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Butare, where this study was conducted, exhibits one of the highest population densities in Rwanda. As a direct result of population growth, most peasants have small fields and land fragmentation is common. The purpose of this article is to examine the effect of land fragmentation on economic efficiency. Regression analysis shows that area operated is primarily determined by the population-land ratio, nonagricultural employment opportunities, ownership certainty and adequate information through agricultural training. Results from a block-recursive regression analysis indicate that the level of net farm income per hectare, which indirectly reflects greater economic efficiency, is determined by the area operated, use of farm information, field extension staff visits, formal education of a farm operator, and the fragmentation of land holdings. Economies of size are evident in the data. The results obtained using ridge regression support the findings of two-stage least squares. Policies should be implemented to improve the functioning of land rental markets in order to reduce land fragmentation, improve rural education and access to relevant information; and strengthen extension facilities to individual farmers.

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The new Cooperatives Act 14 of 2005 was promulgated in August 2005 to promote the development of sustainable cooperatives in South Africa and their use as a vehicle to develop small enterprises. This paper uses the new institutional economics (NIE) to highlight problems created by the Act. Case studies were done of three producer groups in KwaZulu-Natal that formally registered as cooperatives after August 2005. It is clear that the cooperative model was adopted because it was seen as a precondition for government support. All of these cooperatives displayed symptoms of institutional problems and two of them had mitigated these problems by shedding their poorest members and creating their own rules to reward investors with capital gains. The first of these 'solutions' is not consistent with the objective of pro-poor economic development; the second is at odds with the new Act. It is recommended that the new Act should be amended so that cooperatives can at least issue tradable equity shares that offer benefits proportional to shareholding. In addition, it is recommended that the same level of start-up support should be made available to all producer groups that formally register their business, regardless of the business model chosen, and that member empowerment should be an essential requirement for registration and public funding.