The Economics of Smallholder Dairy Goat Production in Mafefe Community of Limpopo Province, South Africa

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1 Asian Journal of Agriculural Sciences 4(2): , 2012 ISSN: MaxwellScienific Organizaion, 2012 Submied: January 28, 2012 Acceped: February 16, 2012 Published: March 26, 2012 The Economics of Smallholder Dairy Goa Producion in Mafefe Communiy of Limpopo Province, Souh Africa 1 M.V. Mosoma, 2 A. Belee, 3 G.M. Senyolo and 4 M.B. Masuku 1 Deparmen of Agriculure, Foresry and Fisheries, Direcorae: Land Selemen, 103 Sefala Building Cnr Bearix and Belvedere Sr. Arcadia, Preoria, Souh Africa 2 Deparmen of Agriculural Economics, Universiy of Limpopo, PB X1106, Sovenga 0727, Souh Africa 3 Agriculural Economics, School of Agriculural Sciences and Agribusiness, Universiy of KwaZulu-Naal, P.Bag X01, Scosville, 3209, Piermarizburg, Souh Africa 4 Deparmen of Agriculural Economics and Managemen, Universiy of Swaziland, P.O. Luyengo, Luyengo, M205, Swaziland Absrac: This sudy presens cos-reurn analysis of he leasing sysem of smallholder dairy goa producion in he Mafefe area of Limpopo Province in Souh Africa. The sudy was carried ou o analyze he economic viabiliy and susainabiliy of leasing sysem o he developmen of dairy goa s keepers in Mafefe ward of Limpopo Province. The sudy used he NPV and BCR analysis o assess he economic impac of he proposed echnology. The primary daa used for he analysis were obained during a 2007 household survey of 30 purposively seleced farmers who keep dairy goas. Also a ime series daa for he years 2004 o 2008 were colleced from he same respondens. The resuls show ha producion of dairy goas hrough leasing is economically aracive for smallholder dairy goa farmers and would have benefis from he financial and economic poin of view. Wih he discoun rae of 10%, he NPV and BCR were found o be R and 3.08 respecively. This implies ha dairy goa producion hrough leasing sysem is a profiable projec. Governmen should assis he households wih he developmen of an appropriae markeing infrasrucure, raining and suppor programs for heir dairy goas for he producion of compeiive dairy producs. Key words: Benefi cos raio, dairy goa, economics of smallholder, ne presen value, producion INTRODUCTION Dairy goas are seen as suiable animals o assis families o break he cycle of povery. They have helped people o survive and hrive for counless generaions and hey are kep in many differen sysems of producion in he ropical world (Devendra and Burns, 1982; Josserand, 1984; Kosgey e al., 2006). They are easy o handle and manage, especially by women and children and are also able o survive on a wide range of forage. Goas in general and dairy goas in paricular play an imporan socio-economic role in he rural areas of Limpopo Province in Souh Africa (Peacock, 1996). Keeping dairy goas is a possible and viable opion in improving he household cash flow of rural people in Mafefe village and resolves he issue of food securiy. The main purpose of keeping dairy goas in he rural areas is o promoe communiy developmen, food securiy, povery reducion and hereby crime prevenion. Delgado e al. (1999) indicaed ha dairy goas are no only a source of high qualiy proein for he family, bu also provide small cash income. Oher researchers (Devendra, 2001; Peacock, 2005; Verbeek e al., 2007; Kosgey, 2006; Kosgey e al., 2008) also confirmed ha dairy goas are good source of food securiy and income generaion. They have he poenial o improve he die of he rural populaion and also supplemening he producer s income (Roes, 1998; DeJong e al., 1994; Braker e al., 2002). The emphasis on smallholder dairy goa producion in Limpopo province calls for increased effors owards he developmen of locally esed echnology ha will increase produciviy given farmers' presen resources level. Available informaion abou smallholder farmers indicaes ha hey are good decision makers, given heir experience and resources, and ha a mere reallocaion of heir resources will no appreciably increase incomes (Sevens, 1977). Assuming ha smallholder farmers allocae heir resources o maximize profi or expeced uiliy of profi, subjec o saisfying heir subsisence needs, new echnologies will only have a chance of Corresponding Auhor: M.V. Mosoma, Deparmen of Agriculure, Foresry and Fisheries, Direcorae: Land Selemen, 103 Sefala Building Cnr Bearix and Belvedere Sr. Arcadia, Preoria, Souh Africa 153

2 success if hey effec an improvemen in he sandard of living. There is a need o undersand he economics of leasing sysem o develop dairy goa producion and he poenial impac of proposed new echnologies before making definie recommendaions. Due o he imporan roles dairy goas play in he life of he rural people, he Cener for Rural Communiy Empowermen (CRCE) a he Universiy of Limpopo came up wih he idea of financial innovaion o Mafefe village. This innovaion is adaped o he local environmen where here is lack of capial o inves ino echnical innovaion as dairy goa keeping. Veldhuizen e al. (1997) is of he opinion ha combining local and exernal knowledge, wih he aim of increasing capaciy wihin he innovaion sysem can adap quickly o changing condiions and hus o improve livelihoods. Through his approach a dairy goa keepers group was formed o gradually ake responsibiliy of leasing dairy goas o individuals on he condiions ha he lease is repaid in he form of monhly insallmen ha can be obained hrough he sale of milk and also from selling he animal offspring. No concree sudy has been underaken on economic viabiliy of such dairy goa projec in he sudy area in paricular and in Limpopo province in general. The objecive of he curren sudy was, herefore, o analyze he economic viabiliy and susainabiliy of leasing sysem of dairy goa keepers in he Mafefe area and explore possibiliies for expansion of goa producion under leasing sysem in oher pars of he Limpopo province. Moreover, his sudy is imporan for idenificaion of consrains, and opporuniies for guidance and argeing of expansion of he dairy goa muliplicaion and fuure breeding programs in Limpopo. METHODOLGY The sudy area and daa collecion: The hisorical daa (2004 o 2008) were colleced in Ga-Mampa, Mafefe village of Capricorn Disric in he Limpopo Province. Mafefe village has been a pilo sie for CRCE where echnical and financial innovaions have been inroduced over he pas years. Mafefe has high populaion densiies, and also here are a large number of small-scale farmers producing a variey of agriculural producs. There is high demand of dairy goa producs such as milk, mea and skin. The majoriy of people in he surrounding areas buy goas for radiional riuals. The sudy used purposive sampling o selec 30 households o paricipae in he sudy. The mehod used o collec daa from Mafefe village was household inerview. A srucured quesionnaire was used o collec informaion from households ha keep dairy goas in one form or anoher. Analyical echnique: The sudy used he wo differen projec crieria o analyze he daa colleced from he 30 households. The wo crieria used o evaluae he economic viabiliy of leasing sysem o he developmen of dairy goas are he Ne Presen Value (NPV) and Benefi Cos Raio (BCR). A projec is considered o be financially viable when he NPV is posiive and he BCR is greaer han uniy. According o Giinger (1982), he sandard models for deermining he profiabiliy and hence economic viabiliy of any projec (in our case dairy goas projec) can herefore be wrien as follows: The ne presen value: NPV n B C o ( 1 The benefi cos raio: n B /( 1 BCR 0C /( 1 where B = Benefis in year C = Coss in year n = Number of years he projec will be under operaion i = Discoun rae RESULTS AND DISCUSSION As can be seen from Table 1 household members in he age bracke below 38 years were less and hose older han 39 years more. I seems ha dairy goa farmers in he sudy area are composed of a mixure of aduls and pensioners. Of he 30 households 19 (63.3%) of hem are females and he remaining 11(36.7%) are males. This perhaps indicaes ha he female households end o have a high poenial for keeping dairy goas in he rural area Table 1: Summary of some socio-economic characerisics of dairy goa farmers in Mafefe communiy Parameer Frequency Percenage Age: years years Toal Sex: Female Male Toal Educaion level: No schooling Primary Secondary Toal Income sources: Salaried employmen Farming Remiances Toal

3 han men. The sudy found ha he highes percenages of households were educaed up o secondary educaion. The sudy also indicaed ha farming is he only source of income for 85% of he respondens. Dairy goa managemen pracices by farmers in Mafefe communiy: Generally, households supplemened heir dairy goas feeding wih field crop residues, home grown fodder and purchased feed. Resuls from he survey indicaed ha all he respondens (100%) fed heir dairy goas wih field crop residues and fodder crops. Abou 96% of he respondens fed heir dairy goas wih home grown feeds, while abou 40% of he respondens fed heir dairy goas wih purchased feed. Cleaning he salls, milking and feeding dairy goas: The main asks in he dairy goa producion were cleaning he sall, milking and feeding. Mos aciviies were carried ou by women and children. According o survey resuls abou 70% of women and children are responsible for aking care of feeding dairy goas followed by 30% of man aking care of feeding dairy goas in he households. Feeding sraegy of dairy goas: The resuls indicaed ha 53.3% of he households fed is dairy goas wice per day, usually once in he morning and once in he afernoon. Abou 33.3% of he households fed is dairy goas once per day, especially during he mid-day, and slighly >10% (13.3%) of he households fed is dairy goas more han wice per day. This implies ha he majoriy of farmers feed is dairy goas wice per day for he goas o be srong enough. Availabiliy of feed needed for he dairy goas: Abou 60% of he households among he dairy goa keepers indicae ha he feed for dairy goas are readily available a he same ime every day, while 37% of he households keeping dairy goas menioned ha he feeds for goas are someimes available bu no every day. Only 3% of he households indicae ha he feed for he goas are no readily available and he dairy goas have o move around in search of feed. This perhaps indicaes ha heir goas do no produce enough milk because of poor feeding sraegy. Markeing of goas and by-producs: Markeing is a complex aciviy ha sars wih a farmer s decision on how o dispose of his produce o he aciviies of he inermediaries (ARC, 1998). In he sudy area, here has no been any headway as far as goa markeing is concerned. Almos all dairy goas are markeed as live animals wih lile value being aached o oher byproducs. Lack of informaion, appropriae infrasrucure such as abaoirs, roads and markeing poins were cied by he households as some of he problems. The resuls furher indicaed ha 86.7% of he respondens sell heir goas and by-producs o he local Table 2: Dairy goa flock size composiion and producion Year Dairy goas (number) Female goas Male goas Kids born Toal Purchases (number) Female goas Male goas Deahs (number) Female goas Male goas Male kids Female kids Toal Sales (number) Female goas Male goas Male kids Milk producion (L) Dairy milk producion Milk sold Home consumpion Compued from survey daa (2007) Table 3: Projeced revenues and operaing coss Years Average Revenues (R) Sale of male kids Sale of female goas Sale of male goas Suboal Sale of milk (R) Raw milk sale Toal Operaing coss (R) Feed coss Veerinary services Toal Compued from survey daa (2007) people in he same village, while 43.3% of he households sell goas and by-producs o he people from neighboring village. The resul is ha goas are raded informally, ha is, ou of hand sales. As such, buyers buy direcly from he farming households whereby no commissions charged. Cos benefi analysis of dairy goas: Table 2 shows a summary of dairy goa flock size and producion for 5 years (from 2004 o 2008) which is assumed o be he average life of he projec. The resuls show a growh in he oal number goas over years. The projec faced a high moraliy rae of kids over years, and his could be due o poor managemen (feeding sraegy and housing). From 2005 o 2007, seven goas were sold o he marke, while here was an increase in milk producion over he years. Households were benefiing from he sale of dairy goas and milk sold o he local communiy and neighboring village. Table 3 shows he revenues generaed and coss incurred on he dairy goa projec over he five year period. In 2004 he dairy goa projec did no sell milk and 155

4 Table 4: Calculaion of ne presen value (rands) Year Toal flow of coss Toal flow of benefi Discoun facor (10%) Presen value of cos Presen valueof benefis Toal Ne presen value (NPV) Benefi cos raio (B/C) Compued from daa (2007) Table 5: Summary of discouned cash flow analysis of he dairy goa projec Normal Benefis reduced Combined Effec-coss inflaed by Measure condiions by 20% Coss inflaed by 20% 20% and benefis reduced by 20% Presen value of coss Presen value of benefis Ne Presen Value (NPV) Benefi Cos Raio (BCR) Compued from daa (2007) kids and hence no revenues were generaed. On average, he projec s revenue from he sale of goas and milk was R4525, he oal average operaing coss over he year was R1425. The findings from he economic analysis in Table 4 revealed ha he dairy goa keepers group should inves on dairy goa projec since he NPV from he projec is posiive and he BCR is greaer han zero. This perhaps gives an indicaion ha he projec will provide enough financial benefis o jusify he invesmen. According o Giinger (1982) a higher NPV index and a higher raio of benefis o coss indicae ha invesing on a projec is financially beneficial and economically viable. Sensiiviy analysis: The purpose of he sensiiviy es is o deermine he effecs ha marginal changes in cerain variables would have on he projec. I is necessary o run sensiiviy analysis in such projecs o deermine he effecs of uncerainies. I was concluded ha he variables ha are mos likely o be subjeced o change are he price of goa milk, he goas hemselves and cos of he inpus. Consequenly, we have considered he following hree siuaions: C Benefis reduced by 20% C Coss inflaed by 20% C Combined effecs where boh benefis are reduced by 20% and coss inflaed by 20% As can be seen from Table 5 he projec would be sensiive o he reducion of benefis ha is likely o resul from changes in prices as producion increases, assuming all oher hings remain consan. As can be seen from Table 5, a reducion of benefis by 20% could cause he Ne Presen Value (NPV) o fall from o , and he Benefi Cos Raio (BCR) from 3.08 o The projec is herefore fairly sensiive o changes in prices of goas and goa milk bu sill profiable. A similar assessmen was made by assuming ha he coss are inflaed during he life of he projec. As shown in Table 5, a 20% increase coss resul in a drop of he NPV from o and BCR from 3.08 o This perhaps indicaes ha he projec is less sensiive o he increase in coss han o a reducion in benefis. The combined effecs include reducion of benefis by 20% and an increase of cos by 20%. Table 5 shows ha he effecs of he wo variables combined will resul in a posiive NPV ( ) and a B/C raio of more han one (2.05). CONCLUSION In general, he sudy reveals ha small scale farmers are beer off in producing dairy goas hrough leasing sysem. The inroducion of dairy goa keeping o he rural people is an aracive innovaion and echnically as well as financially viable opion. I also aims a ensuring ha rural people know how o develop new echnology ha could benefi hem in a susainable and economically viable way. An imporan added advanage is ha his leasing sysem mehod o develop dairy goas would be a new culural pracice being inroduced o Mafefe rural communiy. From he daa represened in his sudy, i appears ha smallholder paricipaion in producion of dairy goas could play a significan role in creaing jobs and improving he financial well-being of small-scale farmers. The projec was found o be economically sound and financially viable. The analysis shows ha milk producion wih dairy goas in smallholder farming sysems in Limpopo Province of Souh Africa can be a viable proposiion. In general, he projec is considered o be viable, bu fuure sudies need o consider more scenarios o revise for eiher underesimaion of coss or overesimaion of prices of producs or oher uncerainies. 156

5 RECOMMENDATION Dairy goa keepers in he sudy area indicaed ha goas can be raded informally i.e., ou of hand sales, buyers in he village buy direcly from he farming households whereby no commissions are charged. The markeing of goas hrough formal marke in he Capricorn Disric in paricular is sill very discouraging as compared o he oal number of goas in he province. Therefore, he governmen should assis he households wih he developmen of an appropriae markeing infrasrucure for heir dairy goas and dairy goa milk so ha hese households will be able o produce for marke. Training and suppor programs for dairy goa farmers need o be pu in place and his has o be suppored by appropriae exension services. I is imperaive ha a dairy goa muliplicaion and fuure breeding programmes for povery alleviaion should be commensurae wih farmer s resource and managemen capaciy o ensure success, and suggess he use of appropriae messages and echnologies based on he undersanding of he farmer s objecives, opions and consrains REFERENCES Agriculural Research Council (ARC), Goa Producion Manual. Preoria, Souh Africa. Braker, M.J.E., H.M.J. Udo and E.C. Webb, Impacs of inervenion objecives in goa producion wihin subsisence farming sysems in Souh Africa. Souh Afri. J. Anim. Sci., 32: DeJong, R., L.G. Kuruppu, Q.W. Jayawardena and M.N.M. Ibrahim, Performance of small-scale livesock/crop demonsraion-cum-rain ing farms in sri Lanka. Asian-Ausral. J. Anim. Sci., 7: Delgado, C.L., M. Rosegran, H. Seinfeld, S. Ehui and C. Courbois, Livesock o 2020: The Nex Food Revoluion. Food, Agriculure and he Environmen Discussion paper 28. IFPRI, Washingon, DC. Devendra, C. and M. Burns, Goa Producion in he Tropics. Common Wealh Agriculural Bureau. Farnham Royal Bucks, England. Devendra, C., Small ruminans: Imperaives for produciviy enhancemen, improved livelihoods and rural growh-a review. Asian-Ausral. J. Anim. Sci., 14: Giinger, J.P., Economic Analysis of Agriculural Projecs. 2nd Edn., The Johns Hopkins Universiy Press, Balimore. Josserand, H.P., A sraegy for small ruminan developmen in Africa. Proceedings of he Workshop on Small ruminan sysems in he Humid Zones of Wes Africa, January, Ibadan, Nigeria. Kosgey, I.S., R.L. Baker, H.M.J. Udo and J.A.M. van Arendonk, Successes and failures of small ruminan breeding programs in he ropics: A review. Small Ruminan Res., 61: Kosgey, I.S., G.J. Rowlands, J.A.M. van Arendonk and R.L. Baker, Small ruminan producion in smallholder and pasoral/exensive farming sysems in Kenya. Small Ruminan Res., 77: Peacock, C., Improving Goa Producion in he Tropics. A Manual for Developmen Workers, UK. Peacock, C., Goas unlocking heir poenial for Africa s farmers. Proceedings of he Sevenh Conference of Minisers Responsible for Animal Resources, 31 Ocober-4 November, Kigali, Rwanda, pp: Roes, M., Commercializaion of indigenous goa producion and producs in Souh Africa. Cape Town. Sevens, R.D., Tradiional and Dynamics in Small Farm Agriculure. Iowa Sae Universiy Press, Ames, pp: Veldhuizen, V.L., A. Waers-Bayer and H. Dezeeuw, Developing Technology wih Farmers: A Trainer s Guide for Paricipaory Learning. ZED Books, London. Verbeek, E., E. Kanis, R.C. Be and I.S. Kosgey, Soci-economic facors influencing small ruminan breeding in Kenya. Lives. Res. Rural Develop., 19(6). 157