In 1988 the agricultural economy in Zambia was stagnant and underemployment prevailed. The surveys show that in most households underemployment was common. This is indicated by the finding that 9 out of 10 households in fact started, or expected to start, their fish farming activity without reducing other agricultural activities.
This also meant then, that both land and water were available, in effect at no cost, as their use in fish culture did not imply any reduction of other activities. This means, in turn, that when the farmer has used so much of his time and resources in agricultural activities as he and his household will consume, the remaining resources (and resulting produce) have a value only if he has access to a market in which to trade his produce for goods and services he himself cannot produce.
In this situation, those who decided to start fish culture as well as those who continued the activity felt that their income (however measured) was, or was likely to be, greater than the costs associated with the activity. For the farmer the costs as well as the income appear in cash and/or in kind. There are those directly related to the activity and those which might be generated by the “consumption effects” of the activity. We will consider them in turn.
(i) Effects on net monetary income.
The surveys did not ask for absolute amounts (believing it would be difficult to obtain reliable answers6) of expenditures or income. Instead they inquired about the nature of the income and expenditures (cash or kind) and about the order of magnitude.
Given that most farmers constructed and ran their fish ponds without incurring any expenditures in cash while many report an income in cash, it is clear that for the average farmer, the cash flow has been positive. And that remains so even if we consider only the short period up and including the first harvest.
(ii) Effects on net income in kind.
The surveys indicate that in most households some of the fish produced is consumed. Thus there is an addition to the income obtained through the cash surplus described above. The magnitude of the addition depends on what the farmer actually wanted to do with the quantities not sold. If he withheld them from sale on purpose we can argue that to him they were worth at least as much as the average price of the fish sold. If he tried to sell them, but could not, we must conclude that to the farmer the unsold fish is worth, at the most, as much as the going market price, but probably less.
What are the farmers' costs in kind? Let us distinguish between the physical resources needed (land, water, etc) and on the other the labour required by household members.
The surveys were designed to investigate to what extent the farmers believe there are alternative uses for the resources needed in fish farming. The farmers have indicated that there are a number of alternative uses. However, those possibilities are generally not used. In fact, a large majority of farmers did not change their farming activities in order to accommodate fish culture; it was simply added to the rest. Thus, to the average farmer the use of land, water, etc for the purpose of fish culture cannot have represented a large cost. If not used in fish culture, they would have remained idle, given that there were so few alternative uses at hand.
Also for farm labour the real, as opposed to the theoretical, alternatives of earning an income are few. But although there are few productive alternatives, there is always the alternative of idleness or leisure. Digging a pond is rather hard work, generally, and one would suspect that there is a threshold of income (in cash or kind) which the farmer must be convinced he will obtain before he undertakes hard labour. What that level is, the surveys do not reveal.
It is clear in conclusion though, that whatever the threshold, created by the drugery of digging a pond, it has not been so high as to cancel the positive benefits derived from the expected exploitation of the pond. We know from the survey that these benefits include, for the average farmer, a positive cash balance, and possibly an increase in fish consumption. However, the author believes that farmers also experience, and are concious that they will experience, “consumption effects”.
(iii) Consumption effects
The term “Consumption effects” is used in this report to mean the increases in production which an improved quality of consumption causes. Thus, the concept is purely economic: it tries to measure the increased production of goods and services which a person will achieve as a result of better consumption. We are not trying to express in monetary terms the enjoyment which the farmer and his family may experience through a more varied diet or a more varied pattern of consumption. We are trying to establish the value of the fish strictly from the standpoint of the addition to the production of goods and services which it might cause.
The increased production will come about as the individual, by means of an increased income, will afford:
medicines and medical services leading to improved health;
a better education, leading to a higher efficiency and productivity;
a better nutritional standard; leading in the short term to higher stamina for physical work, and in children to more developed intelligence; and,
better tools for agricultural production, leading to a higher output (also in activities other than fish culture).
The extent to which these consumption effects take place depends on the level of consumption of the household when fish culture is started. The lower the consumption level the higher the likelihood that these effects do occur. It seems more than likely that if the increased consumption is spent in this manner, it will generate an increase in production both on and off the farm.
An increased supply of medicines, and improved tools, will generate rather immediate effects, but they might not be that long-lasting. The tools will wear out and the effects of medicines may (or may not be) short term in nature.
Better nutrition and education must be sustained over a longer period to be effective. However, once achieved -- and the beneficiaries will be the younger generation -- the effects are likely to last for decades.
The surveys have not attempted to establish the extent to which the farmers, in their comparison of benefits and costs associated with the future fish pond, also consider these aspects.
Whether they have done so or not is not important at this point, but consumption effects should be remembered when fish culture is to be promoted.
(iv) Conclusion
Many of the farmers express satisfaction with their fish culture activity in spite of the low volumes produced. This is logical given that alternatives for obtaining a cash income are so few, and the need for an increase in disposable income so great. Also, once an increase in income is assured it is likely to spark further increases in production and income.
This situation represents the other extreme of the scale. It is not yet common in southern Africa. However, as it is the goal of governments' agricultural policies, it should be studied.
In this situation a farmer will have the opportunity to work for an income. He may not be able to do so for as many hours and days as he would want. But, there is an alternative to complete idleness. The economic conditions for rural fish farming now differ from those described in the earlier scenario when economic stagnation prevailed and underemployment was rampant. The farmers will now compare what they might earn from raising fish in ponds with what they most definitely will not earn (in other activities) by devoting their time to fish farming.
The organization of the analysis is identical to that just used: effects on cash income, on income in kind and consumption effects.
(i) Effects on net monetary income.
The farmer must now start to consider not only what he actually spends and earns in cash, but also what he could spend and earn in alternative activities. This complicates matters.
The farmer is now going to incur costs for pond farming. Even if he still has on-farm idle resources, he must start to consider the cost of his own time. His own time has a cost in the sense that if he decides to engage in pond farming (of tilapia or other fish) he will forego earning an income through other activities7.
The possibility of earning a daily wage is a serious alternative. It is better than the possibility of selling increased quantities of a known crop (maize, vegetables), as it implies security. The period between effort and reward for a day-laborer is short compared to the six months to a year common in fish culture. Also, having a salary or a daily wage means that there is little or no uncertainly for the farmer about the income to be earned.
Even in a growing economy farmers, at least initially, will refrain from purchasing inputs. The results of a “cash maximizing strategy” will then fluctuate with prices for the cultured tilapia. What will happen with fish prices as the rural economy transfers from unemployment/stagnation to full employment/growth?
It seems likely that the real price of tilapias will increase basically as there are limited possibilities for technical improvements in tilapia fisheries. However, general rules are a poor guide as to what will happen to the real price of fish at any particular place. That will need specific studies.
Farmers considering whether or not to start farming
To venture into pond farming the farmer only needs and demands a net return. That is, as long as the activity covers all his direct costs plus his foregone (net) earnings and those of his household members, he is better off farming tilapia.
In a growing economy, the need to consider labour costs is important particularly for the farmer who is considering whether or not to start fish farming. The reason is that one of the major inputs when starting fish culture (apart from water/land) is labour needed to dig ponds. Thus, the moment there are alternative employment (earning) possibilities for the farmer the projected costs of starting fish culture will increase dramatically, probably more rapidly than will the potential cash revenues.
Farmers who have fish ponds
In the expanding, growing economy, the “salvation” for the established fish farmer is the fact that relatively little time is used to keep established ponds going. Thus, within the household it is perhaps possible to keep the pond going although wage employment is accepted by members of the household, including the farmer himself. Thus, at the beginning of economic growth (that is in the short run) there need not be any major modifications to the net cash revenue for the established fish farmer, as long as continued use of the ponds does not require that someone forego other cash earning possibilities.
In the long run, the situation is likely to be different. The farmer, who initially did not consider the use of land and water a cost - or if he did, a very small cost - will find that agricultural development will make valuable his previously unused land and water. Even if he could not use it himself, there may be possibilities of recruiting labour (or leasing it), in order to derive an income. Thus, in his calculations of the costs associated with water use in fish ponds, he will start to cost it. The (yearly) net cash contribution of fish culture will decline as a result, and there is no a priori reason that the balance will stay positive. When, and if, it becomes negative, the farmer will have a strong incentive to stop his fish culture activity.
Before that stage is reached though, the entrepreneurial farmer will have attempted to get more fish out of the land, water and labour he is already dedicating to the effort. Some farmers who have ample land with soil suitable for pond construction and ample supplies of water, may find that expanding the fish farming activity may be a better way to increase net cash income than any other way.
Intensification of farming
It should be clear from the above discussion that economic growth in southern Africa will push the aquaculture technology from an extensive technology in the direction of intensive farming. Given the present starting point, an extreme extensive technology, this tendency will manifest itself initially mainly in the form of a slightly increased number (biomass) of fish per square metre of pond surface area combined with an increased use of locally available manures and agricultural waste as feed. The explanation of the tendency towards intensification is that a fixed physical supply of land and water is confronted with the farmer's desire for a higher income per hour worked.
(ii) Effects on net income in kind
The effects of a growing economy on net income in kind (that is basically fish consumed in the household) is clear. It is going to diminish, at least as a portion of the total income.
Initially, as poor farmers get the opportunity to sell more of their production they will probably sell more. This will mean that in absolute terms the “net income in kind” is going to decline.
In the long run, the average production per household, with fish ponds in production, is likely to increase. The increase will take place both as a result of higher productivity per unit area of pond surface, and because there will be a tendency towards larger areas under water for each farm, as the forces of specialization are at work. This means that the share of the production that will be consumed as income in kind by the household will decline.
In practical terms the result will be that those preparing feasibility studies of fish farms, in this economic situation, need not spend much time investigating income in kind.
(iii) Consumption effects
As the rural economy grows the potential “consumption effects” of engaging in fish farming are going to diminish in importance.
The reason is that in the long run, for the average farm household the pattern of consumption is likely to be rather insensitive as to whether the farmer engages in pond farming or some other activity; at best, he is going to be marginally better off with pond farming.
Therefore the effects of fish farming, in terms of better health, education and production equipment, will also be marginal.
(iv) Conclusions
It is obvious from the above that the number of kg of tilapia produced in a pond will not by itself reflect the usefulness of the activity. That is determined by the level of living of the household, by the alternative ways of earning an income that is open to the farmers and by the long term prospects of technical and economic developments in crop growing, livestock raising and other rural occupations.
However, it is also obvious from the preceding analysis that unless the economic returns per hour worked on the fish ponds increase, pari passu with other activities, the farmers will be tempted to drop pond farming in favour of the more rewarding alternatives.
What complicates the understanding of the above is that the economic returns are not simply the fish consumed, or the fish sold, but the fact that a “consumption effect” may occur. That is, increased consumption may cause substantial increases in subsequent production.
The face value of sales receipts is least important in a stagnating, agricultural economy with considerable under-employment. In such an environment it seems plausible that “consumption effects” are the most important. However, when the rural agricultural economy takes off, “consumption effects” will diminish in importance, vis-a-vis cash returns.
6. See Annex 4 for a discussion of this issue.
7. In economic literature this concept is referred to as the “opportunity cost”.
