Developing Entrepreneurship Framework for Improved Productivity and Financial Performance of Smallholder Agricultural Cooperatives

Abstract

South African agriculture plays a significant role in the development of the economy and in ensuring food security at household level. Thus, entrepreneurship is considered as essential channel for transformation within the economy. Such that development of entrepreneurship in agriculture is handled differently by bodies, including researchers and policy makers. As a result, entrepreneurship is regarded as a key factor for the survival of small-scale farming sector, which operates in an ever-changing and an increasingly global economy. Therefore, agricultural cooperatives are promoted to boost smallholder farmers, thus this study was on the development of an entrepreneurship framework in promoting primary agricultural cooperative’s productivity and financial performance. The study determined and profiled the nature and characteristics of smallholder agricultural cooperatives in Ngaka Modiri Molema district. The study also assessed the current level of productivity and financial performance of primary agricultural cooperative in the study area (efficiency of these cooperatives). Lastly, explored the relationship that exists between entrepreneurship skills and cooperative performance. Primary data of the study was based in only three municipalities of the Ngaka Modiri Molema District- North West province due to their intensity in agricultural activities and time restriction. The cooperative managers, randomly selected from these municipalities and data was obtained through structured questionnaire to interview 29 cooperative managers within the study area. The study employed descriptive analysis to emphasize the nature and characteristics of the cooperatives from the views of the cooperatives' management to analyse the data acquired from the sampled managers. The results were presented using the general frequency distribution and summary of the descriptive analysis such as frequencies and percentages is illustrated using graphs, charts and tables. The expected results of the study were that most of the agricultural cooperatives are overwhelmed by old and people with lack of formal education, who are mostly men. Further, the results indicate that most of the cooperatives does not own the lands (66%) that they operate in. Therefore, the results obtained from the study indicated that most of these managers were men (62%), not women. In addition, the results indicate that the highest qualification most of the cooperative managers is primary school (48%), which is the lowest level in education. Additionally, stochastic frontier technique was employed in the study to measure the level of productive efficiency of cooperatives, which showed the technical efficiency of all the

cooperatives skewed in the 0.90 and 1.00 range. The results from the estimates shows that the goodness-of-fit of the estimated model was measured using F-statistics, which showed a p value of .0121 indicating acceptable measure of fit. Moreover, multicollinearity of results was tested to check if there was collinearity in the analysis, and the results showed the Variance Inflation Factor (VIF) of 1.01, which asserts that there is no multicollinearity in the analysis.Three financial ratios were used to assess the financial performance of cooperatives (Liquidity, solvency and profitability). In addition, to analyse the financial performance of the cooperatives, the study used the Data Envelope Analysis. This study used Malmquist DEA methods to calculate catalogues of Total Factor Productivity (TFP) change, technical efficiency change, and scale efficiency change. Furthermore, the result from this analysis shows an average total productivity change of 17.3% of the year 2019/20, which asserts that there has been a decline in the productivity of cooperatives in that year, and this decline was mainly due to technical efficiency change within cooperatives. This means that most of the cooperatives were not growing, technical efficiency of some of the cooperatives were high, which meant that they used most of their advanced technologies. Moreover, 21 out of 29 cooperatives had a decline in in the total factor productivity change during 2019/20, which is 72% of the cooperatives. Lastly, to describe the existing relationship between entrepreneurship skills and cooperative performance canonical analysis was used. The analysis was conducted to show how much variance of the dependant variables is explained by the dimensions. Furthermore, the study employed Wilk’s lamda and corresponding F-test to evaluate the null hypothesis of the study, which stated that the canonical correlations for all function are zero. The results of this model showed that only one of the two canonical coefficient was statistically significant at p<0.05. The study recognised that management skills, opportunity skills and networking skills have a significant association with the cooperative performance factors (Financial performance and productivity). It also identified that financial performance was the main contributor of performance of the crop cooperatives. Moreover, the finding of the study aided in developing an entrepreneurship framework which will help to improve the performance of agricultural cooperatives and affiliated members (smallholder farmers). The study recommends that similar studies covering the entire province and all varieties of agricultural cooperatives be undertaken as part of future research.