Entrepreneurial competencies and financial performance of farmers in South Africa

Abstract

Aim: The main objective of this study was to explore the relationship between the entrepreneurial competencies of farmers and their financial performance. Setting: The study was conducted in South Africa among farmer clients of a commercial financial organisation. Methods: The financial performance of the farmers was calculated by means of financial ratios which were used to compile a single performance indicator: operating efficiency. The operating efficiency indicator was calculated using a financial-based data envelopment analysis. An entrepreneurial competencies instrument was used to measure the entrepreneurial competencies of the farmers. Ordinary least squares regression was used within the principal component regression framework to explore the relationship between entrepreneurial competencies and financial performance. Results: The results indicate there is a positive relationship between entrepreneurial competencies and financial performance of farmers. Each of the individual competencies also indicated positive correlation between the entrepreneurial competencies and financial performance. Conclusion: An increase in specific entrepreneurial competencies behaviour may increase the operating efficiency of the farm. Educational opportunities exist to educate farmers on the potential benefits of using entrepreneurial behaviour to their advantage (to benefit their operating efficiency). Sectors involved with agriculture, for example agricultural advisors, financial advisors and educational institutes, should emphasise the importance of utilising the competencies of farmers.