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Profitability and income contribution of small ruminant production to rural African households: A case study of Kgatleng and Kweneng districts in Botswana

A. Panin

Botswana College of Agriculture
Department of Agricultural Economics, Extension and Education
Private Bag 0027, Gaborone, Botswana

Abstract
Introduction
Study area, data collection and analysis
Results and discussion
Conclusions
References

Abstract

This study evaluates the profitability and relative income contribution of small ruminant production to rural African households. The analysis is based on 1991/92 farm management survey data on 114 smallholder households from Kgatleng and Kweneng districts in Botswana. Budgetary and household income analyses were used to estimate the profitability of the small ruminant production and its relative household income contributions. The results show that small ruminant production is both profitable and economically viable. It returned an average income of P 23.00 per animal to the small ruminant owning households. Also, it provided a return of 34% on capital invested in the enterprise. Its contribution of 15% to the household income was substantial, exceeding similar contribution from crop production by 58%. Smallholder farmers in the area should, therefore, exploit the potential benefits of small ruminant production to increase their household income by allocating more resources to its improvement. Furthermore, policy makers, researchers and farmers should be made aware of the economic viability of small ruminant production in the country and elsewhere in Africa.

Introduction

The importance of livestock in Botswana's economy has long been recognised. It is a major source of income and employment for most of the rural dwellers who are the majority of the estimated total population of 1.5 million people in the country (MoA 1991). Livestock, primarily cattle, are one of the main sources of foreign exchange generated by the agricultural sector (MoA 1989). The total population of cattle, goats and sheep in the country is estimated at about 2.7, 2.1 and 0.3 million, respectively (CSO 1991).

The cattle industry in the country has been well developed. This is because it has, since the country's independence in 1967, been receiving considerable attention with respect to research, marketing and other institutional support from the government which in turn is mainly due to the preferential trade arrangement granted to the country's beef export by the European Economic Community (EEC). Ironically, the distribution of cattle ownership in the country is very skewed with 30-40% of the rural households without any (MoA 1991; Panin et al 1993). By contrast, almost every rural household owns at least a unit of small ruminant (Fane 1992). In spite of the popularity of small ruminants among the rural households as reflected in their ownership distribution, available evidence indicates that the small ruminant production system receives relatively little attention in terms of the above mentioned services rendered to that of cattle (Fane 1992). This is despite the fact that the small ruminant production system has proved to be suitable to the prevailing harsh climatic conditions in the country (Molefe 1987).

Lack of information on the profitability of the small ruminant production enterprise as well as on its income contribution to the rural folks is assumed to be the principal reason for the non-recognition of its importance by the policy makers and relevant institutions and hence the resulting little attention given to its improvement in the country. The purpose of this paper is to contribute to the literature on the relative economic importance of the small ruminant production enterprise in African rural households by assessing both its profitability and income contributions to the rural folks.

Study area, data collection and analysis

The data on which the analysis is based were drawn from a farm management survey carried out in six villages from Kweneng and Kgatleng districts in Botswana. Two and four villages were selected from Kweneng and Kgatleng districts, respectively. The two villages from Kweneng were Gabane and Metsimotlhabe and the four from Kgatleng were Oodi, Morwa, Bokaa and Modipane. The villages were similar in terms of socio-economic characteristics. The selection of the study area was justified by the fact that small ruminants are more popular in the area than many other areas in the country.

The two districts are located in the south-eastern part of the country and the selected villages are within a 20-40 km radius of Gaborone, the capital of Botswana. Like the rest of the country, the rainfall of the study area is varied in its distribution with an annual mean ranging from 400-500 mm. The vegetation of the area is tree savannah. The economy of the area is mainly based on subsistence farming, with about 90% of its total labour force directly or indirectly engaged in agriculture (Panin et al 1993). Mixed crop and livestock farming is the common practice of the inhabitants. Cultivated areas ranged from 1-14 ha with an average of 6 ha per household. The major crops of the area are sorghum, maize, beans and millet with sorghum being the most important single crop in terms of cultivated area and utilisation. Productivity of both food crops and forage is relatively low in the study area as in other areas in the whole country.

The profitability of the small ruminant production enterprise was estimated using the budgetary analytical method. The budgetary analysis was based on cost and returns data of only small ruminant household owners. The total small ruminant owning household was 102. The deciding factor for the inclusion of a particular household in this sample of 102 was that the household owned at least a unit of one of the small ruminant species. For the enterprise budget, the costs and returns were estimated for the period under review.

Total costs were obtained by estimating both the operating cost and the fixed cost. The operating cost consists of the cost of the variable inputs used by the farmers. This cost included the expenses on medicines, water, dipping, feeding and replacement of the stock. The fixed cost was obtained by valuing the family labour the most single important fixed input under the smallholder sheep and goats farming system in the area. Attempts to use the depreciation method to estimate the annual cost of kraal revealed insignificant values, hence these were excluded from the current analysis. Also, an average interest rate of 12% representing the then market rate for capital was used to reflect the opportunity cost of capital tied up in the form of investment in sheep and goats.

The returns were obtained by estimating the total value of production which included the value of animals sold and consumed by the households as well as the value of milk sold and consumed. The farm gate prices for a unit of each product was used for the computation of the home consumed products.

Primary data were collected from 114 randomly selected smallholder households from the six selected villages through interviews with the aid of structured questionnaires during the 1991/92 cropping season. Information on several aspects of crop-livestock farming was collected as well as other socio-economic variables such as income transfers from other family members residing and working outside the villages.

Results and discussion

Ownership and distribution of small ruminants

The ownership of the small ruminants among the total 114 households studied is presented in Table 1. As clearly shown in the table, goats were more widely owned than sheep. About 90% of the sample households possessed at least a unit of goat as compared with only 27% of the same sample households who owned sheep. Also, the percentage of households owning any one of the two species of animal was the same (90%) as goat owning households. Mixed flock of sheep and goats enterprise was found to be practised by only 27% of the households in the area. The average number of goats owned across all households was 19. This varied greatly between the households as reflected in the standard deviation (SD = 18.1). Sheep flock size also varied considerably among the households, ranging between 0 and 64 head with an average of only 2.7 (SD = 7.7). As regards total number of all ruminants per household, the average flock size was 21.7 with standard deviation of about 22.

Table 1. Ownership of small ruminants in Kgatleng and Kweneng districts in Botswana, 1991/92 (n=114).


Variables

Species


All ruminants

Goats

Sheep

Per cent of households owning at least one small ruminant

89.5

27.2

89.5

Mean flock size

19.0

2.7

21.7


(18.1)a

(7.7)

(21.4)

Range

0-93

0-64

0-110

a Figures in brackets are standard deviations.

Table 2 presents the frequency distribution of number of animals for only ruminant owning households. The total number of households owning goats, sheep and both species together were 102, 31 and 102, respectively. The data in the table reveal very striking information. In general, the frequency distribution of the two species of animals was highly skewed with a majority of the households owning between 1 and 10 units of animals. However, the skewness is highly pronounced among sheep owning households. More than two-thirds (68%) of all sheep owning households possessed between 1 and 10 units of sheep. In contrast, only 38% of all households with goats had similar units of animals. The proportion of households that owned more than 60 units of each species of animal or both together was relatively smaller at 5, 3 and 7% each for goats, sheep and both, respectively.

Given that profitability per animal as reported by Mpho (1993) is much higher for goats enterprise than sheep, it is not surprising to find out that smallholder households in the study area keep a very small number of sheep relative to goats. Another probable reason for the discrepancy between both species sizes might be that the adaptation potential of goats to the prevailing harsh climatic conditions in the country may be higher than that of sheep.

Table 2. Per cent distribution of number of ruminants among owning households, Kgatleng and Kweneng districts, Botswana, 1991/92.

% households owning

Number of animals (range)

Goats

Sheep

All ruminants

1-10

38.2

67.8

33.3

11-20

24.5

22.6

23.5

21-30

14.7

6.5

17.6

31-40

8.8

n.a*

8.8

41-50

4.9

n.a

3.9

51-60

3.9

n.a

5.9

61-70

3.9

3.2

3.9

>70

1.0

n.a

2.9

n.a. = not applicable.

Overall, higher numbers of goats are kept by the households than sheep, suggesting that goats are more popular in the study area than sheep. Similar observations from various studies conducted in the same area and surroundings has been made by Mpho (1993), Fane (1992) and Panin (1994).

Small ruminant enterprise profitability analysis

The results of the budgetary analysis for the small ruminant enterprise are presented in Table 3. On average, the small ruminant production enterprise earned a household a total net profit of P 561.00. On a per animal basis, an appropriate measure for the profitability, the return per animal was P 23.00.

This suggests that a small ruminant production enterprise is profitable. However, profit per se may not be the best measure of how efficiently the factors of production have been utilised. The best measure of efficiency is that which recognises the returns per unit of input. Since capital has been identified as one of the constraints to increased agricultural production in the area (Panin and Mahabile 1994), the return per Pula of capital tied up in the small ruminant enterprise was calculated. This was to help in assessing whether it is worth investing in such enterprise as capital has an opportunity cost. Capital here is referred to as the value of the total average number of sheep and goats owned by a household. Data in Table 3 show that the return to capital was considerably high, about 34%, exceeding the interest rate by almost 65%.

Table 3. Small ruminant enterprise budget per household in the Kgatleng and Kweneng districts in Botswana, 1991/92.

Variables

Total value (Pula)

A. Revenue

Sales from:


Animals

385.98


Milk

207.51

Value of home consumed:


Animals

184.80


Milk

432.90

Subtotal A

1221.19

B. Operating cost


Medicines

35.37


Water

20.23


Dipping

18.99


Feeding

8.17


Replacement

35.37

Subtotal B

100.81

C. Fixed cost value of family labour

360.00

D. Interest on capital

199.36

E. Total cost of enterprise (B+C+D)

660.17

F. Net enterprise profit (A-E)

561.02

G. Profit per animal

23.18

Percentage return on capital*

33.77

* = (561.02/1661.3) 100 = 33.77.

Income contribution of small ruminants

The summary of the farm household income analysis for the small ruminant owning households is presented in Table 4. The net household income is derived from the total net revenues from crop and livestock production as well as non-farm employment. The average net household income for the year under review amounted to P 6306.

The relative contributions of the various income sources are shown in column three of Table 4. The contribution from agriculture (livestock and crops) amounted to 55.3% of total household income. This finding contradicts the result of Panin et al (1993) who found out that contribution of non-farm employment sources (53%) in the same area was higher than that of agriculture (47%). The discrepancy might be due to the difference in the sampling procedure. While Panin et al (1993) considered income of all selected households irrespective of one owning animals or not, the current analysis focused only on households owning small ruminants.

Comparison between crop and livestock incomes reveals that while livestock accounted for 49% of total net income, crop production contributed a mere 6%. Within the livestock sector, cattle contributed the highest (33%). Nevertheless, the contribution of small ruminant is substantial, amounting to 15%. This exceeds the contribution from crops by 58%. This finding provides enough evidence for the smallholder farmers to reallocate some resources from crop production to small ruminant production if only they view profitability and efficient utilisation of resources as their main goals.

Table 4. Summary of farm household income analysis for Kgatleng and Kweneng districts in Botswana, 1991/92.

Income source

Amount (Pula)

% contribution

A. Net crop revenue

389.0

6.2

B. Net livestock income:


Small ruminants

921.0

14.6


Cattle

2102.7

33.3


Others

78.7

1.2


Subtotal

3102.4


C. Net farm income (A+B)

3491.4


D. Off-farm income

2814.2

44.6

E. Total net household income (CD)

6305.6


Conclusions

The study has examined the profitability and contribution of small ruminant production as an enterprise to rural household incomes. The analysis was mainly based on 1991/92 data on 102 small ruminant owning households from Kgatleng and Kweneng districts in Botswana. It is evident from the resuIts that small ruminant production is both profitable and economically viable. It accounts for a substantial share (15%) of the total average rural household income. Its contribution to the household income exceeds that of crop production by 58%. Smallholder farmers should exploit the potential benefits of small ruminants by allocating more resources to their improvement.

References

CSO (Central Statistics Office). 1991. Agricultural Statistics 1990: 1990 Agricultural Survey Report. Government Printer, Gaborone, Botswana. 150 pp.

Fane B. 1992. Socio-economic Importance of Sheep and Goats Production in Botswana. Diploma dissertation, Department of Agricultural Economics, Extension and Education, Botswana College of Agriculture, Botswana. (unpublished)

MoA (Ministry of Agriculture). 1989. Agricultural Sector Assessment: A Strategy for Development of Agriculture in Botswana. Government Printer, Gaborone, Botswana. 239 pp.

MoA (Ministry of Agriculture). 1991. Botswana's Agricultural Policy: Critical Sectoral Issues and Future Strategy for Development. Agricultural Information Sector, Gaborone, Botswana. 51 pp.

Molefe D. 1987. Sheep and goat production in Botswana. In: Adeniji K.O. and Kategile J.A. (eds), Proceedings of the Workshop on the Improvement of Small Ruminants in Eastern and Southern Africa, Nairobi, Kenya 18-22 August 1986. OAU (Organization of African Unity)/IDRC (International Development Research Centre), Nairobi, Kenya. pp. 235-243.

Mpho I. 1993. The Contribution of Small Ruminants to Rural Farm Household Income: A Case Study of Three Villages. BSc dissertation, Department of Agricultural Economics, Extension and Education, Botswana College of Agriculture, Gaborone, Botswana.

Panin A 1994. Relative Economic Efficiency of Goats and Cattle Production Systems of Smallholder Farmers in Botswana. Working Document. Department of Agricultural Economics, Extension and Education, Botswana College of Agriculture, Gaborone, Botswana. 25 pp.

Panin A. and Mahabile M. 1994. Response of land productivity to wealth of smallholder farmers in Botswana: A case study. Paper accepted for presentation in the forthcoming Fifth Annual Conference of SADC-Land and Water Management Research Programme to be held in Maseru, Lesotho, 10-14 October 1994.

Panin A., Glahah P., Mahabile M. and Sebolai S. 1993. Smallholder sorghum production constraints in arid Africa and their implications for household food security: A case study of Botswana. Quarterly Journal of International Agriculture 3:308-320.


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