Rural household sources of income, livelihoods strategies and institutional constraints in different commodity contexts - Institutional Constraints to Small Farmer Development in Southern Africa - page 30

Table 2.1. Key features of distress-push and demand-pull diversification.

Push factors Pull factors

Population growth Availability of a wide range of resources

Inadequate access to fertile land Higher returns on labor in non-farm activities

Low farm productivity Higher returns on investment in rural non-farm activities

Low returns to farming Lower risk of non-farm activities compared to farm activities

Lack of access to farm input markets Generation of cash to meet household objectives

Deterioration of the natural resource base
Temporary events and shocks
Lack of access to rural financial markets

2.3.1 Demand-pull factors

The existence of a wide range of resources (labour, assets, education, etc.) that are not
suitable for traditional farming practices drives households' efforts to explore alternative
opportunities for utilising these resources (Davis, 2003). Diversification is undertaken to
use these resources in a manner that is sustainable on the one hand, while also expanding
total household incomes (Matsumoto et al., 2006). Diversification in this perspective is
characterized by response to evolving market or technological opportunities, which offer the
potential for increasing labour productivity and household incomes (Barrett et al., 2001).

Households are 'pulled' into non-farm activities as a means of obtaining more income and
improving their current living conditions (Davis and Pearce, 2001). They might be attracted
into non-farm activities because of higher returns on factors of production (labour and
capital) in these activities relative to agriculture (Barrett et al., 2001). Potentially higher
returns to labour that could be obtained from working off the farm would lure households
into diversifying. Studies conducted by Estudillo et al. (2006) in the rural Philippines
suggest a structural shift as households move away from farm-based sources of income
and specifically away from agriculture into non-farm activities between 1985 and 2004.
Such a shift may have resulted from an increase in the relative profitability of rural non-
farm employment (NFE) opportunities vis-à-vis farming. A study by Fraser et al. (2003)
recorded an increase in agro-processing activities and service-providing institutions in rural
South Africa and this shows that the rural non-farm sector is growing. The development of
the rural non-farm and also the urban labour markets has raised the wage rates in these two
sectors, thus inducing households to reallocate their labour resources away from own farm
production (Estudillo et al., 2006).