Impact of Contractual Arrangements on the Income of Honey Producers in Eswatini

Background and Objective: Contractual arrangements such as formal and informal agreements play a key role in shaping market participation and income generation among smallholder honey producers in Eswatini. However, farmers self-select into contract types based on both observed and unobserved factors, complicating efforts to measure the true impact of contracting on income outcomes. This study aims to assess the effects of different contractual arrangements on the income of honey producers in Eswatini. Materials and Methods: This study applies an Endogenous Switching Regression (ESR) model to account for selection bias and estimate the causal effects of formal, informal, and non-contractual arrangements on three income measures: Total revenue, gross margin, and honey yield value. Data from 307 honey producers were used across three ESR comparisons: Formal vs. informal (N = 221), formal vs. no contract (N = 225), and informal vs. no contract (N = 168). Results: The participation in formal contracts significantly improves income outcomes, with increases of up to 75.16% in revenue and 71.48% in gross margin compared to non-contractual arrangements. Informal contracts also provide income benefits over no contract, though to a lesser extent. Differences in honey yield value were less pronounced across contract types. Conclusions: These findings offer robust, statistically grounded evidence that formal contracting arrangements confer substantial income benefits to smallholder honey producers, underlining the importance of structured market relationships in enhancing farm-level profitability.