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Risk perceptions and management strategies by smallholder farmers in KwaZulu-Natal Province, South Africa

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  • Kisaka-Lwayo, Maggie
  • Obi, Ajuruchukwu
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    Abstract

    Risk is a central issue in rural areas that affects many different aspects of people’s livelihoods in the developing world. Unless well managed, risks in agriculture can slow development and hinder poverty reduction. Farmers’ perceptions of and responses to risk are therefore important in understanding their risk behaviour. This paper examines risk perceptions and management strategies using field data collected from 200 smallholder rural farmers. The relationships between various socioeconomic characteristics and perceived sources of risk were also examined. In general, price, production and financial risks were perceived as the most important sources of risk. Using Principal Components Analysis, seven principal components (PCs) that explained 66.13% of the variation were extracted. Socio economic factors identified to have a significant relationship with the various sources of risk are age, gender, education, location, information access and risk-taking ability. The most important traditional risk management strategies used by the surveyed farmers were identified as crop diversification, precautionary savings and participating in social networks. The result of this study provides useful insights for policy makers, advisers, developers and sellers of risk management instruments.

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    File URL: http://purl.umn.edu/149748
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    Bibliographic Info

    Article provided by Institute of Agricultural Management & International Farm Management Association in its journal International Journal of Agricultural Management.

    Volume (Year): 01 (2012)
    Issue (Month): 3 (March)
    Pages:

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    Handle: RePEc:ags:ijameu:149748

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    Related research

    Keywords: Risk; Risk management; principal components analysis; smallholder farmers; social networks.; Risk and Uncertainty;

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    1. Feigenbaum, James, 2011. "Precautionary saving or denied dissaving," Economic Modelling, Elsevier, vol. 28(4), pages 1559-1572, July.
    2. Adesina, Akinwumi A. & Brorsen, B. Wade, 1987. "A risk responsive acreage response function for millet in Niger," Agricultural Economics, Blackwell, vol. 1(3), pages 229-239, October.
    3. Mahlanza, B. & Mendes, E. & Vink, Nick, 2003. "Comparative advantage of organic wheat production in the Western Cape," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 42(2), June.
    4. Llewelyn, Richard V. & Williams, Jeffery R., 1996. "Nonparametric analysis of technical, pure technical, and scale efficiencies for food crop production in East Java, Indonesia," Agricultural Economics, Blackwell, vol. 15(2), pages 113-126, November.
    5. Stockil, R.C. & Ortmann, Gerald F., 1997. "Perceptions Of Risk Among Commercial Farmers In Kwazulu-Natal In A Changing Economic Environment," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 36(2), June.
    6. MacNicol, R. & Ortmann, Gerald F. & Ferrer, Stuart R.D., 2007. "Perceptions of key business and financial risk by large-scale sugarcane farmers in KwaZulu-Natal in a dynamic socio-political environment," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 46(3), September.
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