Marketing Methods and Income Generation amongst Small-Scale Farmers in Two Communal Areas of Kwazulu-Natal, South Africa

High transaction costs are detrimental to the efficient operation or existence of markets for inputs and outputs. The cost of information and the costs associated with the search for trade partners, distance to formal markets and contract enforcement are likely to influence the marketing of food crops. This study hypothesises that the level of income generated from food crop sales by small-scale farmers in the Impendle and Swayimana districts of KwaZulu-Natal, South Africa, is influenced by transaction costs and certain household and farm characteristics. Regression analysis shows that the depth of marketing methods is significantly influenced by transaction cost proxies such as cooperation with large commercial farmers and ownership of means of transport. Results from a block-recursive regression analysis show that the level of crop income generated is determined by the depth of marketing methods, the size of allocated arable land and off-farm income. Households with lower transaction costs, and having sizeable allocated land and off-farm income can be expected to generate higher crop income. Investment in public goods such as roads, telecommunications and an efficient legal system (to uphold commercial contracts), and farmer support services (extension, marketing information and research) would likely raise farm and non-farm income by reducing transaction costs. This would increase the effective demand for locally produced goods and services, thus contributing to rural employment and livelihoods within rural communal areas.