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Farming plays a vital role in the food supply chain and the profession is regarded as one of the most solemn forms of employment.
But in South Africa, the once peaceful and tranquil lure of farm life has been marred by increasingly brutal attacks on isolated, rural farming communities, policy uncertainty and financial precariousness.
A Stellenbosch University study has found that one-out-of-five farmers intend to leave the profession within the next decade.
PhD candidate Dr Kandas Cloete recently explored the reasons behind the farming exodus in South Africa in her dissertation, Investigating farm-level exit decisions and exit rates in commercial agriculture in South Africa: An agent-based approach.
Cloete’s research was funded by the National Research Foundation (NRF) and she recently received her doctorate degree from Stellenbosch University’s Faculty of AgriSciences.
This is the largest study of its kind that investigates farm-level exit decisions and rates in the country.
Cloete, who was raised on a farm outside Laingsburg, completed her studies in the Department of Agricultural Economics in 2021.
She now works for the Bureau for Food and Agricultural Policy (BFAP) as a senior analyst.
“The question of why producers quit farming and sell their land is a topic that was covered historically and from a policy perspective. My interest was in predicting whether this pattern will continue, and what the drivers of the decision to exit or stay are,” said Cloete.
Cloete’s study focused on the decisions that producers expecting to exit farming will likely make regarding land use and occupation over the next ten years, and how these decisions could affect the agriculture system as a whole.
“Land supply and demand remain a vast, complex and multifaceted phenomenon, but it can be broken down into smaller parts by using structured analyses like in this study to provide useful insights,” she said
Cloete’s research surveyed 450 participants on land-use patterns to identify the factors that drive farmers’ willingness to sell their land.
The sample size included producers with plans to expand, those who want to maintain their farming operations as they are, and those who plan to exit the sector.
Cloete employed various research techniques in her study, including statistical modelling. This enabled her to determine a baseline farming exit rate.
This is the rate at which land may become available in the open market.
Through a cluster analysis involving 23 variables, she identified four distinct groups of respondents: the ‘ambitious’, the ‘persistent’, the ‘retrievers’, and the ‘remainers’.
Among Cloete’s participants, one out of every five producers indicated that they plan to exit farming within the next decade.
While ‘retrievers’ will be opting out within the next decade, producers in the ‘ambitious’, ‘persistent’ and ‘remainer’ groups plan to keep toiling the land.
The data revealed that producers currently aged 30 to 45 years are more likely to exit farming than those aged between 45 and 65.
Cloete is now able to describe, in great detail, who is the producer most to exit farming over the next decade.
“He is a third-generation, 54-year old individual with 26 years of experience and a college or university degree,” she says.
“This producer is typically still repaying long-term loans while also using production loans and other types of debt capital.
“Given the financially constraining, leveraged position he finds himself in — together with a lack of business confidence — his financial strategy is to contract rather than expand his farming operations. As a result, managing multiple loans while planning for retirement remains a challenge, explained Cloete.”
Although the decision to remain in or exit the agricultural sector is often a personal one, driven by the unique circumstances of the producer, Cloete’s research identified certain common themes among the four different groups.
Farming exit decisions are affected by investment cost, financial constraints and producers’ age, Cloete’s results show.
Other deciding factors include retirement without succession, financial problems, a lack of dependable labour, uncertainty regarding land reform policy, and concerns about rural safety.
While there appears to be no link between turnover and exit plans, a larger turnover (of more than R10 million per year) could certainly play a role in the intent to stay.
Cloete says producers’ decisions to keep farming are also affected by business confidence and production loans.
“It is typically a combination of different factors that determines the decision to quit farming and sell the property,” she says.
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Cloete’s results show there is enough land available in the market due to exit plans among certain producers to accommodate others who want to either enter the sector or expand their existing operations.
“The results show that the South African land market is indeed well functioning,” she says.
“This is proven by producers’ intention to exit. Hence, land supply — in the general sense — is not a constraining factor in transformation (in agriculture).”
Still, the land market is somewhat constrained by barriers to exiting, which translates into a direct barrier to entry among prospective farmers.
“Often, one man’s decision to exit creates an opportunity for another. Those producers making exit plans are also enabling expansion by others and access for new entrants.”
Cloete’s research identified the barriers preventing some farmers from exiting.
In addition, rent-seeking, land ownership and the perception that land market prices will grow were also identified as barriers to exiting.
Cloete says there is a concerning number of producers who are planning to continue their operations despite being constrained by existing financial commitments and not planning to invest in the future.
“While collectively appearing to have a strong appetite to grab the bull by the horns, so to speak, some producers are driven to deal with the challenges as best they can and while they can in order to add value – on the income and balance sheets.
Many producers will, however, eventually retire and sell their farms because no other viable solution is available.”
Yet, financial vulnerability due to the risks associated with farming affects producers’ finances and often leaves ageing producers unprepared for retirement, Cloete explained.
“Perhaps the biggest issue is not the loss of 20% of our producers who will exit over the next ten years but rather the fact that the ones that should be exiting, find themselves locked in by the barriers to exit and don’t have an exit strategy,” she concluded.
Compiled by Narissa Subramoney
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