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A Comparative Analysis of the various Pros and Consof the Pre

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4.3 The advantages and disadvantages of the free market system A producer'sduplication in the marketing chain and so obviate additional costs.

    A comparative analysis of the pre-1996 marketing control board system and the post-1996 free market system, with reference to the South African fruit and vegetable

    industry

    Grant Norman

    Research Report

    presented in partial fulfilment

    of the requirements for the degree of

    Master of Business Administration

    at the University of Stellenbosch

    Supervisor: Prof André Roux

    Degree of confidentiality: Grade A Graduation date: March 2009

Declaration

    Hereby I, Grant Norman ID No. 8011235130084, declare that this research report is my own original work and that all sources have been accurately reported and acknowledged, and that this document has not previously in its entirety or in part been submitted at any university in order to obtain an academic qualification.

Signature

G Norman 30 January 2009

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Acknowledgements

    I would like to express my sincere gratitude to the following people for their support and assistance while I researched and wrote this research report:

    To my father and mentor, Harry Norman, for his guidance throughout the preparation of this report; for his devotion to the livelihood of fresh produce producers and his faith in the future of fresh produce markets, especially in Cape Town; and finally for his unflagging support throughout my life and for teaching me the core values of Honesty, Commitment, Integrity and Fairness.

To my mentor, Corné Bouwer, CEO of the Lebombo Growers Group, for his continued

    support and belief in me, and for inspiring me to do my MBA.

    To Pieter du Toit, CEO of the Du Toit Group, for his valuable insights and for teaching me that agriculture is a very important contributor to the economic system and can be a critical factor in the sustainable success of the economy of South Africa.

    To Rob Lowe and his executive team at Cape Fresh International (Cape Town Market) for proving to me that privatisation of fresh produce markets can add value to the role-players operating within it.

    To my supervisor, Prof André Roux, for his valuable insights and guidance during the preparation of this research report.

    To Fine Bros for their financial support in flying me to Mpumalanga to conduct the necessary interviews crucial for this research report. Thanks to Kade Lotter and Roy Fine for their continued belief in me and their patience, especially given the amount of time I was distracted from work to write this report.

    To my family, partner and friends for standing by me during my studies, and for always understanding when my attention was focused on this report.

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    My thanks are also extended to Dr IR Ward Anseeuw, CIRAD Researcher of the Postgraduate School of Agriculture and Rural Development, University of Pretoria; Schalk Burger from the NAMC; Mike Cordes from Agripress and IMASA; and Dr JF Prinsloo from BGASA.

Finally to anyone who I missed who deserves a mention Thank you!

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Abstract

    This research report is a comparative analysis of the pre-1996 marketing control board system and the post-1996 free market system in the fruit and vegetable industry in South Africa. The report investigates and discusses the advantages and disadvantages of both systems and their effect on the stakeholders of the industry.

    The control boards had both positive and negative effects on the producer within the fruit and vegetable industry. The free market system is currently also having an effect, both positive and negative, on the producer. In this research report these divergent effects are explored, the objective being to obtain a better understanding of their impact on the industry stakeholders. On reaching a clearer understanding, strategy recommendations have been designed and are presented for all producers operating within the fruit and vegetable industry.

    The fresh produce industry is large, with many stakeholders. The information potentially available is vast, but, given the fact that time was too limited to do a complete research study on the entire industry, it was decided to focus on four sectors of the industry, namely bananas, deciduous fruit, citrus and potatoes.

    To give the report more credibility in terms of the data acquired, a number of interviews were conducted with producers and producer organisation leaders, from whom first-hand, ground level information was obtained.

    In this research it was found, among other things, that in general there was an imbalance in both the producer and consumer surplus in South Africa.

    Despite regulation, the marketing control boards had, through the pooling of prices, provided benefits only to certain producers. This, in effect, meant that quality improvement was largely negated, as the return to the producer did not provide an incentive to produce a better quality product. Contrary to the control board system, the free market system provides industry stakeholders with many opportunities, while the role of producers is also evolving to incorporate aspects of marketing.

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    Producers consider service excellence, and culture and diversity to be important. Furthermore, in terms of available channels for marketing, many producers view the fresh produce markets as a desirable means of marketing their produce, as these outlets are still considered to be the price-determining mechanism for the fresh produce industry.

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Opsomming

    Hierdie navorsingsverslag is 'n vergelykende studie van die bemarkingsbeheerraadstelsel voor 1996 en die vryemarkstelsel ná 1996 in die vrugte- en groentebedryf in Suid-Afrika. Die verslag ondersoek en bespreek die voor- en nadele van albei stelsels en hul uitwerking op die bedryf se belangegroepe.

    Die beheerrade het ‟n positiewe sowel as negatiewe uitwerking op die produsent in die vrugte- en groentebedryf gehad. Die vryemarkstelsel het tans ook ‟n positiewe sowel as negatiewe uitwerking op die produsent. Hierdie uiteenlopende gevolge word in hierdie navorsingsverslag verken om só ‟n beter begrip van die impak daarvan op die bedryf se belanghebbers te verkry. Strategie-aanbevelings is op grond van groter begrip ontwerp en aan produsente in die vrugte- en groentebedryf voorgelê.

    Varsprodukte is die grootste bedryf in vrugte- en groentebedryf, en daar is talle belangegroepe. Die inligtingsmoontlikhede is enorm, maar gegewe die feit dat tyd te beperk was om ‟n volledige navorsingstudie van die hele bedryf te onderneem, is daar besluit om vier sektore te beklemtoon, naamlik piesangs, sagtevrugte, sitrus en aartappels.

    Om die verslag meer geloofwaardigheid te gee ten opsigte van die data wat verkry is, is ‟n aantal onderhoude met produsente en die leiers van produsentorganisasies gevoer om eerstehandse, voetsoolvlakinligting te bekom.

    Die verslag het onder meer bevind dat daar oor die algemeen ‟n wanbalans in die produsente- sowel as verbruikersurplus in Suid-Afrika is.

    Die bemarkingsbeheerrade het ondanks regulasie voordele slegs aan sekere produsente gebied deur die saampot van pryse. Dit het in werklikheid beteken dat gehalteverbetering grootliks ontken is omdat die opbrengs nie die produsent aangespoor het om die gehalte van hul produkte te verbeter nie. Die vryemarkstelsel bied, in teenstelling met die beheerraadstelsel, talle geleenthede aan die bedryf se belangegroepe terwyl die rol van produsente ook ontwikkel word om aspekte van bemarking te inkorporeer.

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    Produsente beskou voortreflike diens, en kultuur en diversiteit as belangrik. Daarby beskou produsente die varsproduktemark, wat een van die beskikbare bemarkingskanale is, as ‟n wenslike manier om hul produkte te bemark omdat dié afsetpunt steeds as die prysbepalende meganisme vir die varsproduktebedryf gesien word.

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Table of Contents Page

Declaration i

    Acknowledgements ii

    Abstract v

    Opsomming vii

    List of tables xii

    List of figures xiii

    List of appendices xiv

    List of acronyms xv

CHAPTER 1: INTRODUCTION

    1.1 Background 1

    1.2 Definition of the terms 3

    1.3 Research objectives 4

    1.4 Research methodology 5

    1.5 Outline of the study 5

CHAPTER 2: CONTROL BOARDS

    2.1 The Marketing Act and the Marketing Control Board 7 2.2 The Banana Control Board 9

    2.3 The Deciduous Fruit Board 10

    2.4 The Potato Board 12

    2.5 The Citrus Board 14

    2.6 Motivation, insight and the impact of the control boards 16

    2.7 Deregulation of the control boards in perspective 19 2.8 Deregulation of the Banana, Deciduous Fruit, Potato and Citrus Boards 20

    2.9 Summary 21

CHAPTER 3: FREE MARKET ECONOMY

    3.1 Background 26

    3.2 What is a free market system? 27

    3.3 Criticism of the free market system 31 3.4 A current snapshot of the fresh produce industry in South Africa 34

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3.5 Summary 38

CHAPTER 4: RESEARCH QUESTIONNAIRES

    4.1 Introduction 41

    4.2 The advantages and disadvantages of the control boards: A producers

     perspective 45

    4.3 The advantages and disadvantages of the free market system: A producers

     perspective 47

    4.4 The fruit and vegetable industry in terms of:

     4.4.1 Service excellence 53

     4.4.2 Culture and diversity 55

     4.4.3 Various channels of marketing 58

     4.4.4 The role of fresh produce markets 61

     4.4.5 Key issues 65

     4.4.6 Critical success factors for the survival of the fresh produce

     industry 68

    4.5 Summary 71

    CHAPTER 5: THE COMMON AGRICULTURAL POLICY OF THE EUROPEAN UNION

    5.1 Introduction 74

    5.2 The amended Common Agricultural Policy: Reforms 77 5.3 The Common Agricultural Policy track-record 78 5.4 The Common Agricultural Policy under review in 2008: Some new debates

     expected

     5.4.1 Common Market Organizations 79

     5.4.2 The European Union‟s budget 80

     5.4.3 Allocation and transparency of Common Agricultural Policy

     Payments 81

     5.4.4 Biofuels 82

    5.5 Criticism of Common Agricultural Policy

     5.5.1 Cost 82

     5.5.2 Over-production 83

     5.5.3 Environmental damage 84

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