Influence of institutional factors on smallholder farmers’ marketing channel choices - Institutional Constraints to Small Farmer Development in Southern Africa - page 94

Ownership of market transport (TRANS), specifically vehicles, was used to measure the
availability of produce transportation facilities by households. Moreover, the availability of
transportation facilities helps reduce long market distance constraint, offering greater depth
in marketing choices. In cases where households owned a vehicle, the variable took the value
of one, and zero if the household did not own any form of vehicle. This variable is expected
to have a positive influence on the market participation choices.
Social capital (SOCIALK) in this study refers to personal social networks that encourage
market participation. It is through these networks that trust is developed, which, in
turn, encourages cooperation and regular exchanges. Therefore, social networks reduce
transaction costs, leading to diversified market participation choices. Again, information
and production resources can be transmitted through these networks. In order to capture
this variable, respondents were asked about their connection with their customers and
whether they had any regular customers. The availability of an extensive social capital
structure is expected to impact positively on the dependent variable.
The availability of contractual agreements (CONTRCT) ensure the availability of a
guaranteed market for the farmers, thus promoting market participation and including the
smallholder farmers in mainstream agriculture. In other words, the existence of a guaranteed
market reduces the costs that are associated with searching for potential buyers, thereby
encouraging participation in formal markets. This variable is expected to have a positive
relationship with the dependent variable
The types of farming (FMNGTYP) have been divided into either arable farming or
livestock farming, where the former takes a value of one and the latter takes the value of
zero. This variable was included into the model in order to capture the differences in the
nature of produce from different farming types. Thus, in some types of farming, formal
market penetration may be easier than in the other types. For instance, Matungul et al.
(2002) pointed out that formal livestock markets are readily accessible to both commercial
and small-scale livestock farmers in South Africa, owing to public investment in sales yards.
The variable can take either a positive or a negative value.
The ability to add value to agricultural produce is captured by the variable (ADDVAL).
Dummy values are used to define the variable, where those households who add value to their
produce, take the value of one and those who do not, equal to zero. It is hypothesized that the
ability to add value exerts a positive impact on market participation. This positive relationship
is because households with the ability to add value can sell their produce in an improved
state, which can be more appealing to customers. The variable storage facilities (STOR), is
closely related to value adding. Good storage facilities reduce loss of produce and urgency
of produce selling, and maintain the physical state of produce. Thus, households with good
storage facilities are more likely to participate in formal markets, hence a positive relationship.