The nature of municipal markets in the Eastern Cape
By Zingisa Ngqongwa
Municipal markets operate from a central wholesale market, which provides fresh vegetables and fruits that people need every day. The market shoulders the crucial functions of bringing in produce from various producers, setting a fair price, and ensuring a stable distribution of fresh produce for the consumers. Fresh produce by its very nature has a short life span. It is also easily affected by changes in weather and other natural factors leading to unpredictable production levels and changes in the balance between supply and demand. This in turn greatly affects the price. In light of these factors, the market strives to carry on the job of gathering, pricing and distributing large quantities of fresh produce in as effective a way as possible to help ensure the variety and safety of the produce which consumers need, and in so doing add stability to the dietary habits of the communities.
The vegetable market is unregulated and technically open to all producers. The fluid and uncertain nature of the market has led retailers to enter contracts with large growers at the beginning of the season so as to ensure a specific range of vegetables in accordance with predetermined schedules. These arrangements have seen a declining role for municipal markets and make it difficult for small, new producers to gain access to the major supermarkets. In spite of these arrangements, opportunities for the supply of small quantities of produce to a range of outlets do exist. Spar, Lombardi Foods, the traders at municipal markets, restaurants, corner shops and hawkers all procure some of their goods opportunistically on an informal spot-market basis from small scale producers. The key in accessing these opportunities is to win the trust of purchasers by demonstrating the ability to produce quality vegetables consistently and to deliver them on time. Emerging producers are also well placed to supply the burgeoning informal settlement food market, where onions, cabbages, potatoes and squash are a staple diet and real incomes are increasing.
Ownership of Markets in the Eastern Cape
Markets in South Africa essentially function on a commission-based system. Market agents and the market owners (municipality) receive a commission from producers for the services supplied to producers by the markets. Fresh Produce Markets in South Africa are mostly owned and managed by local government. The Port Elizabeth and East London markets are departmentally owned markets. This implies that normal day-to-day business improvements may take place, but that no real intervention with regard to throughput will occur. In this option both the property (land, buildings and other improvements) and the operation of the fresh produce market business are owned by the municipality. On the other hand the Kei Umtata Market is a municipal entity. Here the operations, systems, employees and movable assets of the fresh produce market are transferred to a municipal entity, but not the property (land, buildings and other improvements).The shareholding in a municipal entity, which is a private company incorporated in terms of the Companies Act, can take various permutations. The company is a municipal entity as long as one or more municipalities collectively hold effective control in the business. In this option the property is leased on an arm’s length basis from the municipality. A municipal entity cannot enter into a Public Private Partnership (PPP), thus the property can only be leased in terms of a normal business lease of property and no real risk transfer to the municipal entity can take place. The Johannesburg FPM (a private company in terms of the Companies Act) and Kei Umtata Markets (a Section 21 Company in terms of the Companies Act) are municipal entities in terms of the Municipal Systems Act.
Issue of Accessibility
In most cases, fresh produce markets are situated in faraway places out of town and away from busy streets where most consumers are. These markets are most suitable to big commercial farmers and unfavourable to hawkers and small farmers who want to sell their produce. Even though the market is said to be open to everyone, people often face a great challenge of not being able to access the market due to lack of transport. A number of small farmers often find themselves having to sell their produce informally around towns to make profits. In other cases, some are even advised to sell informally rather than to sell at the market and compete with well established farmers.
Price Formulation at the Market
Municipal markets are supposed to offer a low risk, low barrier to entry marketing channel. The main purpose of the system is to discover an accurate price for produce given the unique circumstances of that particular moment. There are no fixed prices and the value of a good market agent lies in their ability to achieve the correct price. This price might be high or low, but the price has to reflect the current variables (supply, demand, weather, quality, etc.).
If a product is of good quality and can compete with the biggest farmer in the country then the agent has a duty to treat all his consignments the same. In order to assist the small farmers and individuals who want to sell at the market, the East London market is planning to restructure the cold storage facility so as to open a space for previously disadvantaged individuals (PDI) and small farmers to trade or compete at the market.
Challenges Markets Often Face
One of the challenges that markets often face is the issue of securing reliable market agents, which is the core of the business. Market agents play a central role as they are the interface with suppliers. Market agents are appointed by the market and earn their keep on a commission basis. They act as the guarantors of quality and are critical to the success of a market. The other challenge is that of finding reliable suppliers (farmers) to supply the market.
For an agent to consider you for supply you need to be able to fulfill contractual obligations and some emerging farmers are far from being that. This challenge is often faced by municipalities that are attempting to grow the opportunities for emerging farmers to access new markets. Arguably, it is impossible for municipalities to address the supply side issues without the assistance of other spheres of government working closely with emerging farmers to address the quality and reliability of supply. There are many issues there. That is a role that should be carried out by the Department of Agriculture as municipal markets do not have that capacity. Other departments also need to be involved, as well as commercial farmers, because these issues relate to land access, skills, infrastructure and other types of support. There is a lot of input that needs to be given, and co-ordination is also needed.
Small-scale producers, on the other hand, are confronted by a number of constraints that impact negatively on their ability to market fresh produce; lack of transport facilities, poor market infrastructure, poor road infrastructure in certain regions, lack of market information as well as a lack of capacity to interpret data.
To deal with these challenges, other spheres of government need to work together in assisting emerging farmers. Some programme needs to be developed to capacitate emerging farmers by offering assistance with transport to markets, selling of fresh produce at municipal markets, arranging farm visits, administration assistance and queries, monitoring and measuring turnover from emerging producers and assisting with market information and communication. All these will help develop small-scale farmers so that they can produce good products and be able to compete with well established farmers. Ultimately, the objectives of this programme should be to boost production, increase sales at municipal markets and ensure that the profits flow back to the emerging farmers in order to make their businesses viable and sustainable.
References
• http://www.spp.org.za/reports/commodity_markets.pdf
• http://www.namc.co.za/assets/pdf/published/FreshProduceStudy2.pdf.
Municipal markets operate from a central wholesale market, which provides fresh vegetables and fruits that people need every day. The market shoulders the crucial functions of bringing in produce from various producers, setting a fair price, and ensuring a stable distribution of fresh produce for the consumers. Fresh produce by its very nature has a short life span. It is also easily affected by changes in weather and other natural factors leading to unpredictable production levels and changes in the balance between supply and demand. This in turn greatly affects the price. In light of these factors, the market strives to carry on the job of gathering, pricing and distributing large quantities of fresh produce in as effective a way as possible to help ensure the variety and safety of the produce which consumers need, and in so doing add stability to the dietary habits of the communities.
The vegetable market is unregulated and technically open to all producers. The fluid and uncertain nature of the market has led retailers to enter contracts with large growers at the beginning of the season so as to ensure a specific range of vegetables in accordance with predetermined schedules. These arrangements have seen a declining role for municipal markets and make it difficult for small, new producers to gain access to the major supermarkets. In spite of these arrangements, opportunities for the supply of small quantities of produce to a range of outlets do exist. Spar, Lombardi Foods, the traders at municipal markets, restaurants, corner shops and hawkers all procure some of their goods opportunistically on an informal spot-market basis from small scale producers. The key in accessing these opportunities is to win the trust of purchasers by demonstrating the ability to produce quality vegetables consistently and to deliver them on time. Emerging producers are also well placed to supply the burgeoning informal settlement food market, where onions, cabbages, potatoes and squash are a staple diet and real incomes are increasing.
Ownership of Markets in the Eastern Cape
Markets in South Africa essentially function on a commission-based system. Market agents and the market owners (municipality) receive a commission from producers for the services supplied to producers by the markets. Fresh Produce Markets in South Africa are mostly owned and managed by local government. The Port Elizabeth and East London markets are departmentally owned markets. This implies that normal day-to-day business improvements may take place, but that no real intervention with regard to throughput will occur. In this option both the property (land, buildings and other improvements) and the operation of the fresh produce market business are owned by the municipality. On the other hand the Kei Umtata Market is a municipal entity. Here the operations, systems, employees and movable assets of the fresh produce market are transferred to a municipal entity, but not the property (land, buildings and other improvements).The shareholding in a municipal entity, which is a private company incorporated in terms of the Companies Act, can take various permutations. The company is a municipal entity as long as one or more municipalities collectively hold effective control in the business. In this option the property is leased on an arm’s length basis from the municipality. A municipal entity cannot enter into a Public Private Partnership (PPP), thus the property can only be leased in terms of a normal business lease of property and no real risk transfer to the municipal entity can take place. The Johannesburg FPM (a private company in terms of the Companies Act) and Kei Umtata Markets (a Section 21 Company in terms of the Companies Act) are municipal entities in terms of the Municipal Systems Act.
Issue of Accessibility
In most cases, fresh produce markets are situated in faraway places out of town and away from busy streets where most consumers are. These markets are most suitable to big commercial farmers and unfavourable to hawkers and small farmers who want to sell their produce. Even though the market is said to be open to everyone, people often face a great challenge of not being able to access the market due to lack of transport. A number of small farmers often find themselves having to sell their produce informally around towns to make profits. In other cases, some are even advised to sell informally rather than to sell at the market and compete with well established farmers.
Price Formulation at the Market
Municipal markets are supposed to offer a low risk, low barrier to entry marketing channel. The main purpose of the system is to discover an accurate price for produce given the unique circumstances of that particular moment. There are no fixed prices and the value of a good market agent lies in their ability to achieve the correct price. This price might be high or low, but the price has to reflect the current variables (supply, demand, weather, quality, etc.).
If a product is of good quality and can compete with the biggest farmer in the country then the agent has a duty to treat all his consignments the same. In order to assist the small farmers and individuals who want to sell at the market, the East London market is planning to restructure the cold storage facility so as to open a space for previously disadvantaged individuals (PDI) and small farmers to trade or compete at the market.
Challenges Markets Often Face
One of the challenges that markets often face is the issue of securing reliable market agents, which is the core of the business. Market agents play a central role as they are the interface with suppliers. Market agents are appointed by the market and earn their keep on a commission basis. They act as the guarantors of quality and are critical to the success of a market. The other challenge is that of finding reliable suppliers (farmers) to supply the market.
For an agent to consider you for supply you need to be able to fulfill contractual obligations and some emerging farmers are far from being that. This challenge is often faced by municipalities that are attempting to grow the opportunities for emerging farmers to access new markets. Arguably, it is impossible for municipalities to address the supply side issues without the assistance of other spheres of government working closely with emerging farmers to address the quality and reliability of supply. There are many issues there. That is a role that should be carried out by the Department of Agriculture as municipal markets do not have that capacity. Other departments also need to be involved, as well as commercial farmers, because these issues relate to land access, skills, infrastructure and other types of support. There is a lot of input that needs to be given, and co-ordination is also needed.
Small-scale producers, on the other hand, are confronted by a number of constraints that impact negatively on their ability to market fresh produce; lack of transport facilities, poor market infrastructure, poor road infrastructure in certain regions, lack of market information as well as a lack of capacity to interpret data.
To deal with these challenges, other spheres of government need to work together in assisting emerging farmers. Some programme needs to be developed to capacitate emerging farmers by offering assistance with transport to markets, selling of fresh produce at municipal markets, arranging farm visits, administration assistance and queries, monitoring and measuring turnover from emerging producers and assisting with market information and communication. All these will help develop small-scale farmers so that they can produce good products and be able to compete with well established farmers. Ultimately, the objectives of this programme should be to boost production, increase sales at municipal markets and ensure that the profits flow back to the emerging farmers in order to make their businesses viable and sustainable.
References
• http://www.spp.org.za/reports/commodity_markets.pdf
• http://www.namc.co.za/assets/pdf/published/FreshProduceStudy2.pdf.