Estimation of Technical, Economic and Allocative Efficiencies in Sugarcane Production in South Africa: A Case of Mpumalanga Growers

Abstract

This study measures the productive efficiency (technical, allocative and economic) levels of 231 small-scale sugarcane farmers in the Mpumalanga Province of South Africa using the stochastic frontier production function by Coelli (1995).The study uses sugarcane farm data collected in 2011 from a sample selected randomly. Labour, herbicides and fertilizer are identified as factors that contributed significantly to improved production. The results indicate that the sugarcane farmers lack technical, allocative and cost efficiencies. The mean technical, allocative and cost efficiency estimates are 68.5, 61.5 and 41.8 percent respectively. The study concludes that farmer education, land size, farming experience, and age contributed significantly and positively to productive efficiencies. The policy implication is that there is enough potential for farmers to increase sugarcane production and net profits. The study recommends that government needs to further invest in public education and strengthen farmer education as they constitute important determinants of productive efficiencies.

Keywords: stochastic frontier production, cost function, technical efficiency, allocative efficiency, economic efficiency, inefficiency determinants, South Africa.

The research was conducted in 2010/11 when Londiwe Thabethe was a student at the University of Pretoria in South Africa. The corresponding author is grateful to the Department of Agriculture, Forestry and Fisheries (Bursary Support), the National Agricultural Marketing Council (partly funding the research work),  Bonani Nyhodo and Dr. Thulasizwe Mkhabela who assisted with content organization and data analysis respectively.