Agro-processing participation and economic efficiency of smallholder crop farmers: pathways to sustainable food systems in Limpopo Province, South Africa

Abstract

Agro-processing participation serves as a key determinant of economic efficiency amongst smallholder crop farmers and a critical mechanism for advancing sustainable food systems in developing regions. It facilitates value addition, improves market access, and reduces post-harvest losses, thereby enhancing smallholder farmers’ capacity to utilise resources more efficiently whilst simultaneously strengthening farm-level productivity and diversifying income streams. Within Limpopo Province, where smallholder agriculture is central to rural livelihoods, understanding how participation in agro-processing influences economic efficiency is essential for identifying viable pathways towards more sustainable and inclusive food systems. This study examined the relationship between agro-processing participation and the economic efficiency of smallholder crop farmers in Limpopo Province, South Africa. Primary cross-sectional data were collected through a multi-stage sampling approach, using semi-structured questionnaires administered to 130 farmers, comprising equal proportions of agro-processing participants and non-participants. Descriptive statistics were used to analyse socio-economic and institutional factors associated with participation in agro-processing activities. Stochastic Frontier Analysis (SFA) was employed with the Cobb–Douglas production function to compare and estimate the economic efficiency levels of participants and non-participants of agro-processing, whilst a binary regression model was used to investigate the contribution of agro-processing participation on farm turnover. The findings indicate that participation in agro-processing is associated with higher economic efficiency. Agro-processing participants exhibit a mean efficiency score of 0.87, compared to 0.63 for non-participants, indicating that participants operate closer to the production frontier and utilise inputs more effectively. In addition, agro-processing participation significantly increases the likelihood of achieving above-average farm turnover, with an odds ratio of 9.61 ( p  < 0.01). These results demonstrate that agro-processing participation enhances economic outcomes and supports smallholder integration into value chains, highlighting its importance as a pathway towards sustainable food systems in Limpopo Province.