The Impact of Institutional Particularities on Agricultural Policy

The process of restructuring the agricultural sector in Southern Africa will require a wide range of incentives and subsidies provided by agricultural policies. But it may depend even more on certain preconditions which have to be fulfilled by general politics, e.g. protection of human rights, implementation of democratic principles and abolition of racial discrimination. Economic efficiency in agriculture and- what may be even more importantsocial peace can only be achieved and maintained if all groups of farmers have equal access to land, markets, education, technology, infrastructure, political measures, and the process of policy-making from which decisions on agrarian institutions and policies derive (cf. Van Zyl & Van Rooyen, 1990:1; Kassier & Vink, 1990:21). Recent experiences in Eastern Europe have shown that large-scale agriculture based on a non-democratic system lacks economic efficiency and social stability. Instead, in most industrialised states without central planning, smaller farms integrated in a pluralistic political framework have become the prevailing institutional arrangement in agriculture. According to Schmitt (1990:22), "the dominance and persistence of family farms (in Western countries, K.H.) is explained economically by flexibility and stability in resource allocation to farm and non-farm employment as well as household production. Their economic superiority vis-a-vis large farms employing hired labour or organized by producer cooperatives is explained by lower transaction costs. Most likely, advantageous transaction costs of smaller family managed farms are not outweighed by increasing returns due to economics of scale and size of larger farms".