The International Development Research Centre is a public corporation created by the Parliament of Canada in 1970 to support research designed to adapt science and technology to the needs of developing countries. The Centre's activity is concentrated in six sectors: agriculture, food and nutrition sciences; health sciences; information sciences; social sciences; earth and engineering sciences; and com­ munications. IDRC is financed solely by the Parliament of Canada; its policies, however, are set by an international Board of Governors. The Centre's headquarters are in Ottawa, Canada. Regional offices are located in Africa, Asia, Latin America, and the Middle East. Le Centre de recherches pour le développement international, société publique créée en 1970 par une loi du Parlement canadien, a pour mission d'appuyer des recherches visant à adapter la science et la technologie aux besoins des pays en développement; il concentre son activité dans six secteurs : agriculture, alimenta­ tion et nutrition; information; santé; sciences sociales; sciences de la terre et du génie et communications. Le CROI est financé entièrement par le Parlement cana­ dien, mais c'est un Conseil des gouverneurs international qui en détermine l'orien­ tation et les politiques. Établi à Ottawa (Canada), il a des bureaux régionaux en Afrique, en Asie, en Amérique latine et au Moyen-Orient. El Centro Internacional de Investigaciones para el Desarrollo es una corporaci6n publica creada en 1970 por el Parlamento de Canada con el objeto de apoyar la investigaci6n destinada a adaptar la ciencia y la tecnologia a las necesidades de los paises en desarrollo. Su actividad se concentra en seis sectores: ciencias agri­ colas, alimentos y nutrici6n; ciencias de la salud; ciencias de la informaci6n; ciencias sociales; ciencias de la tierra e ingenieria; y comunicaciones. El Centro es finan­ ciado exclusivamente por el Parlamento de Canada; sin embargo, sus politicas son trazadas por un Consejo de Gobernadores de caracter internacional. La sede del Centro esta en Ottawa, Canada, y sus oficinas regionales en América Latina, Africa, Asia y el Medio Oriente. This series includes meeting documents, internai reports, and preliminary technical documents that may later form the basis of a formai publication. A Manuscript Report is given a small distribution to a highly specialized audience. La présente série est réservée aux documents issus de colloques, aux rapports internes et aux documents techniques susceptibles d'être publiés plus tard dans une série de publi­ cations plus soignées. D'un tirage restreint, le rapport manuscrit est destiné à un public très spécialisé. Esta serie incluye ponencias de reuniones, informes internos y documentos técnicos que pueden posteriormente conformar la base de una publicacion formai. El informe recibe distribucion limitada entre una audiencia altamente especializada. IDRC-MR321 e November 1992 Agricultural Marketing in Lesotho by M. T. Mochebelele, N.L. Mokitimi, M. T. Ngqaleni, G.G. Storey, and B.M. Swallow Edited by G.G. Storey Institute for Southern African Studies, National University of Lesotho, Roma, Lesotho and Agricultural Economics Department, University of Saskatchewan, Saskatoon, Sask., Canada INTERNATIONAL DEVELOPMENT RESEARCH CENTRE Ottawa• Cairo• Dakar· Johannesburg• Montevideo• Nairobi• New Delhi• Singapore Material contained in this report is produced as submitted and has not been subjected to peer review or editing by staff of the Corporate Affairs and Initiatives Division of IDRC. Unless otherwise stated, copyright for material in this report is held by the authors. Mention of a proprietary name does not constitute endorsement of the product and is given only for information. ISBN: 0-88936-641-1 INTRODUCTION The primary purpose of the report is to present the results of research carried out during the first phase of the project on Agricultural Marketing in Lesotho. This project which is described more completely in Appendix A, was organized to focus on agricultural marketing problems in Lesotho. Several sectors of Lesotho's agriculture were the area of focus: livestock, wool and mohair, dairy and vegetables. Research was carried out in Lesotho by a resident team of researchers who worked in collaboration with the Research Division of the Ministry of Agriculture. Research was also carried out as dissertations for Masters of Science Degrees at the University of Saskatchewan, Canada. Although the focus of the marketing and related research is on Lesotho, the theoretical and conceptual models, methodology and results have implications beyond that of Lesotho. Many of the problems that confront Lesotho can be found in other parts of Africa and the agricultural economies of the developing world. For most of Africa agricultural productivity has not kept pace with the rate of growth of population. The reasons are numerous: adverse climatic conditions, political instability, lack of capital for investment, land tenure, and others. While a high percentage of Africa's population continue to live in rural areas, an increasing rate of urbanization places a further burden on the economy. This calls for the development of a marketing system to assemble agricultural products from rural areas and in some cases transform primary products into food. This calls for investment in transportation, storage and processing facilities. However, much more is required. As experience has shown, too often economic and agricultural policies in developing countries have tended to be consumer, rather than producer oriented. Low prices, overvalued exchange rates, and food aid have stifled the incentive of producers. Capital investments too often were focused on an industrial strategy for economic development. Often where agricultural development projects were introduced, the focus was primarily on increasing production. Where marketing was neglected and not made an integral part of the project, surplus production could not reach consumers. As a result producers became discouraged and the project failed. The marketing project in Lesotho operated from several philosophies. First is that of "appropriate marketing or appropriate markets" meaning that the marketing system must be tailored to the particular situation. The type of commodity, location, availability of infrastructure, cultural traditions of people, financial, legal and business institutions determine what marketing approach is "best" suited to development. Second, that research must be developed and carried out in cooperation with the users, particularly government. The report contains seven chapters. The first two chapters provide the setting for the research that is reported in the last four chapters. In Chapter 1, M. Mochebelele and N. Mokitimi describe the main characteristics of the Lesotho economy. This includes data on the macro and micro economies as well as the relationships of the Lesotho economy with that of the Republic of South Africa (RSA). Special attention is paid to the agricultural sector with a description of crops, livestock, land tenure, marketing and trade and the role of government. In Chapter 2, Gary Storey outlines in theoretical terms the role and importance of marketing and marketing research in development. Discussion focuses on the reasons for market failure in development. The importance of institutions is discussed along with the role of education in institutional change. Following is an examination of various approaches to market performance evaluation. A final section presents a model of the relationship between the Lesotho/RSA economies with a focus on trade and the overall implications for agriculture in Lesotho. In Chapter 3, Brent Swallow reports on the major research work carried out in Lesotho for the report, the analysis of the livestock industry in the context of rangeland . utilization with overall implications for marketing. In this context the results have importance for similar livestock/range problems elsewhere in Africa. The specific production/marketing system in Lesotho is described. Results of a household survey complete with partial budgets for livestock are presented. Of particular importance is the presentation of the open access and common property models in dynamic terms. They are developed in the context of the Lesotho situation. This is further extended to questions of policy and regulation. In Chapter 4, Malijeng Ngqaleni examines marketing for vegetable production in Lesotho. Results are drawn from two sources, initial research carried out in Lesotho and work as part of her M.Sc. dissertation. Of particular interest is the dependence of Lesotho on the RSA for vegetables. The efforts by the government to reduce the dependency and the associated problems and implications for development are discussed. The chapter reports on the research which analyzed the constraints to increased production through a vertical market systems analysis. In Chapter 5, Motsamai Mochebelele presents the results of research carried out as part of his M.Sc. dissertation. The focus of the study was to examine alternative economic and trade policies which have a bearing on Lesotho's dairy industry and its development. The structure of the dairy industry is described. The methodology which incorporated a step-wise linear programming model is presented along with the validated benchmark model. The results of six case studies of alternative policies are presented in welfare economic terms with further implications for transportation and processing costs, and regional