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Higher profits for bigger communal farmers neutralise financial incentive to relocate to commercial farms

Higher profits for bigger communal farmers neutralise financial incentive to relocate to commercial farms

By Dr HJ Sartorius von Bach.

The second National Land Conference called for higher productivity and availability of land for achieving social justice. His Excellency, President Geingob referred to opening up space for emerging farmers. Many resolutions were formulated, such as to encourage the large communal farmers to be relocated to commercial areas to free some grazing for smaller communal producers. The question to be asked is: Why has relocation not happened before?

Cattle ownership is very important in the Northern Communal Areas (NCA). About 60% of all households own cattle on their 16 million ha of rangelands following a production system based on relatively small herd sizes. A longitudinal comparison show that the average herd size increased in all NCA regions and that on average the size of household herds almost doubled in 13 years. However, herd ownership is very skewed with less than 20% of households owning herds larger than 30 cattle. The reference made at the land conference reflects to cattle owners with more than 300 cattle which is marginal in the broader context of local ownership.

It is clear that from an animal husbandry perspective, cattle marketing is limited with these small herd sizes. The Delphi method was used to derive regional production drivers. From the table it is clear that regional averages differ, that drivers differ significantly from optimum production levels and that the regional cattle and land sizes differ significantly. It has to be understood that production drivers depend on soil conservation production practices, i.e. soil security in some regions is significantly inferior to others. It is widely accepted that soil and water security will increasingly underpin the Namibian social stability and security, as referenced in the land conference resolutions.

Region (NCVF)

Total available rangeland (ha)

Cattle umber (2016)

Drivers of prosperity

Cattle offtake (%)

Cattle Calving (%)

Cattle Mortality (%)

Otjozondjupa North

310,505

9,030

5.8

40.2

10

Kunene North

7,180,893

170,590

8.8

54.3

11

Omusati

742,531

206,219

7.4

40.7

7

Oshana

143,800

187,711

6.5

35.2

5

Oshikoto North

2,763,214

336,313

6.4

49.6

16

Ohangwena

365,600

340,390

9.7

43.7

21

Kavango West

1,775,794

120,428

9.8

58.7

12

Kavango East

1,975,794

80,890

10.8

58.7

12

Zambezi

954,023

162,702

9.9

41.6

24

Total NCA

16,212,154

1,614,273

9

47

13

Optimum cattle production

>28.0

>80.0

<3.0

Based on research, these small herd sizes do not result in scale benefits and produce low taxable returns. The figure below is based on the national averages and presents that Omusati cattle-post ox producers for example yield higher returns than the Kavango small-scale weaner producers. As a comparison, both scenarios achieve positive returns and compares well with the average commercial ox producers south of the cordon veterinary fence (indicated as SCVF in the graphs). Both communal and commercial ox producers sell their oxen locally at above N$8000 each, while the weaners are traded for about N$5400. Investigations showed that equal produce yielded similar prices.

The producers’ value chain illustrates some differences in the Namibian cattle production system. The value of the newborn calf is higher for the communal farmer than for the commercial farmer, and the commercial farmer has significantly higher water, fuel, vehicle, maintenance, finance and other costs. It is interesting to observe that only labour and vaccination costs are similar between communal and commercial farming enterprises.

The value chain changes once communal producers operate at optimum levels, i.e. achieving increased fertility above the national average of approximately 50% to an optimal level of 80%. As a consequence, the production circumstances of these larger producers result in benefitting from scale effects.

The achievement of these optimum production levels in both the NCA and the commercial areas illustrates increased levels of taxable returns. This is possible from producing cattle by applying calving percentages of 80% instead of the 47% presented above, and moving from 13% mortality to 3%, which leads to an offtake rate close to 30%.

The illustration clearly show that scale benefits result in increased taxable returns and related multipliers. The cost relationship between the systems does not differ. It is clear that the communal large scale ox producers are much better off than the ox producers in the commercial areas. The communal farmers’ profits are more than double than their counterpart in the commercial areas. This is a direct result of substantially lower water, maintenance, and finance costs. This illustrates the need for improved average production to stimulate prosperity and social stability.

Without institutional support, it remains questionable whether large communal cattle producers, who operate productively at optimum levels, would relocate from their communal set-up to the commercial area, without further incentives. It does not make sense for them to relocate only to assume higher financial risks against a much-reduced profitability.

About The Author

Helmke Sartorius von Bach

Dr Helmke Sartorius von Bach obtained his PhD in Agriculture Economics at the University of Pretoria in 1992. He became professor in 1994 at the age of 32 and headed the Department of Agricultural Economics, Extension, and Rural Development. He returned to Namibia in 1996, taking up full-time farming and part-time consulting as agricultural economist. His academic and theoretical background coupled with his practical and implementation experience allowed him to successfully lead the MCA-N Agriculture project as Director of Agriculture from 2009 to 2014. Dr Sartorius von Bach was a member of the University of Pretoria Senate, a founder member of the Post-graduate School of Agriculture and Rural Development (UP), a Council Member of the Namibia University of Science and Technology and a former director of Meatco. He continues to consult for both Namibian and international organisations on agricultural economics. His most recent work was done for USAID, Future Works and Urban Econ.