South African smallholder farmers could significantly contribute to food security and conservation agriculture, provided they receive greater support from financial institutions, according to a study from Stellenbosch University.
The research, conducted by Wolfgang von Loeper, Josephine Musango, Alan Brent, and Scott Drimie, highlights that the majority of these farmers are battling to join the modern economy due to restricted access to credit, insurance, and markets to sell their produce.
Through a system dynamics approach, the team found that “banks may have the potential to trigger an impact on smallholder farmers’ productivity that could then attract other value-chain industries to take part in efforts to support these farmers.”
With the backing of banks and other financial institutions, the study suggests smallholder farmers could become a “long-term viable and sustainable option for increasing food security in South Africa,” particularly by adopting conservation agriculture practices.
However, the study does caution that the data from semi-structured interviews with value-chain participants is limited, emphasising the need for ongoing research. There are unresolved questions like “how much each industry is prepared to engage with smallholder farmers in the event of other industries being prepared to do the same; and how long it will take each industry to react to a willingness to engage.”
The researchers also noted a dynamic hypothesis that “bank engagement influences insurance engagement, and vice versa,” which is not fully considered in the existing model. They suggest that including this reinforcing feedback loop in the model might alter the results and should therefore be examined.
The study acknowledges the absence of certain factors in the model, such as the potential impacts of the Financial Intelligence Centre Act (FICA), the Credit Act, grant funding, and access to fertile land on risk and productivity. They note that these elements “could be useful if added in future.”
The team also recommends considering the influence of retailers’ willingness to buy crops from smallholder farmers, which could encourage banks to extend loans. The model also does not account for the role of Information and Communications Technology (ICT) or practical barriers faced by farmers, such as communal grazing impact on yield and crop theft.
Despite these limitations, the study points to a promising direction for future research and policy development. By placing banks at the centre of a potential revolution in conservation agriculture, this study offers an important perspective on fostering an inclusive economic system that benefits smallholder farmers.
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