Demythifying contract farming: Evidence from rural South Africa

ABSTRACT This paper intends to contribute to the ongoing debate about whether and how restructured agri-food markets can provide viable market opportunities for small-scale farmers in South Africa. It analyses contract farming from the small-scale farmer perspective to better understand the implications for small-scale farmers of contractual arrangements with processing and/or marketing firms. The paper, based on empirical research conducted in the Limpopo Province of South Africa using a combination of qualitative and econometric analyses, argues that contract farming is not a panacea for small-scale farmers. On the one hand, contract farming improves agricultural production for contract farmers who benefit from increased incomes, enables better access to services and resources, and creates new opportunities to participate in markets. However, on the other hand, the results show that contract farming remains limited and mostly involves the already better-off, who have benefitted from specific development paths and public support. This case study shows that contract farming in itself does not appear to provide an efficient means of reducing poverty, nor does it provide an institutional tool through which to improve rural livelihoods. It does, therefore, not represent a tool appropriate for the majority of small farmers or for redressing the historical imbalances in the South African agricultural sector.