Investigating potential financial gains from using production inputs more efficiently

The aim of this paper is to extend existing research that analyses technical and allocative efficiency and its determinants by quantifying and comparing the potential financial gains from improving technical and allocative (cost) efficiency levels of emerging raisin producers from Eksteenskuil in the Northern Cape Province of South Africa. Results show that, at whole farm level, the average financial gains in margin above variable costs from improving technical and cost efficiency amount to R21 335 and R21 581, respectively. Importantly, the gains represent potential increases of 246% and 249%, respectively, in margins above variable costs. Improving the levels of efficiency with which the farmers use their inputs thus may contribute substantially to increase the contribution of raisin production to the livelihoods of raisin farmers from Eksteenskuil. The close comparison of the potential gains suggests that the current emphasis of extension services on maximising output levels should be extended to also promote the use of inputs in cost minimising combinations. Farmer-to-farmer skills transfer has a major role to play in supporting the farmers to use their inputs in a technically efficient manner. Extension officers and other support services should pay more attention to developing the skills of the farmers to be able to select the least cost combination of inputs.