Measuring transaction costs in marketing cattle in Southern Botswana: A case study

Abstract

This study attempted to identify factors responsible for transaction costs that private and communal livestock farmers in the southern region of Botswana face. Sample survey data were used to estimate the parameters of a regression model. The equation postulated in the model was estimated with Ordinary Least Squares (OLS). Results obtained suggest that herd size, farmer age, wage (liquidity), and short term credit are determinants of transaction costs incurred by respondents. Secure tenure was also suggested as a determinant of transaction costs that could motivate farmers to increase supply of cattle to the abattoir. Respondents with private farms were found to have better access to the market and tended to incur less transaction costs when they market their livestock. It is suggested that government should (a) vigorously pursue the infrastructural development in Botswana as promulgated in the Agricultural Policy, (b) uphold private property rights to land where they already exist; (c) privatise open access grazing to individual owner-operators who have the resources (money) to do so and who will be required to keep an acceptable herd size and could be motivated to increase supply of cattle to the Botswana Meat Commission (BMC), (d) where privatisation to individuals is not feasible, government should encourage users to convert the grazing into common property by subsidising (transaction) costs of defining user groups and the boundaries of their resources, and of enforcing rules limiting individual use and misuse of common property, (e) financial institutions be encouraged to offer short term credit for those farmers who need it and (f) the government should pursue converting the traditional marketing cooperatives into the New Generation Cooperatives (NGC) so as to reduce each producer’s transaction costs.