Abstract:
The ability of genetically modified (GM) crops to increase yields and reduce use of pesticides
is well established. Based on food security needs and the central role of agriculture, Africa
may stand to benefit from green biotechnology given the low agricultural productivity and
the looming food crises in most urban areas. However, the adoption of GM crops in Africa
has been slow and limited to a handful of countries. The primary objective of this paper is to
evaluate the impact of GM maize adoption in South Africa by looking at wholesale spot prices.
We apply a threshold autoregressive model to time series data on the price of maize and GM
adoption rates in South Africa to address the following questions: (1) Does the adoption of GM
maize excite the growth rate of price of maize in South Africa; (2) Does the error variance of the
maize price growth rate exhibit regime-switching behaviour to impact the volatility? The results
show evidence that the adoption of GM maize influences the dynamics of the maize price
growth rate in South Africa. Further, there is strong evidence that the error variance exhibits
regime-switching behaviour with the posterior mean for the error variance in the first regime
about twice as large as that of the second regime.
