Comparative Economic Advantage of Alternative Agricultural Production Options in Swaziland

110 Pages·2000·1.88 MB·English

SD Publication Series
Office of Sustainable Developmen't
Bureau for Africa
Comparative Economic
Advantage of Alternative
Agricultural Production Options
in Swaziland
Glenn T. Magagula and Hamid H. M. Faki
Center for Agricultural Research and Policy Analysis
University of Swaziland, Luyengo
Technical Paper No. 103
December 1999
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This publication is part of the
Regional Trade Agenda Series
USAID I Africa Bureau
Office of Sustainable Development
Agriculture, Natural Resources and Rural Enterprise Division
Food Security and Productivity Unit
and
Regional Economic Development Support Office
Eastern and Southern Africa, Office of Agriculture and Natural Resources
Activity Title
Regional Trade and Comparative Advantage in Eastern and
Southern Africa: Implications for Food Security
The series includes the following publications:
• TradeNet: User's Guide to InterMaii
Comparative Analysis of Economic Reform and Structural Adjustment Programs in East Africa:
With Emphasis on Trade Policies
Comparative Analysis of Economic Reform and Structural Adjustment Programs in East Africa:
With Emphasis on Trade Policies- Annex
Comparative Transportation Cost Analysis in East Africa: Executive Summary
Comparative Transportation Cost Analysis in East Africa: Final Report
Comparative Analysis of Structural Adjustment Policies in Southern Africa: With Emphasis on Agriculture
and Trade
Comparative Cost of Production Analysis in East Africa: Implications for Competitiveness and Comparative
AdvantagE! .
Methodologies for Estimating Informal Cross-Border Trade in Eastern and Southern Africa
Reported Trade in East and Southern Africa: Analysis ofO fficially Reported Data
Analysis of Policy Reform and Structural Adjustment Programs in Malawi: With Emphasis on Agriculture
and Trade
Structural Adjustment and Agricultural Policy Reform in South Africa
Policy Reforms and Structural Adjustment in Zambia: The Case ofA griculture and Trade
Analysis of Policy Reform and Structural Adjustment Programs in Zimbabwe: With Emphasis on Agriculture
and Trade
Informal Cross-Border Trade Between Kenya and Uganda: Proceedings ofa Workshop Held at the
Mayfair Hotel, Nairobi Kenya, December 6, 1996
Unrecorded Cross-Border Trade Between Kenya and Uganda: Implications for Food Security
Comparative Costs of Transport: The Northern Tier Countries of the Greater Hom of Africa
Comparative Costs of Transport: The Northern Tier Countries of the Greater Hom of Africa: Executive Summary
Unrecorded Cross-Border Trade Between Malawi and Neighboring Countries
Unrecorded Cross-Border 'Trade Between Mozambiqpe and Her Neighbors: ImplicatIOns for Food Security
Unrecorded Cross-Border Trade Between Tanzania and Her Neighbors: Implicatio1JS for Food Security
Comparative Economic Advantage in Agricultural Trade and Production in Malawi
Regional Agricultural Trade and Changing Comparative Advantage in South Africa
A~alyzing Comparative Advantage of Agricultural Production and Trade Options in Southern Africa:
Guidelines for a Unified Approach
Analysis of the Comparative Economic Advantage of Alternative Agricultural Production Options in Tanzania
• Comparative Economic Advantage of Alternative Agricultural Production Options in Swaziland
• Comparative Economic Advantage of Alternative Agricultural Production Activities in Zambia
For more information about the series, contact:
Brian D'Silva Joe Carvalho
USAIDIREDSO/GHAI USAIDIREDSOIESAfANR
TEL: [phone];FAX: [phone]
~L:2~2-751613;FAJ(:254-2-743204
Internet: [email protected] Internet: [email protected]
Agriculture, Natural Resources and Rural Enterprise
Office of Sustainable Development
Bureau for Africa
U.S. Agency for International Development
Comparative Economic Advantage of
Alternative Agricultural Production
Options in Swaziland
Glenn T. Magagula and Hamid H. M. Faki
Center for Agricultural Research and Policy Analysis
University of Swaziland, Luyengo
Technical Paper No. 103
December 1999
Publication services provided by The Mitchell Group, Inc. (TMG)
pursuant to the following USAID contract:
AFR/SD Support Services Contract Number AOT-C-00-99-00224-00
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Contents
Foreword v
Acknowledgements vii
Dedication ix
Executive Summary xi
Glossary of Acronyms and Abbreviations xii
1. Introduction 1
1.1 Brief Overview of the Study 1
1.2 Study Objectives 2
1.3 Methodology Outline 3
2. A Brief Overview of Agro-ecological Zones and the Agricultural Sector of Swaziland 5
2.1 Geographic Location and Major Agro-ecological Zones of Swaziland 5
2.2 The Political Economy 7
2.3 Role and Magnitude of Swaziland’s External Trade 10
2.4 Overview of the Role of the Agricultural Sector in the Economy of Swaziland 12
2.4.1 The Swazi Nation Land (SNL) 13
2.4.2 The Individual Tenure Farms (ITF) 16
2.5 Agricultural Policy 21
3. Research Methodology 29
3.1 Concept and Assessment Method of the Comparative Economic Advantage (CEA)
of Agricultural Production 29
3.2 Procedure for Data Collection and Analysis 31
3.2.1 Sampling in Swazi Nation Land 32
3.2.2 Sampling in Individual Tenure Farms (IRF) 32
3.3 Procedure and Assumptions for Crop Budgets Estimates 35
3.4 Some Considerations in the Analysis Procedure 38
4. Competitiveness of Agricultural Production on Swazi Nation Land Sector 41
4.1 Cropping Structure 41
4.2 Profitability and Policy Interventions 43
4.2.1 Private Profitability 43
4.2.2 Social Profitability 43
4.2.3 Policy Interventions in Tradable Commodities 44
4.3 Comparative Advantage 44
4.4 Sensitivity of the Comparative Advantage 45
4.4.1 Comparative Advantage with Average Crop Yields 45
4.4.2 Break-even Yields 46
4.4.3 Competitiveness under Improved Management Practices 47
4.4.4 Break-even World Market Prices 48
4.4.5 Break-even Exchange Rate 49
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5. Competitiveness of Agricultural Production on Individual Tenure Farms 51
5.1 Cropping Structure 51
5.2 Crop Yields 53
5.3 Profitability and Policy Interventions 53
5.3.1 Private Profitability 53
5.3.2 Social Profitability 54
5.3.3 Policy Interventions in Tradable Commodities 54
5.4 Comparative Advantage 55
5.5 Sensitivity of the Comparative Advantage 55
5.5.1 Comparative Advantage with Average Crop Yields 56
5.5.2 Competitive Threshold Yields 58
5.5.3 Effect of World Market Prices 59
5.5.4 Effect of Exchange Rate 60
5.5.5 Effect of Land Opportunity Cost 61
5.6 Crop Competition for Domestic Resources 62
6. Summary and Conclusions 65
Appendices 69
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Foreword
Southern Africa was characterized by a heavily regulated agricultural market before the late 1980s but, since then,
countries in the region have followed a strategy to remove restrictive measures from the agriculture sector. The de-
regulation process has taken place within the context of worldwide liberalization of agriculture. These changes have
meant that Swaziland, and the entire southern African region, has to compete internationally in a more open agricul-
tural market. In order to be competitive, southern African countries have to use resources more efficiently by ex-
ploiting their comparative advantages. Policy decision-makers should be guided so as to implement policies and strat-
egies that will enhance the competitiveness of agricultural producers.
Various studies have shown that countries can improve their welfare by opening up their borders to freer trade.
Furthermore, there is a worldwide move toward economic integration, the European Union being the most prominent
example. Southern Africa is no exception with the region’s move toward a Free Trade Area under the auspices of the
Southern African Development Community (SADC). Not only is it foreseen that this movement will improve welfare
in the whole region, but the region’s competitiveness could also improve. Within the framework of economic integra-
tion in southern Africa, countries will only reap benefits by exploiting comparative advantages that exist within the
region.
Swaziland is one of seven countries in SADC participating in the Research Program on Regional Agricultural
Trade and Changing Comparative Advantage in Southern Africa. The comparative economic analysis (CEA) study in
Swaziland, therefore, forms part of a larger activity to determine comparative advantages in the region. These studies
not only examine the existing comparative advantages, but also provide a means to evaluate the impact of different
agricultural policies on comparative advantage. This proves to be an especially valuable tool to guide policymakers in
the region.
The comparative economic analysis revealed that Swaziland has a high and fairly stable competitiveness in sugar
cane, pineapple, grapefruit and cotton. With regard to the SwaziNationLand (SNL), the study found that maize is
important for subsistence and food security, there are low returns for family labor, and there is a potential for both
mechanization and mixed cropping. The authors, therefore, recommend several policy options including importing
maize, boosting maize yields, maintaining cotton production, and/or stabilizing groundnut yields. The study also
found that title deed farms or Individual Tenure Farms (ITF) are competitive in most crops, excluding maize. Both
sugar cane and cotton are highly stable crops and pineapple also shows considerable stability while vegetable crops
show high variability
The findings of the study, and their implications, have also been specified according to highveld, middleveld, and
lowveld. In the highveld, there is competition between vegetables and maize. While the comparative advantage of
vegetables depends on further exploitation of irrigation possibilities, the expansion of maize depends on yield im-
provement. There is competition for land and water between rainfed and irrigated crops in the middleveld. Pineapple
and vegetables are the priorities in this area, but maize has a better potential here than in the highveld. Finally, in the
lowveld sugar cane, fruits, and irrigated cotton are competitive. While sugar cane and citrus fruits are competitive in
irrigated areas, priority should be given to cotton for rainfed cultivation.
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This study is one in a series of studies on Africa’s regional trade and comparative advantage, a joint activity of
USAID Africa Bureau’s Food Security and Productivity Unit in the Office of Sustainable Development, Agriculture,
Natural Resources and Rural Enterprise Division and the Regional Economic Development Services Office for East-
ern and Southern Africa (REDSO/ESA).
Dennis Weller, Chief
Agriculture, Natural Resources and Rural Enterprise
Office of Sustainable Development
Bureau for Africa
U.S. Agency for International Development
Dennis McCarthy, Chief
Office of Agriculture, Engineering, and Environment
Regional Economic Development Support Office,
Eastern and Southern Africa
U.S. Agency for International Development
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Acknowledgements
Many invaluable contributions made to this study are highly acknowledged. The advice of Prof. Rashid Hassan,
Univeristy of Pretoria, was instrumental in the foundation of the study design and his assistance has been crucial in
geo-referencing and alliance of socioeconomic data and geographical maps, as well as in providing constructive
comments on the study. Data collection on the Swazi Nation Land was lead by Prof. A. Okorie and Ms. P. Magagula.
Ms. Magagula also contributed to the surveys on Individual Tenure Farms. Further, the contribution of Dr. S.L.
Ndlovu to determine coordinates of the sampled farms through the GPS are highly appreciated. The cooperation of
farmers and managers in the traditional and private agricultural sectors in providing information was central in the
conduct of the study. Last but not least, the financial support of the USAID through UNISWA/CARPA was momen-
tous in the realization of the study.
This study was made possible through support provided by the Regional Economic Development Support Office
for Eastern and Southern Africa (REDSO/ESR) and AFR/ARTS/FARA/FSP, U.S. Agency for International Develop-
ment under the terms of grant No. 623-0478.23-A-00-4092-00. The opinions expressed herein are those of the au-
thors and do not necessarily reflect the views of the U.S. Agency for International Development.
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