Drivers of cattle commercialization in rural South Africa: A combined test of transaction cost and store-of-wealth hypotheses

ABSTRACT

Empirical studies investigate micro-level determinants of livestock market participation among smallholders from either the transaction cost or the consumption smoothing perspective. Based on the sustainable livelihoods framework (SLF), this study proposes a unifying lens through which key insights from the two perspectives can be conceptually synthesized. Leveraging on the proposed unifying lens, a cross-sectional dataset from a survey of 230 cattle farmers in the Okhahlamba Local Municipality is employed in the analysis of a Double Hurdle model. In line with the transaction cost hypothesis, the preliminary results suggest that education and cattle productivity influence positively the decision to participate in cattle markets, and given positive decision, the supply volume increases with proximity to rural towns. Vindicating the store-of-wealth hypothesis, the results also show a negative effect of access to water sources on the market participation decision, coupled with a positive and negative effects of cattle productivity and expected price, respectively, on supply volumes. The article concludes with some implications for rural development policy in South Africa.

Keywords:

• market participation
• transaction cost
• store of wealth
• sustainable livelihoods framework
• South Africa

JEL codes:

• Q12
• Q13