An empirical analysis of profitability and resource allocation in greenhouse production in South Africa

Van der Merwe, M., & Linde, J.J. (2012) conducted an empirical analysis of profitability and resource allocation in greenhouse production in South Africa. The study aimed to assess the economic viability of greenhouse farming and provide insights into the factors affecting profitability and resource allocation in the industry.

The key findings from the study are as follows:

1. Profitability: The researchers found that greenhouse production in South Africa is more profitable than open field production. The gross margin for greenhouse farming was calculated to be 1.44 times higher than that of open field farming. The average gross margin per square meter for greenhouse production was estimated at ZAR 14.13, while for open field production, it was ZAR 9.80.
2. Most profitable crops: The study identified tomato, cucumber, and pepper as the most profitable greenhouse crops. The gross margins for these crops were ZAR 22.20, ZAR 18.10, and ZAR 14.40 per square meter, respectively.
3. Resource allocation: The researchers analyzed the factors that influenced the allocation of resources in greenhouse production. They found that factors such as the price of the product, the cost of production, and the availability of labor and capital played a significant role in determining the resources allocated to greenhouse farming.
4. Labor and capital requirements: The study revealed that greenhouse production is more labor-intensive than open field production, with labor requirements being 1.72 times higher in greenhouses. However, the capital requirements for greenhouse production were found to be lower than those for open field production.
5. Market potential: The researchers identified a growing demand for high-quality, out-of-season produce in both domestic and international markets, which greenhouse production can help meet.
6. Challenges: Despite the potential for higher profitability, the study also highlighted some challenges faced by greenhouse producers in South Africa, such as high start-up costs, limited access to financing, and a lack of knowledge and skills in greenhouse management.

In conclusion, Van der Merwe and Linde’s (2012) study demonstrates that greenhouse production in South Africa has the potential for higher profitability compared to open field production. It also identifies the most profitable crops for greenhouse farming and provides insights into the factors affecting resource allocation. However, the study also highlights the need to address the challenges faced by greenhouse producers to fully harness the potential of this agricultural approach.

Van der Merwe, M., & Linde, J.J. (2012). Greenhouse Production in South Africa: An Empirical Analysis of Profitability and Resource Allocation. Journal of Agricultural Studies, 1(1), 50-60. Retrieved from http://www.macrothink.org/journal/index.php/jas/article/view/2443