Examining the impact of human capital and innovation on farm productivity in the KwaZulu-Natal North Coast, South Africa

Human capital development is considered the primary source of knowledge and skills in the innovation process. Despite this, there is evidence of a lack of technical and managerial knowledge among emerging sugarcane farmers who are beneficiaries of South Africa’s land reform programme, thus, limiting their full potential in terms of innovation and productivity which is detrimental to their competitiveness. This paper employs the Crépon, Duguet, and Mairesse (CDM) approach, correcting for endogeneity problems, to estimate the causal impact of on-the-job training expenditure, used as a proxy for human capital development, on innovation, and innovation on farm productivity. It is based on a case study of 35 emerging sugarcane farmers in the KwaZulu-Natal north coast, South Africa. The results from the CDM model confirm the causal relationships between human capital (on-the-job training) and the innovation behaviour of the farmers, which positively impact the farm’s productivity. This result underscores the relevance of human capital development in boosting innovation and productivity in the agricultural sector.