Abstract
M.Com. (Economics)
Although, approximately 80 percent of Lesotho’s population is dependent on
agriculture, its grain output has continued to decline in absolute and relative terms.
Average yields per hectare of maize are estimated to have dropped by 42 percent in
2006/07. It seems maize production is randomly and systematically impeded to
change from subsistence to commercialised production - aimed at producing market
surpluses according to principles and motives vested in specific abilities and
formalised in law.
Agriculture’s contribution to GDP is approximately 16 percent. In order to address
poverty, the trend should be reversed. In a complete study, all the possible
contributions, including costs and benefits for agriculture, the significance of
impediments in Lesotho will be investigated. This study, examines risk impact on
agriculture production, income and returns. It is standard to assume economic
related factors underlie an inability to produce satisfactory and sustainable
agricultural production. This study tests the significance of such an assumption.
This paper proposes that the ground for such an assumption, one of underlying
economic factors being instrumental in an inability to commercialise maize
production, will be evident in the source of economic risk and pricing. Product
price premiums, as measures in off-setting systematic economic and portfolio risk,
are reviewed. Self-insurance and diversification are key instruments in managing
the systematic and specific risk facing the agricultural sector in general, and maize
production specifically. If collaboration prevails along with partial compensation
and/or diversification for risk, then economic risk may not be the only factor
preventing surplus maize production, or the only supporting factor or commercial
motive in maximising returns through maize production.
The finding of the study is that economics in general and economic risk are not
significant impediments to the commercialisation of maize production.
This study is different from other research in this field in that it moves away from
the standard assumption that economic factors are central in impeding commercial
agricultural production research has also to be focused on factors autonomous of the
economy but which effect economic outcomes like cultural impediments in
developing economies like Lesotho. The study indicates, by analysing the higher
moments (economic risk) of the stochastic nature in economics as a specific attempt
to prevent any ambiguousness, that economic decisions are to a great extend
motivated by factors other than economic factors in many instances in great and in
increasing conflict with economic principles. This founds a motivation for a shift in
focus and is the study’s contribution to research in this field. It also contributes to the
on-going debate in South Africa as to the problems and underlying factors in the
commercialisation of subsistence agricultural production in South Africa.