Agricultural expenditure and agricultural total factor productivity growth in South Africa

Nicholas Ngepah; Regret Sunge; Nicholas Ngepah; Regret Sunge

doi:10.3934/agrfood.2023035

AIMS Agriculture and Food

2023, Volume 8, Issue 2: 637-661. doi: 10.3934/agrfood.2023035

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Research article

Agricultural expenditure and agricultural total factor productivity growth in South Africa

Nicholas Ngepah ,
Regret Sunge ^,

University of Johannesburg, School of Economics and Econometrics, P.O. Box 524, Auckland Park, 2006, South Africa

Received: 19 January 2023 Revised: 12 April 2023 Accepted: 19 April 2023 Published: 12 June 2023

The study investigates the impact of government agricultural expenditure on agricultural total factor productivity (TFP) growth in South Africa. South Africa subscribes to the African Union-inspired Comprehensive Africa Agriculture Development Programme (CAADP), established in 2003 to exterminate hunger and lessen absolute poverty. CAADP requires governments to allot at least 10% of government expenditure to agriculture and achieve an average 6% annual growth in agricultural GDP through doubling agricultural productivity. Despite launching CAADP in 2011, South Africa is off-track. Our analysis follows a two-step procedure using data for the period 1986 to 2018. Firstly, using input and output data, we estimate agricultural TFP indices using the growth accounting (GA) and the Malmquist-Data Envelopment Analysis (DEA) methods. Secondly, we use the Autoregressive Distributed Lag econometric technique to estimate the agricultural TFP impact of government expenditure. Estimates from the GA approach proved more reliable. We find that government agricultural expenditure has a significant positive effect on agricultural TFP growth of 4% and 18.5% in the short-run and long-run, suggesting high and increasing marginal gains. Estimations on weather variables reveal that a 1% increase in average temperatures and rainfall would increase TFP by 2.7% and 1.4% respectively. We recommend that South Africa fully implements the CAADP. Also, given significantly positive estimates of imports and exports, we call for increased agricultural trade liberalization biased towards export promotion and more intra-Africa agricultural trade within the AfCFTA framework.
- South Africa,
- CAADP,
- government agricultural expenditure,
- growth accounting,
- Malmquist,
- DEA,
- agricultural TFPMalmquist,
- DEA,
- agricultural TFP
Citation: Nicholas Ngepah, Regret Sunge. Agricultural expenditure and agricultural total factor productivity growth in South Africa[J]. AIMS Agriculture and Food, 2023, 8(2): 637-661. doi: 10.3934/agrfood.2023035

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Abstract

The study investigates the impact of government agricultural expenditure on agricultural total factor productivity (TFP) growth in South Africa. South Africa subscribes to the African Union-inspired Comprehensive Africa Agriculture Development Programme (CAADP), established in 2003 to exterminate hunger and lessen absolute poverty. CAADP requires governments to allot at least 10% of government expenditure to agriculture and achieve an average 6% annual growth in agricultural GDP through doubling agricultural productivity. Despite launching CAADP in 2011, South Africa is off-track. Our analysis follows a two-step procedure using data for the period 1986 to 2018. Firstly, using input and output data, we estimate agricultural TFP indices using the growth accounting (GA) and the Malmquist-Data Envelopment Analysis (DEA) methods. Secondly, we use the Autoregressive Distributed Lag econometric technique to estimate the agricultural TFP impact of government expenditure. Estimates from the GA approach proved more reliable. We find that government agricultural expenditure has a significant positive effect on agricultural TFP growth of 4% and 18.5% in the short-run and long-run, suggesting high and increasing marginal gains. Estimations on weather variables reveal that a 1% increase in average temperatures and rainfall would increase TFP by 2.7% and 1.4% respectively. We recommend that South Africa fully implements the CAADP. Also, given significantly positive estimates of imports and exports, we call for increased agricultural trade liberalization biased towards export promotion and more intra-Africa agricultural trade within the AfCFTA framework.

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