South Africa: Risk preferences and the poverty trap: A look at farm technology uptake amongst smallholder farmers in the Matzikama municipality

This study looks at the determinants of farm technology uptake in South Africa's Matzikama municipality, with attention to farmers’ risk preference and income. The authors use a field experiment to elicit measures of risk aversion, loss aversion, and non-linear weights of probability. They then relate these measures to the adoption of drought-resistant and improved seeds. In light of the poverty trap theory, which suggests that low-income people make choices that keep them impoverished, the authors also consider the role that income plays in risk preference.

The findings suggest that farm risk management policies need to take into account the role of risk and loss preferences in uptake decisions. Farmers do not effectively weigh probabilities, subsequently affecting the implementation of adaptive mechanisms. Improved access to extension services can help farmers understand weather and climate risk, probabilities of loss, technologies, and other adaptive strategies. The study also concludes that low incomes discourage the uptake of resilient crop types, both in the form of naturally drought-resistant crops and technologically modified improved seeds. This signals the need for proactive measures to guarantee access to a minimum package of assets for poor farmers.