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The impact of management model in the fresh produce market in South Africa

(Part 1/2) | Moses M. Letsoalo | Doctorate in Development Studies

Abstract National Fresh Produce Markets (NFPMs) in South Africa are an integral, although diminishing part, of the price-making, distribution and marketing of fresh produce in South Africa. There are 19 commissiondriven NFPMs in South Africa, with the Johannesburg Fresh Produce Market (FPM) being the largest (35% market share). It should be noted that the four largest NFPMs (Johannesburg, Tshwane, Cape Town and Durban) represent more than 74% of turnover and volume throughput at all NFPMs. Since deregulation in 1996/1997, very little volume growth has occurred on NFPMs. However, over the same period, overall production of fresh produce has increased substantially. National production figures for potatoes show that NFPMs, including Johannesburg FPM, have steadily lost market share since 1996/1997. However, the most significant market share loss for NFPMs has occurred in the fruit sector. The performance of NFPMs relative to the production growth in the agricultural sector indicates that NFPMs are finding it difficult to grow their operations and respond to the challenges of a deregulated agricultural sector. Throughputs of most of the smaller NFPMs indicate downward trends.

1. Introduction Fresh produce markets within South Africa’s borders fall under the management of the respective municipalities and are governed by the laws of each. As the pressure mounts for the need for modern fresh produce marketing, it is gradually impacting on the FPMs. The necessary changes that were essential, did not take place, and it became clear that the markets did not have the incentives or effort needed, in terms of management (political bosses), to enforce change. Privatization became even more crucial as it was now perceived as the only answer to the problem. It seemed logical that a privately run market would not be hamstrung by bureaucracy and political inertia (Louw et al, 2005; HSRC, 1990). South African fresh produce markets (FPMs) started out as meeting places between producers and consumers, where they could trade under the control of a government body or official. These places were centrally located and aimed at serving a town and its hinterland. Economic development led to the urbanization of a large portion of the rural population. This, in turn, led to the development of central markets that replaced local markets serving a limited geographical area. A central market usually served two or more towns. In 1967, a Department of Agricultural Economics report recommended the formation of national markets to separate markets of national interest from those of local interest. Fresh produce markets include National Fresh Produce Markets (NFPM) as well as privately owned markets not controlled in terms of bylaws (NAMC, 2005; DoA, 2005). The four largest markets of fresh produce in South Africa are Durban, Johannesburg, Cape Town and Pretoria. The four medium markets include Bloemfontein, East London, Pietermaritzburg and Port Elizabeth, and the six smaller markets are Kimberly, Klerksdorp, Springs, Uitenhage, Vereeniging and Welkom. The fourteen markets were controlled by the various local authorities, who obtained their powers to run the markets from the provincial or the central government. The central meeting place was thus replaced by an economic institution that became the pivot of South Africa’s distribution network of perishable products. At the moment, the large majority of FPMs in South Africa are owned and managed by local authorities whom seem to lack a clear vision in terms of taking this business forward. While the larger FPMs are still wholly owned by the council, the smaller FPMs have private companies in top management and they have all been ‘privatised’ to some extent. All fresh produce markets in South Africa are, however, not driven by profit motives, but rather to be a service to communities (homes, farms and the industry) (NAMC, 2000; HSRC, 1991). The role of the fresh produce market was (and still is) to provide the necessary and obvious facilities to compensate for and cover the growing gap in the market that was emerging. The provision of these FPMs was to allow for equal trade opportunities for large scale, commercialized producers and smallholder farmers producing small quantities of produce. The implementation of these markets started as a government act. They are legally bound to allow anyone to engage in trade without discrimination based on size, colour or origin. The FPMs have allowed for small scale producers to find a market and sell their product easily, as the barriers to entry into the market would otherwise be near impossible, as large corporate buyers and marketing agents are not interested in procuring small, fluctuating quantities and/or varying quality fresh produce from these smallholders (NAMC, 2000). However, smallholder farmers as well as the ‘previously disadvantaged’ find it difficult to supply to the NFPMs because of lack of quality and sustainable volumes. The topic will highlights a number of possible models with regard to ownership and management of NFPMs, namely: • Department/business unit option • Corporatization –Municipal entities • Public entities • Divestiture/private entity • Municipal public–private partnerships (PPPs) • A combination of the above

2. Description National and international trends point towards the need to separate ownership (land ownership) and the management (business) of fresh produce markets in order to achieve efficient business practices. The rationale underpinning this argument is that research shows that since 1999, very little volume growth has occurred in National Markets throughput, despite substantial growth in overall fresh produce production. Therefore fresh produce markets did not keep up with the growth in the industry and lost market share. While the number of open markets is increasing with rising per capita incomes, urbanization, and foreign and domestic investment, there are a number of transformations are occurring in the Mexican fresh fruit and vegetable marketing system. There are a number of new entrants and new forces which traditional marketing channels have to adapt to. The past decade has seen liberalization, which has presented participants in fresh produce marketing with challenges and opportunities. Retail chain stores from the United States and Europe such as Wal-Mart, Price Club and others have entered the Mexican market often in partnership with existing Mexican supermarket chains. The market environment is changing. Small, specialized shops and stalls —corner stores, public markets, and street stalls— that procure produce from governmentbuilt central wholesale markets still account for a big portion of total produce purchases. But things are changing rapidly, especially in the northern Mexican states. The supermarket chain format embodies economies of scale, improved quality standards, cold chain management, and centralized inventory optimization. Supermarkets also attempt to purchase produce directly from producing regions, bypassing, and thus threatening, the dominant role of traditional wholesale markets. Generally wholesale markets are owned and managed by the local authorities and their staff. In Brazil, the traditional fresh produce market comprises of a primarily physical market channel served by a large number of geographically- dispersed small farmers; a large number of wholesalers who are based in the public wholesale markets and work in close proximity to one another and are often inclined to specialize their trade in their in particular products; and many small traditional retailers including open-air market vendors, corner markets, small and medium-sized supermarkets and food service firms. Although government constructed centralized facilities for fresh produce procurement, in recent times procurement has shifted away from the public wholesale markets towards direct purchases from production regions and instituted more formal governance of relationships with suppliers (Farina and Machado, 1999). Firms are able to reduce the marginal search costs of produce acquisition as the volumes of throughput grow through subsequent economies of scale even though these investments involve high startup costs (Mainville, 2004). The change in procurement strategies has led to a proliferation in the number of specialized wholesalers, working independently of the traditional wholesale markets and based in these areas. These wholesalers are known as classifiers and supply retailers with differentiated products and services at competitive prices. South Africa adopted the British markets system in the early 1900s thus there are many similarities with regard to management and ownership in the UK. All wholesale markets in the UK and many parts of Europe began as a municipal institutions and majority have remained as such. There are however a number of ownership models and combinations. For instance most of the local authorities maintain ownership of the buildings and the market management is appointed by them and on their payroll. Almost all services on the markets are outsourced and most of the markets’ management only consists of four to ten persons. The ownership of markets varies but in all the cases the owners of the land, buildings and the management remains in the hands of the local authority. A few small private markets have appeared on the scene in the last few years but not much is known about them. Almost all of the markets have private shareholders. Some markets have restricted shareholder to wholesalers on the market but other markets have sold shares to the general public. In most cases the market owners retain the majority/ controlling shareholding. Market agents act on behalf of the producer and operate freely on the market floor. The market agents trade according to the provisions of the Agricultural Produce Agents Act (No. 12 of 1992). A market agent renders marketing advice and services to the producers. The agent is responsible for payment, via a trust account, to the producer for fresh produce sold. The market agent is in turn remunerated by the producers on an ad valorem basis, which may be up to 7.5% of the gross value of the produce sold. With regards to buyers, i.e. retailers, wholesalers and exporters, market agents ensure suitable quantity, and adequate and consistent supply of produce is available for each of the buyer categories. In addition, agents assist with the loading of bulk purchases. Ownership and management. National Fresh Produce Markets (NFPMs) fall within the sphere of local government and are functional areas of exclusive and administrative municipal competence. Since most of the municipal services or functions contained in Part B of Schedules 4 and 5 of the Constitution (with the exception of basic municipal services) appear to be services or functions which municipalities may elect to provide, it is also possible for a municipality to decide not to undertake a particular function or service. Due to the complicated nature of the legislation and the uncertainty around the process and applicability of Section 78 of the Municipal Systems Act investigations to various services, it has been suggested that a Senior Advocate be approached for an opinion on this particular matter. Municipal participation in NFPMs. Section 156 of the Constitution provides that a municipality may make and administer bylaws for the effective administration of matters listed in part B of Schedules 4 and 5 of the Constitution. The view of a number of stakeholders is that current NFPM bylaws are archaic and do not take account of legislative and institutional changes, and accordingly their effectiveness is questioned It is thus suggested that a new set of bylaws be drafted in terms of the current legislative environment. Should a coordinating body or institution for NFPMs be established (as recommended by the Section 7 Committee), the drafting of a common set of bylaws for the regulation of NFPMs by municipalities throughout South Africa would be an effective way to regulate the industry while ensuring a consistent and uniform approach to the regulation of NFPMs and the implementation of the coordinating body. In order to achieve this it would be necessary to undertake a nationwide rationalization.

3. Benchmarking with other countries In Vietnam the dominant marketing chain in Vietnamese cities is the unstructured and unregulated wholesalers catering for retail markets and hawkers that form the major part of the fresh food market structure. Vietnamese consumers prefer to buy their fresh foods in public “wet” street markets or from street hawkers. Despite the growing market share of supermarket chains in South East Asian cities, fresh food purchases are still done in wet retail markets and Vietnam is no different as wet markets are still very competitive in terms of price and freshness (Cadilhon, 2003). However, there is evidence of coexisting forms of different marketing channels rather than substitution of one by the other. The government program to regulate the market by banning old wholesale markets and through recent frequent raids of hawkers in wet markets has generally contributed positively to the growth of modern retailers in Vietnam (Tam, 2004). Previously, wholesale markets were under state control as government built and regulated their activities. However, the past 12 years have seen the declining share of state involvement in the retail sector (Tam, 2004).

However, although the rules and laws are important constraints, informal constraints may also explain some aspects of economic activities in Vietnam. Cultural and social factors form part of the latter institutions but have been overlooked by fresh food marketing studies in South East Asia although they are recognized as determinant factors in other sub-sectors. In the food markets of South East Asian countries, trust is an important component of transactions and contracts between parties to secure transactions are rare and although the courts exist, they are powerless to enforce existing agreements or are mistrusted (Cadilhon, 2003). Trading objectives of fresh produce companies have changed over the last few years. Marketing and exporting of fresh products is no longer to obtain revenue for the nation or hard currency for the whole economy. It is now becoming focused on meeting customer needs and make profits for the companies. Target markets are being selected and some marketing research is being done in-house or by commissioning marketing research agencies. Marketing departments are also being formed. Attention is increasingly paid towards optimizing the profitability of the product mix and brand names are becoming valuable. Europe (including the UK) has several kinds of markets including Wholesale markets, Markets of origin/distribution and street/ flea/retail markets. These are reviewed in the subsequent text. Unlike the situation in RSA, traders on British fresh produce wholesale markets are all wholesalers. The commission agent system currently used in RSA (adopted from similar European systems in the 1900s) stopped operating on their largest market (New Covent Market) in the early 1960s. Wholesalers’ operations include procuring (taking possession of) produce, placing them on their stands in the market and reselling for a profit. This stock of produce is acquired from a wide range of sources including direct orders, through agents, brokers, and importers. The produce is mainly composed of vegetable imports from Holland & Belgium and fruits from USA, Australia, South Africa and South America.
To be continued

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Study Tips
Including Excel data in an essay

Edward Lambert | AIU Academic Coordinator

An essay does not have to be just words. You can add photos, graphs, tables and even data straight from Excel. One of the great advances in computer programs was the ability to insert information from one program into another. If you write an essay in Microsoft Word, you can insert work directly from an Excel spreadsheet where your data is. You simply select the area that you want to insert, copy it, and then paste it into your Word essay. It is simple. Very few students actually do this. Seriously, inserting part of an Excel spreadsheet into a Word essay should be extremely common. Here are some examples...

Insert a table of data that you prepared in Excel. The data is much easier to read in table format. So instead of just trying to explain the table in your essay, include the table. It makes it so much easier for the reader to understand what you are writing.

Insert any type of graph made in Excel. Just select the graph, copy it and paste it into your essay.

Select the results of a regression analysis and just copy and paste it directly into the essay.

Excel gives wonderful formats for tables, which include borders and colors. They will look great in your essays.

Be successful reading scientific documents

By Dr. Rosa Hilda Lora M. Advisor at AIU | rosa@aiu.edu

When we are part of a group of students or a group of employees and they tell us that we have to work with this or that document, and we read it, we begin to listen to colleagues who say: Did you understand what the article says? And answers like: I read it several times and nothing is understood. To read a scientific document there are methods such as the American PQRST: Preview, Question, Read, Speak, Test by T. Staton and the Spanish PLEMA: Pre-reading, Reading, Outline, Memory, Self-evaluation.

Someone out there will say: the document what it says is this, that and the other. In the case of groups of students, some student appears saying: I already have everything that had to be done. Many ask themselves, deep inside: What did he do to understand everything said there? Simple; Scientific documents have structures that are rarely taught and students and employees learn as a result of school or work. We can ask ourselves. Why during the studies they don’t teach us to work with scientific documents and they’re expected we learn it only by reading what we have to study? The answer is that many skills that are necessary in learning are considered acquired as a consequence and they are not identified as the first objective. There are different intelligences, so that each person has differences with the others. Given the situation that occurs in learning, the United Nations Educational, Scientific and Cultural Organization (UNESCO) formed an international Commission to analyze, in a general way, what happened in it. The commission was directed by Jacques Delors and was officially established in 1993. The Report to UNESCO of this International Commission on Education can be seen in the work published with the title: Learning treasure within. From the study of this Commission emerged very important concepts such as those that they called The four pillars of education: a) Learning to know b) Learning to do c) Learning to live together d) Learning to be They also established the concept of Education throughout life. Pedagogy and Psychology, at the end of the twentieth century, were focused on evaluation as a means of obtaining the rapid results of the educational process for the development needed by globalization or world trade. Thus with world trade, the problem of differences in educational processes or curricular designs of countries where some enjoy better means than others to achieve graduates with greater scientific knowledge arises immediately. Therefore the study of the UNESCO commission regarding the Four Pillars that they established and the concept of Education for life was very important.

As you have to learn to learn one of the skills of learning to learn is to learn to study and learn to study is based on: learning to read a scientific document to explain and apply that knowledge. To read a scientific document there are methods such as the American PQRST: Preview, Question, Read, Speak, Test by T. Staton and the Spanish PLEMA: Pre-reading, Reading, Outline, Memory, Self-evaluation. We propose some elements of the two methods that we believe give better results, in addition to what experience in scientific work has allowed us to identify. 1. Preview a) See the titles and subtitles of the document. Review the prologue, index, graphs, reference notes, bibliography and the Scientists mentioned there as to who they are. b) Read the first line of each paragraph and relate the knowledge that we have about the subject with those we are reading. c) Read what is the purpose or objective of the document that will be read to guide thinking or rational operations. d) Read paragraph by paragraph and underline the main ideas. e) Express in oral form the ideas of the paragraphs that we have already outlined. f) Prepare diagrams or summaries according to what we are most capable of. g) Read the underlined. 2. Read Read paragraph by paragraph relating the graphs, statistics and conceptual maps, if any. 3. Write As an essay a) Elaborate the central part of the essay or body of the work explaining each of the concepts that we underline in the Preview paragraphs. b) Introduce the references that we consider necessary in the central part or body of the work. Enter them in the order in which they appear in Preview. In the references we must choose one form of the four in which they can be worked; AIU suggests the APA Model (American Psychological Association). c) Prepare, after finishing the essay body, what will be our introduction: explain in a general way what the work is about, mention the authors we saw, mention in a general way their contribution, write about the difficulties we find, if is that there were. d) Write the bibliography regarding the document that we work with in the same model chosen for the direct or indirect quotations that we work with.

We can think that doing all these activities will take a long time; it may be that this is the case with the first document, but with the exercise carried out every time we have to work on a document we become experts and feel better and better because of the results we obtain. If you are student your work will be better every day and you will feel more freely because you learn not to depend on others, you learn to be free, independent and you will feel very useful in supporting them when you hear they say: I don’t understand what this document says. You have to learn to learn to be free from fear of evaluations. Learn to read and your student life will be extraordinary and you will become part of the people who learn throughout life enjoying the pleasure of learning instead of suffering.

BIBLIOGRAPHY. Delors, J. (2000). La Educación Encierra un Tesoro. México: Correo de la UNESCO. | Banco Mundial. Comunicado de prensa, septiembre 26, 2017. El Banco Mundial advierte sobre una “Crisis del aprendizaje” en la educación a nivel Mundial. http://www.bancomundial.org/es/news/press-release/2017/09/26/ world-bank-warns-of-learning-crisis-in-global-education | García - Huidobro B. C. y otros (2005). A estudiar se aprende. Metodología de estudio sesión por sesión. México: Alfaomega. | Olave – Arias, G. y otros. (2014). Cómo escribir la investigación académica. Desde el proyecto hasta la defensa. Bogotá: Ediciones de la U. | Organización de las Naciones Unidas para la Educación, la Ciencia y la Cultura (UNESCO), página oficial. Educación. http://unesdoc. unesco.org/images/0024/002472/247234s.pdf

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