Supermarkets wield power in farm market

Published Nov 29, 2012

Share

For South Africans who want to escape the stresses and complexities of 21st century living there’s nothing quite as pleasant as driving through a region of the Western Cape such as the Hex River Valley. Steep cliffs and rolling hills interspersed with acres of rich and well-cultivated crops make for a delightful and peaceful setting for the average urban dweller keen to “get away from it all” for a few days.

Of course the delight and peace of that specific setting was violently disrupted a few weeks ago when smoke drifting up from those cultivated acres signalled that all was not well in this apparent idyll.

But even when the N1 highway linking the Cape with Gauteng was blocked at De Doorns by boulders, burning tyres and the threat of more violent protests, it was possible to sit in the middle of a grape farm and believe you were as close to paradise as is imaginable.

Well, so much for appearances. The reality behind this idyllic setting is one of extreme complexity and ongoing change with powerful economic forces exerting constant pressure on all of the stakeholders involved. It has many of the socio-economic ingredients that made the British industrial revolution of the late 17th century such a violent era. And for the weakest of those trying to eke out an existence in this turmoil, the Hex River Valley must seem closer to hell than to paradise.

The complex story behind the outbreak of protests in the Hex River Valley is representative of developments in much of the country’s horticultural regions and perhaps in a way even in mining. The one thing that is evident is that the problem does not lend itself to the sort of easy resolution that Tina Joemat-Pettersson, the Minister of Agriculture, Forestry and Fisheries, trotted out a few weeks ago in a desperate attempt to quell the growing violence that was spreading across the region. After a few hesitant days the minister’s ploy, supported by Cosatu, appeared to work.

But by underpinning a minimum wage demand of R150 a day, all that it has done is create the potential for much more violent protests when the two-week deadline lapses next week and it becomes apparent that R150 is not forthcoming.

It is unfortunate that, before they sought a speedy resolution to the desperate situation, nobody in the government nor in the trade union movement appears to have had access to an excellent report that has just been published with the rather sombre academic title, “South African Horticulture: Opportunities and Challenges for Economic and Social Upgrading in Value Chains”.

The 40-page report, which provides a riveting account of developments in the fresh fruit – and to a lesser extent –vegetable sectors of the economy over the past 20 years, highlights just how difficult it will be to secure a sustainable resolution to the problems that are dogging the horticulture industry. Not impossible but difficult.

The report is the outcome of extensive research by Margareet Visser of UCT and Stephanie Barrientos of the University of Manchester and will be presented at the Capturing the Gains Global Summit in Cape Town next week.

As the title of Visser and Barrientos’s report suggests, the causes of much of what is unfolding in the Hex River Valley are to be found in the rapidly changing value chains that transport grapes from the valley to our tables and, to a greater extent, to European consumers.

Adding to the complexity is that these changes in the value chain were occurring alongside fundamental changes to the country’s socio-political landscape after 1994.

And as usual in these situations, the participants in the value chain with the greatest power have been able to secure the greatest profit. South African farmers, particularly following the post-1994 dismantling of the export boards, have limited power, permanent workers on South African farms have very limited power and seasonal workers have absolutely no power.

But, as the report highlights, the seasonal workers do make a significant contribution and without them and the farmers and the permanent workers there would be no value chain for South African table grapes.

The complex challenge to this complex situation is for all of the South African stakeholders, including business, workers, civil society, government and multilateral organisations, to work together to “capture” more of the gains from the value chain and ensure that those gains are more equitably distributed.

Between the 1980s and 2007, horticultural production increased from 18 percent to 26 percent of total agricultural output in South Africa, says the report. “Currently over 50 percent of fruit produced is exported and less than 20 percent goes directly into the domestic fresh produce markets.” Most of the remaining 30 percent is bought by the increasingly powerful local food retailers such as Shoprite, Woolworths, Pick n Pay and Spar. The encouraging news on this front is the move into southern African markets, currently being led by Shoprite, which offers stronger prospects for “capturing the gains” than the traditional European markets. There are also encouraging signs of a shift towards markets in Asia and the Middle East.

Since the late 1990s the consolidation of supermarket chains in Europe has meant that fragmented South African growers are facing a smaller and more powerful group of supermarket buyers. These powerful companies “increasingly co-ordinate their sourcing through interlinked global networks of cross- border suppliers rather than operating through fragmented agents with market-led trade channels. Lead buyers govern their value chains through the application of sourcing requirements and standards and are able to acquire economic rents through the ‘capture’ of value at the consumer end of the chain,” write Visser and Barrientos.

Ten years ago the main standards that prevailed in the industry were government and trade standards, but the “private standards” introduced by the European supermarkets now dominate. They fall into four main categories – health control, plant health control, marketing standards, and other requirements such as food additives and labelling. Since 2007, private standards relating to social considerations, in the form of the UK supermarkets’ ethical trading initiative, has been implemented here.

The considerable downside to all these standards, which are strengthening the power of the European supermarkets, is that the hefty costs attached are normally borne by the growers or the packhouses.

While some South African supermarkets monitor their suppliers in relation to product standards, the authors of the report found no evidence of monitoring social standards, apart from Woolworths.

“However, given that many producers sell into different overlapping value chains, European supermarket standards are de facto entering into domestic and regional supermarkets too.” And there has been a move by Fruit SA to develop its own recognised social standard.

On the employment front the changes have been equally dramatic. South Africa has strong labour and social regulation that formally sets a higher standard.

“However, the weakness of legislation is lack of enforcement, particularly in agriculture.” The report points out that agriculture was previously exempted from most labour regulation and farmworkers, many of whom lived on the farms, had few recognised rights. The introduction of a swathe of new regulations after 1994 has meant that the employment profile increasingly takes the form of a core of on-farm workers being supplemented by the growing use of casual seasonal labour. “Overall, the core workforce is better skilled, receives training and enjoys better employment conditions.”

The growing pressure to reduce costs and improve productivity is constantly reducing the ratio of permanent to seasonal workers.

At the same time, there is “an increasing demand for more educated and skilled workers (both permanent and seasonal) to enhance productivity and efficiency of output quality as well as cope with both the increasing complexity of production and packing for diverse markets with different requirements and standards,” says the report.

This complex situation will need more than a two-week Band-Aid approach and it will probably need someone with considerably more clout and credibility than the minister to calm things and offer something deliverable next week.

Related Topics: