THE FARM SIZE-EFFICIENCY RELATIONSHIP IN SOUTH AFRICAN COMMERCIAL AGRICULTURE

Abstract

This paper briefly discusses the sources of economies of scale, with some international evidence. It provides a picture of the structure of South African agriculture, detailing distributions of farm size as well as some results of previous studies analysing farm size efficiencies. An analysis of farm size-efficiency relationship in commercial farming is done by utilising representative farm level survey data on the six major grain producing areas and an irrigation area over the period 1975–1990. The role of policy in explaining these relationships is discussed, while some conclusions are also drawn.

The findings have specific implications for land reform. The inverse farm size-efficiency relationship, which is also present in South African agriculture despite a history of policies favouring relatively large mechanised farms, implies that significant efficiency gains can be made if farm sizes in the commercial sector becomes smaller. An important element in such a process would be the removal of all policies and distortions favouring larger farms relative to smaller farms.