Agent system connects supply chain across South Africa - FreshFruitPortal.com

Agent system connects supply chain across South Africa

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Agent system connects supply chain across South Africa

With around 600 employees and operations in five major cities, RSA Agents helps move a lot of fresh produce across South Africa - about 550,000 tons (MT) of it a year.

In a uniquely South African system, RSA serves as the middleman between producers and buyers. The agency works with around 4,000 producers, big and small, to source fruits and vegetables to supermarkets, corner stores and informal traders.

Early one Saturday morning, managing director Maine Daniels showed www.freshfruitportal.com through the Cape Town Market, a trading platform for 8,000 registered buyers.

Click here to view our photo gallery of the market and the small traders set up along its borders.

A quiet Cape Town Market after traders have cleared out on a Saturday morning

A quiet Cape Town Market after traders have cleared out on a Saturday morning

Although not quite the biggest, the Cape Town Market stands out from other fresh markets in South Africa.

While others are run by their respective municipalities, the Cape Town Market has been privately operated since 2004. It also allows agents and buyers to participate as shareholders.

Daniels explained that the distinct Cape Town system seeks to spark more rapid development than what may occur under a government-run system.

"Cape Town is the only market from the big provinces that has been privatized. It’s the system that producers want," he said.

"The government decided to privatize it so that maybe the private sector could uplift and make a quicker change to the old system. We’re trying our utmost but it’s also not that easy."

A key motivator behind the Cape Town structure has been the ongoing reality of high unemployment.

For the second quarter of 2013, South Africa's national unemployment was reported at 25.6%. The Western Cape fared slightly better than many other provinces, with 24% unemployment.

Although the formal sector added 109,000 jobs nationally, agriculture lost 26,000 jobs during the quarter. Between the unemployed and discouraged workers, there are now over 7 million jobless among South Africa's population of almost 53 million people.

Buyers load up the truck as the market winds down

Buyers load up the truck as the market winds down

At the Cape Town Market, much of the business structure is geared toward workforce inclusion. The system has implemented greater buying flexibility to allow smaller operators to get involved in the sector.

"From our side in the market sector, we tried to help the people. Fruit and veg is a 12 month cycle and people can sell fruit and veg 12 months of the year. So [the Cape Town Market] introduced provisional sales," Daniels said.

With producer permission, the provisional sales system allows sellers to take produce from the market and pay back the cost within five business days. The market-implemented system is unique to Cape Town.

The idea is that cash-strapped producers or sellers have a chance to participate and start businesses of their own.

The agent, who connects growers with buyers, takes full financial responsibility for the transaction. Producers are guaranteed payment for all produce that leaves the floor.

"Whatever product is sold, within the same week, if it’s a fast seller, then he will have his money in his pocket," Daniels said.

The agent takes 5% to 7.5% commission, depending on the product, and the market takes 5% for offering its space and ancillary services.

Across the major markets where RSA operates, group CEO Jaco Oosthuizen explained that the grace of the agent system comes from the speed of transactions and the ease of entry for smaller producers.

Beyond Cape Town, RSA also works with produce markets in Johannesburg, Durban, Bloemfontein and Tshwane. Unlike Cape Town, these markets do not use the provisional sales system.

Throughout South Africa, RSA works with both informal and formal traders, connecting producers to buyers with up-to-date pricing based on current demand and supply.

Apples from RSA Agents' trading space in Cape Town

Apples from RSA Agents' trading space in Cape Town

"There’s no barriers to entry to the market except that you comply to packaging standards, etc. The great thing for emerging growers, whatever we sell today, tomorrow they get paid. It’s a cash business. Even for commercial growers, whatever we sell today, if the consignment is complete, they get paid tomorrow and sometimes even the same day," Oosthuizen said.

"That’s part of our unique selling proposition is that we don’t sit on farmers’ money. It’s not ours, it’s there’s."

Another benefit of RSA comes from the company's extensive reach across markets.

"We do 25% of all produce on the five markets we trade on. If you take that into context, markets move around three and a half billion tons of produce and we do around 550,000 tons," Oosthuizen said.

"We’ve got a well-structured infrastructure. The markets have generated massive amounts of buyers, so that produce actually gets sucked out of the system every day. The infrastructure caters to it. We’ve got the infrastructure and the people."

The mass network across South Africa provides a marketing advantage and allows buyers and sellers to more easily push product throughout the country.

"The advantage is that [the producer] has a specialized sales force in the midst of his marketing team. We are an integral part of the producer's marketing team and provide benefits in terms of marketing information, price discovery, logistical support and administrative excellence," Oosthuizen said.

"[The benefit is] the building of his brand to his customer and proper segmentation of the market that helps us to support him in his marketing search, to know who he sells to, who buys what, how the demographics look and what can he do to grow produce that’s consumer oriented."

From the trading floor in Cape Town, Daniels praised the system not only for its social benefit but also for its functionality.

"It’s a fantastic system we’ve got going because it’s transparent. Everybody knows exactly what’s happening," Daniels said.

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