MANAGERIAL ABILITY AND SIZE ECONOMIES IN SOUTH AFRICAN DAIRY PRODUCTION

Abstract

This study analysed the relationship between economies of size and managerial ability in South Africa'S dairy sector. The results show that the AC curves are U-shaped with greater economies than diseconomies of size. Better managers were shown to profitably produce output levels at lower average cost per litre than other managers do. In addition, their optimum levels of output are between two and four times as large as that of firms with average or low levels of management. Better-managed enterprises are on average operating below their optimum size, but low and average managed firms are producing output well in excess of their optima.