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Small-Scale Agriculture, Land Reform, and Government Support in South Africa: Identifying Moral Hazard, Opportunistic Behaviour, and Adverse Selection

Abstract In the post-apartheid era, agricultural support has been focused on small-scale farmers. Although the support manifests through an array of initiatives, the largest expenditure is on land reform and the Comprehensive Agricultural Support Programme (CASP). However, the impact has been minimal, with few farmers benefiting. This systematic literature review study argues that the design of the government initiatives directed at small-scale farmers contains loopholes that allow the manifestation of certain behaviours explainable by three theoretical concepts from the field of economics of information, namely adverse selection, moral hazard, and opportunistic behaviour. After a comprehensive review and discussion of these concepts, we identify, through a systematic literature review, cases that illustrate the behaviour explained by these concepts within CASP and in the land redistribution programme. Our findings show that agents (service providers, farmers, and government officials) involved in the process of rendering support to small-scale farmers act on these existing loopholes in a manner that is beneficial to themselves. We recommend that efforts be made to minimise such behaviours in order to reduce transaction costs and improve the effectiveness of the support initiatives. We also identify potential future research avenues and how they can be approached.