealth storage, and cattle isonly sold when a farm household faces press-ing cash needs (Doran et al. 1979; Groenewaldand Jooste 2012). The results validate the find-ing that farmers who manage to secure more in-comes from alternative sources are less likely toparticipate in cattle market.

CONCLUSION

This study falls within the realm of participa-tory agricultural extension approaches. Its pur-

pose is to investigate the livelihood drivers ofsmallholder cattle farmers’ participation and sup-ply decisions in OLM within a framework of in-forming the design of livestock extension archi-tecture in South Africa. The goal is to explainthe low rates of cattle market participation bysmallholder farmers in the region and suggestappropriate extension models for extension pro-gramming in the context of OLM. Based on ahousehold survey dataset compiled from a sur-vey of 230 randomly selected cattle farm house-holds, the study runs a Double-Hurdle econo-metric model to calibrate the effect of factorsunder various components of the SLF on theparticipation and supply decisions.

The empirical results of this study reveal thatthe low rate of market participation cannot besimply explained by endowments and accessfactors (the determinants of transaction cost),but the broader aspects of livelihoods of small-holder cattle farmers in South Africa. Notably,this study finds that the difference in access tofinance, natural capital endowments, and liveli-hood strategies could explain the rate of market

Table 2: Livelihood determinants of farmers’ decisions to participate in cattle market in OLM, Resultsestimated using Probit regression model

SLF component and variable name Coefficient Marginal effects p>|Z|Dependent variable: MARKPART1. Vulnerability Context

SNOWLOSS -.127 -.051 0.527DROUGHTLOSS -.355 -.140 0.124

Asset pentagonHuman Capital

BIRTHDAYHHH .009 .003 0.247GOVEXTVISIT .277 .110 0.186

Social CapitalOLCMEMB .177 .070 0.472F2FEXT .444 .173 0.165

Financial CapitalSAVGROUP .338 .134 0.078

Physical CapitalTRACTOR -.277 -.109 0.367RDDISTTODUKUZA .002 .001 0.729

Natural CapitalHERDSIZE .046 .018 0.000CATTLEBREED -.458 -.182 0.031WATERSOURCEDIST .009 .003 0.002

Transforming Processes and StructuresCATTLETAG .565 .216 0.070

Livelihood StrategiesCATTLEINCRANK -.187 -.074 0.003

Livelihood OutcomesREMITRANK .189 .075 0.001EXPPRICE -.000 -.000 0.280

Constant -18 .088 - 0.241Number of obs = 227Wald chi2(16) = 64.92Prob > chi2 = 0.000

Source: Authors’ survey, 2012-2013.


participation. It also provides evidence of a mo-tivational aspect in cattle marketing in SouthAfrica. To a certain extent, the results reveal thatcattle market participation in OLM is essentiallya reactive livelihood strategy, a fallback planagainst harsh environmental and/or economicconditions.

IMPLICATIONS FOR LIVESTOCKEXTENSION

This sample evidence on the effect of vari-ous livelihood factors on cattle market partici-pation has considerable implications for the de-sign of livestock extension programs in OLM,and South Africa, in general.

Table 3: Livelihood determinants of cattle mar-ket supply volumes among smallholder farmersin OLM, Results estimated using truncated re-gression model

SLF component and variable Coefficient p>|Z| nameDependent variable: TOTSOLD

1. Vulnerability ContextSNOWLOSS 2.872 0.728DROUGHTLOSS -11.825 0.318

Asset PentagonHuman Capital

BIRTHDAYHHH -.135 0.619GOVEXTVISIT .922 0.915

Social CapitalOLCMEMB -11.722 0.197F2FEXT 21.966 0.029

Financial CapitalSAVGROUP -3.275 0.631

Physical CapitalTRACTOR 7.991 0.287RDDISTTODUKUZA

Natural CapitalHERDSIZE 1.340 0.002CATTLEBREED 7.648 0.481WATERSOURCEDIST .052 0.648

Transforming Processesand Structures

CATTLETAG -14.332 0.235Livelihood Strategies

CATTLEINCRANK 5.213 0.225 Livelihood Outcome

REMITRANK 3.147 0.298EXPPRICE -.005 0.092IMR 14.140 0.349

Constant 148.752 0.774Number of obs =111Wald chi2(17) =28.09Prob > chi2 =0.030

Source: Authors’ survey, 2012-2013. Tabl

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The significantly positive effect of farmer-to-farmer extension on cattle market supply sug-gests that farmer extension groups are key play-ers in the livestock market development. Publiclivestock extension systems designed in such away to support cattle farmers’ group formationand involvement, not just as “contact groups”that transmit messages from public extensionstaff, but as active players of extension servicefunction (Anandajayasekeram et al. 2008; Swan-son and Rajalahti 2010) are therefore expectedto spur smallholder cattle farmer’s ability to par-ticipate in rural markets. This objective can beachieved through creation of an open, demo-cratic and supporting environment throughwhich these groups can thrive, supporting ca-pacity building to improve their management,injecting basic resources to improve their inter-nal functioning, and extending their links withother group (DFID 1999). This result supportsthe imminent role of a pluralistic extension envi-ronment for a pro-poor cattle market develop-ment strategy.

This latter strategy has even further appeal.Given the significantly positive effect of accessto saving groups for cattle marketing in the re-gion, the livestock extension programs that ex-tend cattle farmers’ access to financial institu-tions are expected to scale up market participa-tion among smallholders in South Africa. Thiscan be achieved by encouraging individual cat-tle farmers and their organizations to save mon-ey, with programs for tailoring inclusive finan-cial products and for overcoming barriers relat-ed to lack of collateral, for example, by identify-ing mechanisms that enable farmers’ natural cap-ital to act as collateral (DFID 1999).

The finding that endowment in natural capi-tal matters for market participation implies thatcontinued efforts by agricultural extension touplift the productivity of local breeds throughaccess to quality feeds and veterinary servicesare expected to increase both cattle productivi-ty and market participation in OLM. These ef-forts can be channeled through a centralizedcommodity-specialized approach using commod-ity extension models to ensure access to re-quired inputs including technology and financeas well as financial gains, although farmers’ feed-back can be better accounted for by other ap-proaches (Anandajayasekeram et al. 2008). How-ever, this productivity emphasis does not needto detract attention from complexity of the is-sues surrounding the management of natural

ecosystems such as water and land for livestock-based livelihoods development in the area. Thiscomplexity requires participatory and systemapproaches to agricultural extension such as thefarming system development approach built ona broader understanding of livelihood systems,the combination with other assets to sustain live-lihoods, the role of structures and processesthat govern the use of these resources (envi-ronmental laws, land and water allocation sys-tems).

The significant effect of compliance withLivestock Identification Act implies that publicextension strategy focusing on programs thataims to alleviate this challenge can be expectedto unlock markets for stallholders. These chal-lenges, as outlined in Coetzee et al. (2005) andGroenewald and Jooste (2012), include high costof registering unique brands and marking andbranding equipments, high possibility of filingclaims after stray animals cause road accident orintrude neighboring fields, and lack of brandingand marking facilities. Notably, direct supportduring the identification process such as pene-trating villages with branding and marking facil-ities or subsidizing the branding cost can beenvisaged (Groenewald and Jooste 2012). Equal-ly appropriate is an indirect support throughstructures that represent smallholder cattle farm-ers to expand their scope to include fast track-ing the identification process both in terms ofaccessibility of facilities and cost reduction forsmallholder farmers and access to appropriateforums for decisions making (DFID 1999).

On the significant effect of livelihood strate-gies, the public livestock extension service sys-tem that take into account the diversity of liveli-hood strategies when designing their programscan have a significant positive effect on marketparticipation. FEGs models can be best devel-oped around households that depend more onincomes from cattle sales, and those that haveless sources of unearned incomes (remittancesand pensions), if market participation is to bedeveloped. Once again, these results supportthe need for a participatory extension programto gauge the extent to which different cattle farm-ing systems rely on cattle incomes.

Finally, the results that price incentives drivecattle market supply volumes auger well with apositive expectation from the public extensionframework that advocates for a good function-ing of institutions that facilitate positive marketoutcomes by reducing the associated transac-


tion risks and costs in order to sustain betterreturns to cattle farming and increase its attrac-tiveness. Validating the need for FEGs as previ-ously outlined, the provision of cattle marketinformation to potential participants throughfarmers’ social capital is an important strategyto integrate them into lucrative market chainsand high value channels. Using the mass mediaextension method to disseminate market infor-mation also remains an appropriate option. How-ever, as Coetzee et al. (2005) cautions, the formatof the information needs to be well understand-able by the target farmers (for example, farmerscannot clearly estimate the total value of theircattle based on information on beef price perkilogram live weight).

NOTE1 For example, i t is during this phase that the re-

searchers were informed about the extent to whichcattle prices fetched by smallholders varies consid-erably across communities, which triggered the needto test the factors motivating cattle marketing inOLM.

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