South African wine grape production, 2005–2015: regional comparisons of scale and technical efficiencies and total factor productivity

This study compares long established and more recently developed wine regions in South Africa. Deterministic efficiency frontiers produce measures of technical efficiency and technical change over time and the results for scale efficiency for each farm and each year show why the farm size results in previous studies are somewhat weak and contradictory. The scale efficiencies are very close to unity and switch from increasing to decreasing returns frequently over the period. This suggests scale efficiency is not important and although decreasing returns to scale dominates it lessens over time. The Malmquist TFP index is the product of technical change and efficiency change, but the usual contemporaneous version gives unreasonable results, as technical change and efficiency change move violently in opposite directions, making interpretation difficult. Since technological regression is not possible in such a short time period the sequential Malmquist is used as it prevents this occurrence. This shows that technological change has been very limited and that efficiency has also improved very little and thus the Malmquist TFP index has also grown very slowly, which bodes ill for South Africa’s competitive position. The differences between the old and new districts are minimal, but growth was slightly higher in the newer regions.