Agricultural growth multipliers for two communal areas of KwaZulu-Natal

Abstract

Expenditure data were collected from 99 households in two rural areas of KwaZulu-Natal. District and wealth group expenditure analyses suggest a less-than-proportional increase in the demand for tradable farm commodities, and a more-than-proportional increase in the demand for non-tradable farm commodities following a 1 per cent increase in household expenditure. Expenditure on non-farm tradables (imported consumer durables) showed the greatest potential for demand growth, with expenditure elasticities ranging from 1,75 to 2,59. An increase of R1,00 in household income is predicted to add an additional 28 cents (multiplier of 1,28) to the local economy. The study estimates relatively weak growth linkages. However, even relatively weak growth linkages could lead to much needed new income and employment opportunities in the local farm and non-farm sectors if the constraints limiting agriculture, and hence broad-based growth in rural incomes, are alleviated. Agriculture-led growth in South Africa requires public investment in both physical and institutional infrastructure to reduce transaction costs and risks in all markets, thus encouraging greater participation by local entrepreneurs and private sector investors. In addition, the roles, functions and services offered by extension agents should be extended to promote collective marketing, facilitate land rental contracts and provide training, technical and business support for farm and non-farm entrepreneurs.