Economic returns of the Agricultural Research Council’s Table Grape Cultivar Development Programme in South Africa

The table grape industry, in line with national policy imperatives such as the National Development Plan (NDP), plays an important role in the South African (SA) economy through employment creation, rural development and foreign currency earnings. The industry has continued to expand over the years. The yields of table grapes have increased considerably in South Africa. For continued growth and sustainability, research and development (R&D) initiatives, among other factors, are important. The Agricultural Research Council’s (ARC) Table Grape Cultivar Development Programme (TGCD) is an R&D initiative that supports the industry with breeding of table grape cultivar varieties suitable for SA conditions. It was established in 1952, and has successfully bred 37 table grape cultivar varieties. However, the impact of the programme on yields and contribution to the economy remains unknown. Therefore, the study sought to estimate the economic returns of the ARC’S TGCD to the South African economy. The impact of the ARC TGCD programme was estimated using a two-stage approach. In the first stage of analysis, the impact on yield of table grapes was estimated using the Just-Pope production function. The first stage of analysis addressed two specific objectives: to determine the yield gains attributable to the ARC’s TGCD Programme; and to determine whether attempts to increase yields and quality of table grapes has compromised yield stability. The second stage of analysis employed a benefit-cost analysis to quantify the benefits in monetary terms. Specifically, BCR and MIRR were estimated. Expert advice was used to select seven ARC popular varieties for which data was available in complete form, for the period 2008 to 2017. v The results of the Just-Pope revealed that the adoption of ARC table grape varieties led to average annual yield gains of 0.79% (or 41% for the entire period) for South African table grapes producers from 1965 to 2014. The results of the Just-Pope also revealed that attempts to increase yields or yield quality of table grapes through development of new table grapes varieties did not influence yield stability. The average annual economic benefit that accrued to South African table grapes farmers as a result of the cultivar development programme was R144 203 964 (in 2010 monetary values) for the same period. This means increased foreign currency earnings through increased and stabilised yields. With reference to net economic benefits, the Benefit Cost Ratio (BCR) and the Modified Internal Rate of Return (MIRR) were 4.85:1 and 18%, respectively. This meant that every R1 invested in the Programme is associated with about R5 benefits. Therefore, there is a proportion of the yields that is attributable to the ARC’s TGCD Programme, over and above improvement in viticultural practices and farmers’ experiences over time. With regard to efficiency, the programme is justified (i.e. the benefits derived from the table grape breeding programme are larger than the costs by a multiple of about 5). The huge and sustainable net economic benefits from the TGCD Programme suggest that an increased injection of public funds should be made to the point, at least, where marginal social benefits are equal to marginal social costs. The restructuring of the TGCD Programme should also consider incorporating the land reform programme. This would mean greater support for the programme through increased smallholder farmer targeting and participation, together with the revitalisation of rural development initiatives for the table grapes industry. These, together with future studies that evaluate the competitiveness of the programme by examining factor and demand conditions, supporting industries; and the programme strategy, structure and rivalry, would generate maximum benefits for the South African economy.