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Abstract
This paper discusses the effects of markets restructuring on small-scale farmers in South
Africa by analysing the determinants of small-scale farmers’ market choices in the tomato
sector in two Provinces. South Africa has a very dualistic agricultural sector with a highly
performing large-scale capital intensive agriculture on one hand and a traditional, semi
subsistence small-scale communal sector on the other. Small farmers’ participation in modern
markets (i.e. supermarkets, agro-processors and national fresh produce markets) is thus very
low. Furthermore, results from our survey indicate that small-scale tomato growers in
Limpopo and Mpumalanga provinces prefer supplying informal markets than modern
markets. The econometric analysis of household level data indicates that access to land is a
key determinant of their participation in modern markets. As confirmed by our survey, small-scale
farming systems in South Africa are still very poorly capitalised. While still not being
widely used, the key non-land asset variable is whether they can produce under greenhouses,
thus supplying consistent quality demanded by the modern local channels. Other factors such
as education and location in a good tomato producing area are also significant determinants of
participation in modern markets. Interestingly, ownership of a cell phone as well as the
number of market channels to which the farmers are connected are significant in determining
market choices but they are negatively related to modern markets choice, which is to be
related to the different natures of the transactions. Modern markets propose fixed prices or at
least very stable prices under some forms of contractual arrangements while informal markets
offer relatively flexible prices, price discovery and price risk management (through multiple
marketing strategies) thus being much more important. The econometric analysis also shows
that supplying modern markets does not improve small-scale farmers’ income whereas the
access to a cell phone does, which supports the importance of the cell phone in price
management as well as the preference for informal markets.