The methodologies of the studies - Institutional Constraints to Small Farmer Development in Southern Africa - page 316

Currently, no study has been undertaken to specifically estimate the price elasticities of
supply and demand for Swaziland maize. In this study, an effort was made to quantify these
supply and demand elasticities although data availability presented some problems as the
available time series data were not sufficiently long thus limited estimation possibilities.
Both supply and demand price elasticity estimates were insignificantly different from zero,
implying that maize prices in Swaziland are inelastic, that is both supply and demand do
not respond to small changes in prices. The supply elasticity is expected to be very low,
almost zero especially when households produce their maize for household consumption in
a resource poor production environment. This is the case in Swaziland where the majority
(80%) of farmers on SNL produce the maize crop on marginal lands with limited crop
production inputs and no irrigation facilities. The price elasticity of demand is also very
low, approximately zero, but this is expected for a crop that is a dominant staple with
comparatively no substitute. Even though rice is consumed in increasing amounts in
Swaziland, maize remains the preferred crop even at higher consumer prices in the isolated
consumer market.
Even though the maize price elasticities of supply and demand for Swaziland are negligible
insensitive, economic theory maintains that the quantity of goods supplied and demanded
should show some reaction no matter how small to price changes in a competitive market
environment. But this is not the case in Swaziland. It has already been revealed above that
the marketing of the staple food maize in Swaziland is not favourable for smallholders
in a competitive market because of the failure of the market to react to market changes.
For this reason, this study uses South African price elasticities that were estimated under
similar market conditions (regulated markets). These elasticities were estimated by Wright
and Nieuwoudt (1993). Although these elasticity figures are also very small, they have
an advantage over the ones obtained for Swaziland in that they are statistically different
from zero. This allows for the welfare analysis of the market organisation to be carried out,
looking ahead to possible market alternatives that will enhance food security in the country.
The PAM identifies 13 different measures for policy effects and efficiency and they are as
follows:
1. private profits;
2. social profits;
3. output transfer;
4. input transfer;
5. factor transfer;
6. net policy transfer;
7. private cost ratio (PCR);
8. domestic resource cost ratio (DRC);
9. nominal protection coefficient on tradable outputs (NPCO);