An Assessment of Effect of Input Subsidies on Economic Efficiency of Sorghum Producers in Botswana

Abstract

Sorghum remains an important component in Batswana’s diet and has the ability to adapt to semi-arid areas of Botswana. In order to increase its productivity, the Government of Botswana has put in place an input subsidy programme. However, the productivity of sorghum remains low compared to that of Botswana’s neighbors. The purpose of the study, therefore, was to evaluate the effect of input subsidies on the economic efficiency of sorghum producers in Botswana as a means to evaluate whether input subsidy has positive or negative effect on the economic efficiency of sorghum producers. Secondary data were used covering the period between 1998 and 2017. The data were collected from both domestic (Botswana’s Ministry of Agriculture, Statistics Botswana, Bank of Botswana and Botswana’s Department of Meteorological Services) and international (the Food and Agriculture Organization of the United Nations, International Labour Organization, the Agricultural Science, Technology and Innovation, and World Bank) databases. A stochastic production frontier was used to compute technical efficiency while a stochastic cost function estimated the allocative efficiency. The two efficiencies were then multiplied to obtain economic efficiency. The effect of input subsidies on economic efficiency was assessed using a Tobit model. The results revealed that input subsidies had a positive and significant effect on economic efficiency; however, rainfall variability and trade openness affected it negatively. Sorghum farmers were both technically and allocatively inefficiency with average scores of 0.94 and 0.67 respectively. The study recommends that the Government of Botswana should increase input subsidies to sorghum as a climate risk-mitigating strategy particularly given the country’s low and unreliable rainfall due to its semi-desert conditions. In addition, there is need to offer adult training programs to increase farmers’ technical and allocative efficiency.