The role of cooperatives in empowering smallholder farmers to access markets: A case study of Eastern Cape and KwaZulu Natal cooperatives in South Africa

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The role of cooperatives in empowering smallholder farmers to access markets: A case study of Eastern Cape and KwaZulu Natal cooperatives in South Africa

Abstract

Smallholder farmers can benefit from market-oriented agriculture when they get support from various institutions and operate in organized groups such as cooperatives. Cooperatives have the potential to penetrate high value markets or better paying markets to improve their living standards. However, agricultural cooperatives often face a number of challenges in accessing better paying markets arising in part from the institutional factors and the emergence of complex supply chains in agriculture. Collective action has the potential to reduce transaction costs and improve bargaining power of farmers vis-a-vis the market. The objective of this paper was to evaluate the probability for South African agricultural cooperative to engage in collective marketing activities over time, given market and institutional characteristics. Using a sample of eighty-nine agricultural cooperatives from the Eastern Cape and KwaZulu Natal Provinces in South Africa, the analysis suggests that collective marketing faces challenges related to increasing competition. Empirical results also suggest that among South African cooperatives, those established in KwaZulu Natal and partly in the Eastern Cape Provinces and upon the voluntary initiative of farmers are more sustainable and have access to better paying markets. The results show that Non-Governmental Organizations supported cooperatives have a longer life span than Government controlled cooperatives.

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