Conceptual framework for value chain analysis for poverty alleviation among smallholder farmers

Despite volumes of research and substantial investments by government, the financial performance of smallholder farmers in South Africa remains poor. The past decade saw little change in the general behaviour of smallholder farmers, and the stumbling blocks faced by smallholder farmers who want to participate in commercial agri-food chains. A possible reason may be that researchers tend to focus on the current behaviour and performance of the farmers while neglecting the influence of the incentive structure on their behaviour. The aim of this paper is to develop a conceptual framework that allows for a more holistic analysis of farmers and their value chains to better understand the reasons underlying current behaviour, and to identify potential solutions to change the behaviour of the farmers and relevant role-players to better match the requirements for successfully participating in competitive agri-food chains. The integrated value chain, New Institutional Economics – Structure-Conduct-Performance framework, does allow for a comprehensive analysis of the incentive structure embedded in the social, physical and institutional environment within which the farmers operate. Special attention is also awarded to the relationship between the farmers and their buyers to identify the appropriate coordination strategy that will minimise transaction costs.