The relationship between social grant dependence and on-farm entrepreneurial behaviour: evidence from smallholder farmers in KwaZulu-Natal, South Africa

Abstract

This study aimed to investigate the relationship between social grant dependence and the on-farm entrepreneurial behavior of smallholder farmers. A sample of 175 farmers was obtained in and around two irrigation schemes, namely, Tugela Ferry and Bululwane, in the KwaZulu-Natal province, South Africa. Principal component analysis and a two-limit Tobit regression model were employed to analyze the data. The study found a positive relationship between social grant dependence and on-farm entrepreneurial behavior. This relationship implies that the prevailing low levels of entrepreneurial activity among smallholder farmers are not driven by their dependence on social grants. Instead, they result from a lack of entrepreneurial knowledge and skills, limited access to opportunities (e.g., training and markets), inadequate access to productive resources such as irrigation water, and institutional barriers (e.g., restricted access to formal credit). For the social grants programme to remain effective, the policy should ensure that social grants benefit (directly or indirectly) the intended beneficiaries and their households. Based on the empirical evidence, this study recommends integrating the existing social grants selection criteria and means tests into agricultural input subsidy programmes. This can ensure that the farming inputs effectively reach the intended beneficiaries, thereby enhancing the programmes’ positive impact on rural on-farm entrepreneurship. This study also recommends the implementation and promotion of strategies that enhance the endowment of non-cognitive skills to improve on-farm entrepreneurial behavior among smallholder farmers. Moreover, extension officers’ active involvement in and outside small-scale irrigation schemes can positively contribute to rural on-farm entrepreneurship.