Assessment of allocative efficiency of smallholder tea farmers in south-western Uganda

Abstract

Tea ranks third after coffee and fish in terms of export value in Uganda’s crop sector. Smallholder productivity and efficiency in Uganda remains a paradox, especially in perennial crops, with past research presenting mixed results on allocative efficiency. The objective of this study was to determine allocative efficiency and its influencing factors among smallholder tea farmers in western-Uganda. A cross-sectional survey dataset was collected from a random sample of 170 tea farmers from Kabale and Kanungu districts in south-western Uganda. The study employed a Stochastic Frontier Approach and the Value of Marginal Product Approach in determining the input elasticities and allocative efficiency levels respectively. Results showed that average allocative efficiency scorers for land, fertiliser, labour and herbicides were 11.17, 1.68, 3.08 and 4.43, respectively; indicating under-utilisation of the inputs. Ordinary Least Squares estimates indicated that allocative efficiency score of fertiliser was positively related to farm size, herbicide type and extension visits. The allocative efficiency score for herbicides was positively influenced by extension access and herbicide type. Similarly, the allocative efficiency score for land was positively influenced by extension access while that of labour was positively influenced by farm size. The results indicate that increasing the scale of tea production in the region is likely to improve productivity and profitability since the average allocative efficiency scores were greater than unity.