'N EMPIRIESE GEVALLESTUDIE VAN BEDRYFSGROOTTEVOORDELE IN DIE VAALHARTSBESPROEIINGSGEBIED / An empirical study of economies of scale in the Vaatharts Irrigation Area

Abstract The Act on Subdivision of Agricultural Land (Act 70 of 1970) prohibits the subdivision of agricultural land in South Africa's commercial areas into “uneconomic” units. In a new dispensation optimal, rather than minimum farm sizes should be pursued. The optimal farm size is theoretically not the same for any two farmers. The better manager will have the larger farm over the long run. The above principle was empirically tested in the Vaalharts Irrigation area by means of cross sectional regression equations with gross income as dependent variable. The result confirms the following: i) If management is ignored, constant returns to size is encountered; and ii) when managerial quality is however included in the model as independent variable, increasing returns to scale is found. This result thus supports the theory and a general conclusion is that optimal farm size is a function of management.