The Impact of Social Grants on the Propensity and Level of Use of Inorganic Fertiliser among Smallholders in Kwazulu-Natal, South Africa

ABSTRACT

This article assesses the extent to which social grants relieve liquidity constraints and improve inorganic fertiliser use among South African smallholders. A total of 984 farming households were randomly selected from four districts of KwaZulu-Natal, and data were analysed using the double-hurdle model. The econometric results indicated that use of social grants had a positive impact on the level of fertiliser use, while increasing dependency on social grants had no significant negative impact. The positive influence of social grants on the amount of inorganic fertiliser used suggests that these grants play a significant role in alleviating the liquidity constraints faced by poor farmers. This result is consistent with the presence of credit constraints that limit poor households’ ability to invest in modern farming technologies. To increase technology adoption among the poor, the study recommends that policymakers should address imperfections in the rural credit markets, increase smallholders’ assets in order to increase their risk-bearing capacity and improve the expected profitability of using inorganic fertiliser.

Keywords:

• social grants
• inorganic fertiliser
• double-hurdle model
• smallholder farming
• KwaZulu-Natal
• South Africa