Agricultural business diversification and its implications on the sustainability of pig-farming SMMEs in the Central Free State of South Africa

Abstract

Pig-farming SMMEs in the Central Free State of South Africa resort to diversification as a business development strategy, with the aim of prevailing through or sustaining pressures over a number of dynamic risks. However, the frequency of liquidations among these enterprises substantiates the statement that sustainable performance is less than satisfactory.

This article aims to illustrate theoretical debates on the nature and consequences of diversification as well as to provide an empirical insight into a five-years-result of diversification attempts.

Based on a questionnaire survey of 144 participants comprising 71 diversified and 73 specialised pig-farming SMMEs, results show that there is no significant association between diversification and sustainable performance among pig-farming SMMEs in the Central Free State of South Africa. Hence, the study identified entrepreneurial idiosyncrasies to be largely responsible for results shown in each of the variables studied, such as sales growth, gross profit, and return on investment. All three performance indicators were critical variables, indicating performance sustainability of the study population. With respect to the risk nature of diversification decisions, it is recommended that to maximize the probability of success, a careful examination of all critical factors motivating the option is required.