37. Until very recently the dominant perspective on the cattle production marketing environment in Lesotho has been that Basotho stockowners are traditional, subsistence-oriented peasants who place great value on their cattle for social and cultural reasons. Basotho own far too many cattle (the current estimate is that Lesotho is overstocked by 400 percent), so it is important that markets are established to introduce Basotho to the idea that their cattle are a marketable product, and to allow stockowners to dispose of surplus or culled animals. It is thus argued that a more productive livestock sector and a destocked range would result from successful marketing programmes.
38. This perspective has determined the way in which a number of livestock development programmes have been designed, implemented and evaluated in Lesotho. The Overseas Development Administration and the Ministry of Agriculture (1980) proposed a comprehensive production and marketing programme, based on the premise that the current low rate of commercial offtake is due to "... the apparent incompatibility which exists between people's socio-cultural reasons for holding livestock and their perceptions of livestock as commercial enterprise" (Bostwick, Hesling and Headey, 1984, p. 7). The proposal recommended that a "... major livestock (especially cattle) marketing operation [be] established to provide outlets for 'surplus' culled animals" so that the Lesotho range may be destocked (p. 33). On the basis of their findings of a negative relationship between current marketings and price, they concluded that"... received economic theory does not apply to [the] curious case" of cattle owners in Lesotho (p. 34). Because cattle are viewed by Basotho as socio-cultural assets rather than productive economic assets, "... it is clear that price incentives will not stimulate the commercial sale of cattle, and may even have the reverse effect" (p.37). The authors argue that development of the commercial cattle industry so that there is a positive marketing response to price increases, and thus destocking, will require a fundamental change in the attitudes of Basotho stockowners. This will only be achieved by a long-term extension effort coupled with a functional cattle marketing system.
39. Cattle marketing was an important component of the Thaba-Tseka Mountain Development Project in Lesotho. The programme of monthly auctions, a small feedlot, and an abattoir were all justified on the grounds that an integrated formal infrastructure would result in a lower stocking rate - by establishing a market where none existed before people would be able to dispose of surplus animals - and transformation of the traditional subsistence society into a cash economy. In an internal review of the programme of monthly auctions, which would be generally considered successful on other grounds, it was stated that:
although not yet making a major contribution to destocking, the monthly markets have steadily increased in popularity. They attract large crowds and offer excellent opportunities for extension. The increased response to the livestock markets reflects the increased awareness of commercial agriculture and the increased demands of the cash economy.
(Thaba-Tseka Mountain Development Project, Review of Accomplishments August 1975 to July 1981, p. 13).
40. In reality, there is very little evidence to validate this dominant perspective and a great deal of evidence to refute it. Firstly, Basotho have been well integrated into the Southern African cash economy for at least 100 years through both commodity and labour flows. Secondly, Basotho have long been aware that their cattle are marketable commodities and large numbers have been exported when economic conditions forced such herd liquidations (see Figure 2). Thirdly, formal cattle markets have been very active for many years. Only during the past ten to twenty years have informal rural markets come to dominate to the present degree. Fourthly, livestock budgets recently presented in Swallow and Brokken (1987) indicate that cattle produce a variety of important cash and non-cash products, and that investments in cattle generate significant economic returns. Finally, Basotho do market significant numbers of animals - though most of this trade occurs outside of formal marketing channels.
41. A small number of recent studies have generated substantial evidence supporting the capital asset model as appropriate to the Lesotho cattle industry. From a survey of migrant workers conducted in 1977, Van der Wiel noted that eleven percent of the cash returned to Lesotho by mine workers was in the form of livestock, compared to five percent in the form of bank savings. Van der Wiel explained this as follows:
The relatively large sum of cash invested in livestock, particularly cattle, is the result of the superior facilities for storing and investing wealth that cattle provide and the inadequate alternating investment opportunities.
(1977, p. 16).
42. The hypothesis that cattle were the most attractive investment available to Basotho migrants in the late 1970s and early 1980s was further supported by Fritsch (1984). Examining macro-economic data, Fritsch argued that low cattle prices, low interest rates on savings accounts, and high migrant remittances all combined to generate a strong economic incentive for Basotho to increase their herds of livestock, especially cattle. The stockowners reacted to these conditions by purchasing large numbers of livestock in South Africa and importing them into Lesotho (see Figure 1).
43. Further support for the capital asset model has recently been provided by Swallow and Brokken (1987) in the form of budgets for cattle, sheep and goat enterprises for a sample of livestock-owning Basotho households. The authors calculated private rates of return of capital investments of 9.4 percent for cattle, 8.7 percent for sheep, and 5.7 percent for goats. These rates of return compare very favourably with the most readily available alternative investment - bank savings accounts. The inflation-adjusted real rate of return on savings accounts averaged negative ten percent (-10%) over the 1979 to 1984 period (Swallow 1985). It thus appears that Basotho stockowners make wise economic decisions when they invest in livestock rather than bank savings accounts, and that they act as portfolio managers and attempt to equate the returns generated from alternative livestock investments while simultaneously spreading their production and price risks between the different species.
44. Within the overall context of cattle being treated as capital assets, the cash needs and the market structure/performance frameworks also provide important complementary insights into the behavior of Basotho cattle owners. Informal surveys of individuals selling cattle as auction sales conducted between April 1985 and November 1986 indicated that most cattle were sold to raise income to meet pressing household financial demands. Within the overall investment framework, decisions on when and how to purchase and sell cattle are influenced by the availability of investment funds and household needs to generate cash income. This type of environment may well exist in moat African countries, and perhaps all countries in the world.
45. The structure of the formal cattle marketing system in Lesotho appears to have flaws which limit its performance. Basotho stockowners have in the past had access to a large network of private traders who would purchase their animals for cash or trade them for younger animals. Over the last twenty years this market outlet has been largely eliminated. The major formal market outlets are now the auction sales conducted by the Livestock Products Marketing Service (LPMS) and the many butcheries scattered throughout Lesotho.
46. Private traders are legally restricted from dealing in live animals, while butchers are reluctant to participate in auction sales because of the strong competition of the National Abattoir/Feedlot Complex, the unreliability of the auctions, and the high transaction costs involved in using the auctions. The result is that butchers depend on individual negotiations with South African suppliers and individual farmers for their supplies of live animals. Individual producers negotiate transactions with neighbours, sell some cattle to butchers, and rely very little on the system of LPMS rural auctions.
