Smallholder agriculture: job creator or livelihood provider?

Sifiso Mhlaba and Zulaikha Brey

South Africa has a dual agricultural economy consisting of well-developed commercial farmers and many more subsistence-based smallholder farmers. Both of these sub-sectors play an important role in South Africa’s economy. They offer employment and opportunities for sustaining livelihoods, amongst others, and there are strong upstream and downstream linkages between the sector and the rest of the economy. But the smallholder sub-sector has particular potential to contribute to the mitigation of South Africa’s employment crisis and food security challenges. This is because smallholder producers tend to use labour-intensive methods rather than capital-intensive ones; and as such, with proper support, smallholder agriculture is likely to absorb more workers and use land more intensively.

Consequently, a number of interventions from government, and indeed the private sector, have been directed at supporting smallholder farmers to take advantage and explore this potential for job creation. And the sub-sector is likely to benefit from even more support going forward. This is clear from government’s recent policy pronouncements. For instance, the New Growth Path identifies six key drivers of employment creation, one of which is employment in the agricultural value chain. Agriculture’s role in job creation is also highlighted in the country’s long term 2030 vision, as reflected in the National Development Plan. Government’s Outcomes framework also places substantial focus on small holder agriculture and rural development with outcome seven instructing “…that government should ensure vibrant, equitable and sustainable rural communities and food security for all.”

To this end, a number of enterprise development initiatives have been funded to support smallholder farmers for the purpose of job creation. Having recently interacted with a number of these initiatives, both in the form of the enterprise development agencies as well as with the farmers directly, we have identified a number of challenges confronting this sub-sector. Of particular interest to us as economists, was the extreme difficultly that these initiatives experience in trying to define and consequentlymeasure a job. This is for a number of reasons:

· Most smallholder producers have diverse sources of livelihoods, including off-farm income, and therefore being a smallholder producer does not necessarily translate into a full-time activity on the farm.

· Agriculture is seasonal in nature. Farm workers are thus hired for certain times of the production season, such as planting, weeding and harvesting. This is even more profound with small-scale farmers as they generally farm on small plots.

· Job verification is difficult in the smallholding sector as farmers do not generally keep records, nor do they run official payrolls.

· Given the scale of operation within the smallholding space, farmers struggle to pay the minimum wage determined yearly by the Minister of Labour. As a result, farmers choose not to declare the correct number of “jobs” created for fear of falling foul of the law. In some instances, the farmers themselves are unable to earn minimum wage equivalent salaries.

In the absence of clear jobs numbers, it is difficult for government (and other funders) to assess the relative efficiency and effectives of difference initiatives. For these reasons, various innovative attempts have been made of measure job creation in this space.

· The first is based on farm turnover. Once a farm reaches a specified turnover, generally R15 000 per annum, a permanent job is presumed to have been created. However, farmers in general are often not forthcoming, and certainly under no obligation, to share their financials with random economists. Moreover, if farmers are benefiting from a government intervention, they may be unwilling to share the correct information for fear of expulsion from the programme. There are also methodological questions around how this threshold amount should be determined. While R15000 per annum might be appropriate for a subsistence level farm, it is well below the minimum wage, and is unlikely to be a reasonable proxy on larger farms. Furthermore, this threshold would likely differ markedly by area and commodity.

· The second uses average job creation per hectare, and differs by enterprise. Thus new jobs created are estimated based on the increase in the number of hectares under production or the number of animals kept in the case of livestock. While this measurement is more sensitive to scale and commodity, it too avoids defining what makes for a full-time job in the agriculture sector.

· An alternative form of measurement is FTE (full time equivalent) concept. The FTE number of jobs is calculated by measuring the total number of hours worked by all farm workers, and then dividing this by the number of hours worked by a normal worker in a full time job. Using this measure a farmer may employ more than 20 seasonal workers over a production cycle, but this might equate to just one FTE.

While measuring the exact number of permanent jobs created by interventions in this sector remains a challenge, there is no doubt that support to smallholder agriculture can have a significant impact in improving the livelihoods of rural dwellers. Thus, in assessing the gains from any one rural development initiative, it is important not to obsess about the number of jobs created. Rather, creative ways must be found to evaluate how such interventions contribute more broadly to rural development. These challenges must somehow be factored into the design and evaluation of future rural interventions.