Introduction

Farming is only one part of the process which gets food onto people’s plates. Agricultural production leads on to packaging, transporting and marketing/selling. There are many places for inefficiencies and wastage. Supply chain management takes a look at all the links in this process.

Dr Tobias Doyer makes the case for co-operation and co-ordination as a way to increase benefits:

  • reduced cost through specialisation
  • improved synergistic performance
  • increased information to support joint planning
  • enhanced customer service
  • reduced risk and uncertainty
  • shared creativity
  • improved competitive advantage

Vertical integration is another name given to extending the business to include upstream and downstream activities. Having various assets under one umbrella maximises value in the supply chain.

Certain aspects require advice from legal professionals to avoid what could be seen as uncompetitive behaviour potentially leading to trouble with the Competition Commission.

South Africa is still a net exporter of agricultural products, although a trend is clearly developing that that this agricultural trade surplus is slowly but surely declining. A challenge is going to be to stimulate additional agricultural production, specifically also by smallholder farmers, and to develop models that will include smallholders in modern integrated food chains in a sustainable way.

Source: Dr John Purchase

The farmer’s share of the consumer rand is shrinking. Primary production is the least profitable of all sectors in a value chain. Farmers can share in the profits made upstream through their own farmer-owned businesses. We should do this before we lose more farmers and the total production lands in the hands of a few large companies.

Source: Dr Koos Coetzee

Small-scale farmers

In the past, agriculture has been fragmented, with input suppliers, farmers, beneficiators, marketers, financiers, off takers, and consumers all seeing themselves as separate role players without responsibility for any other element of the value chain.

There is every argument to be made for small scale farmers to form buying and marketing groups.

  1. They can optimise their input costs and negotiate contracts with off takers. Such groups could operate at a regional rather than national level, and don’t need to be limited to one specific industry.
  2. South Africa’s geographic diversity means that many regions have a range of climatic conditions that would enable a variety of crops to be produced and then sold collectively to local retailers. In other words, grain, livestock, fruit, and vegetable farmers could work together to negotiate one contract to which they would all be suppliers. The retailers would get the product variety they need to attract consumers, and each farmer within a farming group would benefit from a stable supply contract.
  3. It may also be easier for the government to grant subsidies to collective farming structures instead of individuals.
  4. Banks prefer to fund small scale farmers through an umbrella organisation that takes responsibility for the group meeting its contract obligations.
  5. Having a retailer ring-fencing the bank’s risk by contracting to put the group’s products on its shelves makes such groups even more attractive.

Local retailers, like Walmart and Pick ‘n Pay, are paving the way through sourcing goods locally, directly from farmers. The onus now falls on these small scale farmers to make collaboration at their end of the value chain a success. This means upholding a consistent supply of quality products to retailers.

Source: adapted from the article “Small scale farmers must join forces to cash in on new trend toward local supply, processing and distribution” by Magna Carta Public Relations for Standard Bank.

There is a hotline to speed up government payments to Small Medium and Micro Enterprises (SMMEs). Business enterprises experiencing late payments of more than 30 days can call the hotline number on 0860 766 3729 or fax their details to 012 452 0458 for assistance.

Building a sustainable value chain has to involve all role players within the chain and any interventions at one level will have implications for the other stakeholders in the chain. Therefore, for any strategic interventions or investment to stimulate growth and speed up the transformation of the industry, for example the agri-parks, economic realities have to be taken into consideration with a clear understanding where in the chain the incentives and the investments need to be made.

BFAP Baseline Agricultural Outlook 2016-2025, page 12.

Useful contacts

Some agricultural products such as flowers, meat, fruit and vegetables are vulnerable to supply chain disruptions. For contacts, refer to the relevant chapter. Similarly, other chapters which apply include “Risk management and insurance” , “Exporting”, “Marketing” and “Infrastructure and Agro-logistics” chapters.

  • Agbiz www.agbiz.co.za
  • Agri Inspec www.mpo.co.za/agriinspec Agri Inspec is an investigation agency that renders monitoring services to agricultural and corporate industries, mainly to put a stop to import irregularities.
  • Bureau for Food and Agricultural Policy (BFAP) www.bfap.co.za BFAP is “virtual network linking individuals with multi-disciplinary backgrounds to a coordinated research system that informs decision making within the Food System”. Find contact details for the different team members on the website.
  • CIPS – The Chartered Institute of Purchasing and Supply www.cips.org/en-ZA
  • Consumer Goods Council of South Africa (CGCSA) www.cgcsa.co.za
  • Council for Scientific and Industrial Research (CSIR) Tel: 021 888 2614 fevandyk [at] csir.co.za www.csir.co.za
  • Industrial Logistic Systems www.ils.co.za
  • Marketing Surveys and Statistical Analysis (MSSA) www.mssa-research.co.za
  • Stellenbosch University Centre for Supply Chain Management Tel: 021 808 3981 Department of Agricultural Economics Tel: 021 808 4758 http://academic.sun.ac.za/agric_econ/
  • Unilever Institute of Strategic Marketing www.unileverinstitute.co.za
  • University of Pretoria Department of Agricultural Economics, Extension and Rural Development Tel: 012 420 3251 www.up.ac.za
  • University of South Africa (UNISA) Centre for Business Management Tel: 012 352 4170 / 4383 www.unisa.ac.za/cbm BCom in supply chain and operations management. Short courses in supply chain management are also offered.

Websites and publications

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