Determinants of participation of smallholder farmers in the marketing of small grains and strategies for improving their participation in the Limpopo River Basin of Zimbabwe by Thinah Moyo Submitted in partial fulfilment of the requirements for the degree of M Sc Agric (Agricultural Economics) in the Department of Agricultural Economics, Extension & Rural Development Faculty of Natural and Agricultural Sciences University of Pretoria Pretoria February 2010 © University of Pretoria DEDICATION To my loving husband, Behluli Moyo, beloved daughter, Nokunqoba Blessing Moyo, and to my parents, who have always given me moral support to study. ACKNOWLEDGEMENTS I would like to express my sincere thanks to my supervisors: Prof. Charles L. Machethe and Dr Isaac J. Minde for their invaluable dedication, time and patience with which they handled the work to ensure that high quality is attained throughout the study. I thank the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) for granting me funding through one of its programmes, the CGIAR Challenge Program on Water and Food (CPWF). ICRISAT also covered the expenses of collecting all the data used for this dissertation. Sincere thanks are extended to Prof. Johann Kirsten, Head of the Department of Agricultural Economics, Extension and Rural Development at the University of Pretoria, for his constant concern and support throughout the study. I am also grateful to all lecturers and service staff in the Department of Agricultural Economics, Extension and Rural Development at the University of Pretoria who contributed a lot to the success of this work. I would like to acknowledge numerous people whose names I have not mentioned here but are highly remembered: the data collection and entry team, who faithfully dedicated their time to ensure good quality data and also the smallholder farmers in the surveyed districts who volunteered information, making it possible to accomplish this research. I am also indebted to some of my class mates, who provided invaluable advice and encouragement. Finally, many thanks to God who got it all planned for me. Though, all possible shortcomings that remain in this study are my sole responsibility and should not be directed to any of the acknowledged personalities. TABLE OF CONTENTS DEDICATION............................................................................................................................... ii ACKNOWLEDGEMENTS......................................................................................................... iii ABSTRACT …………………………………………………………………………………...viii LIST OF TABLES ........................................................................................................................xi LIST OF FIGURES ................................................................................................................... xiii ACRONYMS …………………………………………………………………………………...xiv CHAPTER 1:INTRODUCTION..................................................................................................1 1.1 Background information.........................................................................................................1 1.1.1 Zimbabwe’s agricultural sector.......................................................................................2 1.1.2 The Limpopo river basin..................................................................................................3 1.2 Problem statement ..................................................................................................................3 1.3 Research objectives ................................................................................................................5 1.4 Statement of hypotheses .........................................................................................................5 1.5 Definition of key terms...........................................................................................................5 1.5.1 Market participation ........................................................................................................5 1.5.2 The market .......................................................................................................................6 1.5.3 Marketing.........................................................................................................................6 1.5.4 Smallholder farmers.........................................................................................................7 1.6 Outline of the study ................................................................................................................8 CHAPTER 2: SMALL GRAIN PRODUCTION, PROCESSING, UTILIZATION AND MARKETING IN ZIMBABWE...........................................................................9 2.1 Introduction ............................................................................................................................9 2.2 Sorghum and millet production in Zimbabwe........................................................................9 2.3 Sorghum and millet processing and utilization ....................................................................14 2.4 The marketing of small grains in Zimbabwe........................................................................16 2.4.1 The Agricultural Marketing Authority (AMA) ...............................................................17 2.4.2 The Grain Marketing Board (GMB)..............................................................................17 2.4.3 Zimbabwe Agricultural Commodity Exchange (ZIMACE)............................................18 2.4.4 Non-governmental organisations’ involvement in the sorghum and millet market.......19 2.4.5 Smallholder farmers’ marketing problem analysis........................................................21 2.4.5.1 Low and unstable grain supplies.............................................................................21 2.4.5.2 Storage ....................................................................................................................21 2.4.5.3 Farmers’ limited capacity for collective action ......................................................22 2.4.5.4 Attitudes and behaviour ..........................................................................................22 2.4.5.5 High processing costs for small grains...................................................................22 2.4.5.6 Unreliable markets..................................................................................................23 2.4.5.7 Highly competitive international markets...............................................................23 2.4.5.8 Lack of finance ........................................................................................................23 2.4.5.9 High credit requirements and credit risk ................................................................24 2.4.5.10 High transaction costs of selling small quantities of inputs..................................24 2.4.5.11 Stringent standards on quality and food safety in domestic and international markets ...................................................................................................................24 2.4.5.12 High transaction costs (search costs) ...................................................................25 2.4.5.13 Poor infrastructure................................................................................................25 2.4.5.14 Transport facilities ................................................................................................25 2.4.6 Field crops and contracts in Zimbabwe ............................................................................26 CHAPTER 3: DETERMINANTS OF MARKET PARTICIPATION BY SMALLHOLDER FARMERS ............................................................................................................29 3.1 Introduction ..........................................................................................................................29 3.2 Transaction costs, collective action and market participation by smallholder farmers........29 3.2.1 Definition of transaction costs.......................................................................................29 3.2.2 The transaction costs theory ..........................................................................................31 3.2.3 The collective action theory...........................................................................................32 3.2.4 Transaction costs and market participation in select countries ....................................35 3.3 Other factors influencing market participation by smallholder farmers...............................38 CHAPTER 4: STRATEGIES FOR IMPROVING MARKET PARTICIPATION ...............40 4.1 Introduction ..........................................................................................................................40 4.2 Food aid for market development.........................................................................................40 4.3 Rural institutions for collective action to improve market participation..............................41 4.4 Contract farming...................................................................................................................42 4.4.1 What is a farming contract? ..........................................................................................42 4.4.2 Use of farming contracts to promote smallholder farmer