With insufficient government funding to support the agriculture sector, farmers have no choice but to acquire bigger farms to be competitive in the market, experts say.
This makes it increasingly difficult for smaller farmers to be profitable and participate in the sector.
A panel of experts were discussing the economy of scale in the agriculture sector at a Nation in Conversation event at the Nampo Harvest Day in Bothaville.
"In 1998, roughly 60% of farms were at the scale of around 800ha. As we deregulated the market and started competing in the world market we saw farms started getting bigger," Wandile Sihlobo, head of agribusiness research at Agbiz, said.
Jannie de Villiers, CEO of GrainSA, agreed that there was good literature about this trend.
"When we measure what support farmers are getting from their governments around the world and plot that against farm sizes and the GDP of the specific agriculture sectors, the data shows that the smaller the contribution from government to farming, the bigger the farms," he said.
"For instance, in Australia, they have very low support from government, but huge farm sizes. If you look at Japan they have very small farms, but 48% of the farm income comes from government. In the South African context, sitting at very low support from government, the only thing farmers can do is to scale up to try and be competitive."
Francois Strydom, CEO of Senwes, said South African farmers have to leverage their size, technology and management systems to be competitive in the international market.
'Infrastructure is a problem'
Against this background, Professor Ferdi Meyer, from the Bureau for Food and Agricultural Policy (BFAP), said the way to make small-scale farms more profitable was a combination of government support and mentorship from the private sector.
"If you look at the National Development Plan, one third of those jobs identified lies in the agriculture sector on small, zero to one-hectare farms. Statistics SA show that rural households' income from agriculture is less than 1% on average. If you look at the 5 000 smallholder farms we've mapped, 30% of their household income comes from agriculture," he said.
De Villiers believes lack of infrastructure is also still a hampering factor.
"There's huge potential for us to grow on a commercial scale in the deep rural areas, but the infrastructure is a problem. And it's not just getting to the markets, but also getting the inputs to the farmers," he says.
However, the real potential for job creation lies in the larger production value chain.
"The jobs won't only come from maize production, but what happens to the maize through the cycle. That's where the jobs and wealth creation will come from. One must never see one production factor in isolation. Maybe we should concentrate a bit more on what the whole system does to provide jobs," Strydom said.