Photo by: Bloomberg
The agency system of sales in the South African fresh product market is “definitely not under siege”, as suggested by the recent Competition Commission raids, say Produce Marketing Association Southern Africa GM Lindie Stroebel and ZZ2 CEO Tommie van Zyl.
The commission, last month, held search and seizure operations at the premises of various fresh produce market agents in Gauteng, Durban and Cape Town. The agents are suspected of involvement in alleged cartel and price-fixing conduct.
“The fresh produce markets, together with the integrated role of market agents, are critical to the South African and Southern African industry to enable market access for all producers and buyers,” Stroebel and Van Zyl noted in a joint statement issued on Wednesday.
Further, they stated that agents served as efficient aggregators of market forces from the supply and demand side. “Even a weak market signal of supply or demand can be translated into a price. Farmers in South Africa are spared the frustration of producing products with weak or no demand and no prices, as is happening in many parts of the world dominated by bilateral agreements or contract markets at wholesale or retail level.”
The statement further noted that the market system in South Africa, within which agents function, could also be credited for the fact that prices are discovered by the transparent interaction of supply and demand in a free relationship between producers, agents and buyers that share the same goal of serving the consumer.
This system enables large and small producers to have equal access to markets, whether domestic regional fresh produce markets, metropole fresh produce markets or export markets.
“To the credit of the agency system of selling, continuity of supply of products in South Africa is enabled by the price signal, which drives rational behaviour by producers, buyers and their customer, the consumer, reacting to the market forces.”
This, Stroebel and Van Zyl believe, has enabled the South African farming sector to be competitive in world terms.
“Consumers can rely on the steady supply of products they need and that they are willing to pay for.
“The number of Southern African neighbours active at the national fresh produce markets to procure fruit and vegetables for their countries is proof of the value created in terms of mass supply of product by the undistorted fresh produce market in South Africa,” they said.
Therefore, Stroebel and Van Zyl emphasised that it was important for the industry to recognise that the very competitive sales environment in South Africa is enabled by the sales commission system.