Photo: Lindi Botha
The recently published Fresh Produce Market Inquiry (FPMI) report sought to find answers to why participation of small-scale and historically disadvantaged persons (HDPs) in the fresh produce sector is low compared with large-scale commercial farmers.
South Africa has followed international trends in agriculture, seeing medium-sized farms growing while small-scale farmers are exiting the industry.
At the heart of the trend lies factors related to economies of scale, where businesses require larger budgets to implement systems and technologies that improve efficiencies to keep food costs down and sustainability prospects high. However, this is detrimental to rural economies and small-scale farmers hoping to make a living off the land.
The country’s agricultural landscape is further impeded by additional challenges that farmers have to overcome and which require even greater budgets.
Although this reality has been made evident in the FPMI report, much emphasis is also placed on pointing fingers at larger farming operations for dominating the sector and minimising opportunities for small-scale producers and HDPs.
“Those who are succeeding are being blamed for the failure of others,” Tommie van Zyl, CEO of ZZ2, tells Farmer’s Weekly. “Success is being bad-mouthed. The FPMI is looking for a culprit, while the real culprit is government, which has not done its job for at least a decade.”
A debilitating environment
Van Zyl believes that aside from upholding a free-market system, the most crucial role of government is to provide an enabling business environment.
“This means roads on which produce and inputs can be transported, a consistent and reliable electricity supply, and a functioning police force that deters criminals from stealing everything the farmer is trying to produce.”
He adds that to succeed in business, one must be fully alert to all opportunities and be prepared to take the necessary risks to capitalise on those opportunities.
“But you can’t do that when you are being robbed blind, the road to get your produce to market is impassable, and the electricity supply is so inconsistent you can’t get a crop to grow. It means you have to work so much harder than anyone else and spend so much more than anyone else to counter these negative effects. And this is something a small-scale farmer or new entrant finds incredibly difficult to do.”
Interviewing small-scale farmers across the country, the FPMI found that producers were indeed hampered by the challenges listed by Van Zyl.
A further impediment was the cost of transporting produce, which was made more expensive by the fact that roads were in a dire condition, and that loads from small-scale farmers were often small, meaning the cost to transport a unit was higher.
The lack of available and knowledgeable extension officers was also highlighted in the report as a significant barrier faced by farmers across the country. The FPMI acknowledged that government aid in general was problematic. An example was instances where farmers required booster fertilisers but received planting fertilisers instead.
Farmers also raised concerns that in some instances, extension officers did not distribute the aid (fertilisers or seeds) timeously or that the aid sometime didn’t even reach the intended beneficiaries.
Farmers in Mopani, Limpopo, added that there was no government insurance for losses and that small-scale farmers didn’t have the scale or diversification to alleviate losses during tough climatic challenges.
Ample markets
An arena with mixed blessings for small-scale farmers and HDPs is national fresh produce markets (NFPMs). The free-market system provided by these markets provides benefits that most countries can only dream of.
Jaco Oosthuizen, CEO of the RSA Group, says that South Africa’s fresh produce markets are unbeatable in their ability to provide an equal playing field for all producers.
“It is a phenomenally successful system where a small-scale farmer’s produce can compete on the same level as the biggest farmers’. The farmer has options in this system – they can compete in a local or export environment, and have complete freedom in choosing to whom they sell their produce.”
He adds that functioning fresh produce markets are a crucial element in getting more small-scale producers into the game and growing them.
“It’s the most transparent platform where farmers can see what sells, who is buying it and at what price. They have a front-row seat every day to see who is succeeding and why, and can use that insight to better their own offerings. The markets also provide an essential role in providing daily indications of prices for all produce sold on the market. So, whether they are selling their produce at the NFPMs or not, they have an indication of what prices their particular produce is fetching that day.”
One lesson quickly learnt is that produce that is well packaged, of good quality and consistently available attracts loyal buyers. Oosthuizen advises farmers to develop their own value proposition by creating a brand and story to attract a premium above the competition. “This is how producers go from average, to good, to great,” he says.
The key here, however, is a ‘functioning’ market. The agriculture sector has long cried foul over the mismanagement of funds at NFPMs. The FPMI has now also acknowledged the extent of the problem, stating that the state of infrastructure is concerning.
It also acknowledge that the lack of maintenance at the NFPMs has led to many sellers and buyers bypassing the markets and contracting directly from large-scale producers, which reduces opportunities for small-scale farmers since barriers to entry into retailers are higher.
The lack of maintenance at the NFPMs is by no means a result of strained finances. Collecting a 5% commission on produce sold through the market, municipalities have ample funds to ensure upkeep. Using the Joburg Market as an example, this equates to more than R500 million per annum.
The FPMI concluded that these funds were not ring-fenced for exclusive use for the markets, which was why income was not reinvested into the markets.
Important to note is that the FPMI found that while most NFPMs were in dire straits, the exception was the Cape Town Market, which is the only market that is privately operated, although owned by the municipality.
None of the issues plaguing the publicly managed markets are applicable to the privately run Cape Town Market. On the contrary, this market undergoes regular maintenance and is in the process of switching to self-generated solar power to circumvent load-shedding.
Yet the FPMI’s recommendation is that rather than have all markets follow the Cape example, they should continue to pursue the public model, but aim for better fund management.
Bringing the NFPMs back up to standard is a crucial element in increasing the success rate of small-scale farmers.
Oosthuizen notes that with many fresh produce farmers growing to the point where they do their marketing in-house, allowing for multichannel marketing, it becomes even more important that there is still a platform where a smaller farmer, who can only focus on one avenue, has a solid option in the NFPM.
While the NFPMs present the most transparent and equal playing field for small-scale farmers, they do come with their own barriers to entry.
During the FPMI’s investigation, small-scale farmers and HDPs expressed frustration regarding the number of requirements needed to be met, both in terms of the mandatory national requirements as well as the additional requirements set by retailers.
Farmers who intend to sell their produce at NFPMs have to obtain about 128 control points to qualify. Even if they reach this threshold, most of the supermarkets still prefer that suppliers obtain Global GAP accreditation with its 190 control points.
Each control point comes with its own cost since it often requires additional infrastructure and labour. These control points are, however, non-negotiable in ensuring that consumers receive safe food and that buyers have the assurance that what they received is what they paid for.
Consistency in grading is vital if a farmer is to develop a good name, as standards should not change from one crop to the next.
The FPMI stated that small-scale farmers tend to be downgraded due to the poor transportation of their produce to the NFPMs, poor packaging, poor handling, and a lack of knowledge from new small-scale sellers at NFPMs regarding the requisite processes.
FPMI officials were shown how a consignment of peppers had been transported in the boot of a car, all loosely thrown in without any packaging or protection.
Small-scale farmers are often unable to afford safety food audits to ensure compliance with the quality standards.
The role of supermarkets
However, all is not lost, as major retailers have programmes to assist emerging farmers in getting certification in place.
The FPMI showed that supermarkets assist small-scale farmers with more favourable trading terms than what larger farmers were offered, particularly in respect of rebates and payment settlement terms. They also offer loans and other forms of financial support.
But the FPMI recommended that retailers do even more to subsidise small-scale farmers to ensure greater participation at a retail level.
An enabling rural environment goes beyond just having government-provided infrastructure in place. A further complexity is that small towns across the world are faced with an exodus of youth and businesses as they struggle to survive in an increasingly lonely environment.
While economies of scale are a proven antidote to rising input costs and the increasing cost of doing business in dilapidated rural areas, Theo de Jager, chairperson of the Southern African Agri Initiative (Saai), believes that bigger is not always better when it comes to supporting rural prosperity.
“Everywhere in the world the big farms are getting bigger and the smaller farms are falling away. If you continue down that road, there will eventually not be any small-scale farmers left. If this happens, services become concentrated and mostly outsourced to bigger cities. This has a ripple effect on the small town because the local accountant, co-op and all supporting services no longer have enough clients and so shut down,” he says.
In De Jager’s experience, a town flourishes when three things are in place: a functioning primary school, which requires that the town has enough young people who are still having children; a church to draw the people together once a week; and a well-stocked co-op.
“If you don’t have any of these three, the town is likely to fold. If farmers have to drive to the next town to get any of these, then they take all their business with them and the town folds.”
He adds that small to medium farms need one other aspect to keep them in business.
“If you can’t keep increasing production, then you need to become more specialised. A smaller farmer can give more specialised attention to each square metre than one who farms 100 000ha. This is where precision farming and new technology can make a massive difference in ensuring every seed, every drop of water and every gram of fertiliser is optimally used for maximum output.”
Youthful innovation
De Jager says this is where youth can play the biggest role, and where small town prosperity has the greatest chance since it can bring an influx of new energy – not to mention the children needed to keep schools going.
“The younger generation was born with smart phones in their hands. They are better equipped to bring the technological revolution to the farms than anyone else.”
Here, De Jager notes the next obstacle that the rural revolution faces: the current generation’s refusal to hand over the reins.
“We’re finally seeing youth who are prepared to go back to the farm after studying. They come with a lot of energy and new ideas, but are often stopped in their tracks by an older generation unwilling to change: the parent is holding onto the purse and does not want to invest in new technology or empower their children to take decisions. This frustrates the new generation and can mean they end up leaving the farm once more.”
But the signs of life are already there, setting the scene for a chain reaction. De Jager references Vanwyksvlei in the Northern Cape where an existential crisis resulted in the town’s revival, just as it stood on the brink of collapse.
Eight years of drought had brought the town and its farmers to their knees. As a last-ditch attempt, Saai drove a project to send feed to the farmers for their animals. When they delivered the feed, they took along a singer and arranged a farmer’s day where everyone could get together and encourage each other.
“Then it started raining. It doesn’t rain sheep or feed, and it takes time to rebuild after such a prolonged drought. But the youth saw that there was light at the end of the tunnel and used the momentum to arrange more events to raise funds. Car races through the Karoo were organised and a social media campaign created a lot of buzz. These are things that require youthful energy – it’s not something the municipality is responsible for,” says De Jager.
A conducive operating environment and functioning infrastructure requires role players across the industry to take responsibility for their part in attracting and keeping farmers on the land.
Email Jaco Oosthuizen at [email protected] or Theo de Jager at [email protected].
