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Economic Feasibility Study of the Establishment of Smallholder Pig Farmers for the Commercial Market: Empolweni Case Study

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Economic Feasibility Study of the Establishment of Smallholder Pig Farmers for the Commercial Market: Empolweni Case Study Economic feasibility study of the establishment of smallholder pig farmers for the commercial market: Empolweni case study by Johannes Jacobus Roelofse Thesis presented in partial fulfilment of the requirements for the degree Master of Science in Engineering (Engineering management) at the University of Stellenbosch Supervisors: Mr. Nico Treurnicht Department of Industrial Engineering Faculty of Engineering Mrs. Lindie Liebenberg Department of Animal Sciences Faculty of Agri-Sciences December 2013 Stellenbosch University http://scholar.sun.ac.za Declaration By submitting this thesis, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification. Signed: Hanno Roelofse Date: 2013-08-31 Copyright © 2013 Stellenbosch University All rights reserved i Stellenbosch University http://scholar.sun.ac.za Abstract Food security is a national priority, according to Section 27 of the South African Constitution. It states: “Every citizen has the right to have access to sufficient food and water, and that the state must by legislation and other measures, within its available resources, avail to progressive realisation of the right to sufficient food.” Nevertheless, while food security is clearly a government priority and regardless of the country being considered as self-sufficient in respect of food production, food insecurity remains a dire South African challenge. This study presents the improvement of smallholder pig farmers to a commercial standard with funding from the government as a potential means to address poverty and food insecurity in South Africa. Commercial standard pig farms as opposed to smallholder pig farms provide increased employment, food production, biosecurity and food safety. This investigative study evaluates the economic feasibility of a smallholder commercial pig farm in the Mamre area. The Empolweni community’s pig farmers serve as the case study and as an example of a typical smallholder pig farming community. Their current operations are studied, the requirements for a conversion to a commercial standard are assessed and the profitability and sustainability of the proposed commercial model is judged. The study’s findings indicate that specific scenarios (high production performance, large pig farm unit sizes, pork price increases or feed costs reductions) a commercial smallholder pig farm can achieve economic feasibility. However, trends indicate that there is low likelihood of the required conditions to achieve economic feasibility will be able to occur. The thesis judges only the potential economic feasibility of the case study, as opposed to the economic feasibility of commercial smallholder pig farmers on a national or regional level. ii Stellenbosch University http://scholar.sun.ac.za Opsomming Voedsel sekuriteit is ‘n nasionale prioriteit en vorm deel van die Artikel 27 Grondwetlike regte in Suid- Afrika. Die Grondwet stel dat elke landsburger die reg op toegang tot voldoende voedsel en water het en dat die staat deur middel van wetgewing en ander maatreëls, binne sy beskikbare middele, progressiewe verwesenliking van die reg op voldoende voedsel moet laat geskied. Nietemin, alhoewel voedsel sekuriteit ongetwyfeld ‘n prioriteit van die regering is en ten spyte daarvan dat Suid- Afrika as selfonderhoudend ten opsigte van voedselproduksie gesien word, heers onvoldoende voedsel sekuriteit steeds. Hierdie studie stel die volgende moontlike oplossing voor: Suid-Afrikaanse kleinskaalse varkboere moet hul bedrywighede opgradeer na 'n kommersiële standaard. Verskeie redes kan gegee word waarom hierdie oplossing 'n gangbare opsie bied om armoede en voedselsekuriteit in Suid-Afrika teë te werk. Kommersiële varkboere, in teenstelling met kleinskaalse varkboere, bied verhoogde vlakke van voedselproduksie, werkskepping, biosekuriteit en veiliger voedingsbronne. Hierdie studie poog om die ekonomiese gangbaarheid van ‘n kleinskaalse kommersiële varkplaas in die Mamre omgewing te bepaal. Die Empolweni gemeenskap se varkboere dien as 'n gevallestudie van ‘n tipiese kleinskaalse varkboerdery gemeenskap. Hul huidige bedrywighede is ondersoek, die benodighede vir ‘n opgradering is bepaal en die winsgewendheid en volhoubaarheid van die kommersiële model is beoordeel. Bevindings toon dat vir spesifieke gevalle (hoë produksievlakke, groot varkplaaseenhede, varkprys verhogings en voerkoste verlagings) ‘n kommersiële kleinskaalse varkplaas ekonomiese gangbaarheid kan behaal. Alhoewel, tendense toon dat daar ‘n lae waarskynlikheid is dat die nodige kondisie om ekonomiese gangbaarheid te behaal sal kan plaasvind. Die tesis oorweeg slegs die ekonomiese gangbaarheid van die gevallestudie. Die ekonomiese gangbaarheid van kleinskaalse varkboere op ‘n nasionale of streeksvlak word dus nie ingesluit nie. iii Stellenbosch University http://scholar.sun.ac.za Acknowledgements I would like to express my sincere gratitude and appreciation to: My supervisors: Mr N. Treurnicht and Mrs L. Liebenberg for their guidance and support during my research. Mr C. Venter for always being available and for providing thesis progression advice. The Empolweni community (especially Mr D. Steyl and Mrs Bennet) for distributing and answering my case study questionnaires. The various pig production experts that I consulted to gain detailed information about the pork industry. I would also like to acknowledge the financial support that I received from the Stellenbosch OSP fund. Lastly, I take this opportunity to thank my family and friends for supporting me during my studies. iv Stellenbosch University http://scholar.sun.ac.za Table of contents Declaration .............................................................................................................................................. i Abstract .................................................................................................................................................. ii Opsomming .......................................................................................................................................... iii Acknowledgements ............................................................................................................................. iv Table of contents .................................................................................................................................. v List of Figures ...................................................................................................................................... ix List of Tables ......................................................................................................................................... x Glossary ................................................................................................................................................ xi 1. Introduction ....................................................................................................................................... 1 1.1. South African food security .......................................................................................................... 1 1.2. The role of agriculture................................................................................................................... 2 1.3. Pig farming potential ..................................................................................................................... 3 1.3.1. Food production ..................................................................................................................... 3 1.3.2. Employment opportunities ..................................................................................................... 3 1.3.3. Land requirements ................................................................................................................. 4 1.3.4. Food safety ............................................................................................................................ 4 1.4. Objective of the study ................................................................................................................... 4 2. Literature study ................................................................................................................................. 5 2.1. Research methodology................................................................................................................. 5 2.2. Pig production modelling .............................................................................................................. 6 2.2.1. Pig production cycle ............................................................................................................... 6 2.2.2. Production performance ........................................................................................................ 8 2.3. Smallholder pig farming budgeting ............................................................................................. 12 2.3.1. Start-up costs ....................................................................................................................... 12 2.3.2. Income ................................................................................................................................
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