Markets selling agricultural products have been with humankind for many thousands of years. They have adapted and changed over time but the fundamental reason for their existence has never changed i.e. where supply and demand meet to establish a value for a product so that a sale can be made.
There are different types of agricultural markets, such as farmers’ markets where the farmer is on hand to sell his products, or wholesale markets where a wholesaler has purchased the products from the farmers and sells those products for a profit, or a commission markets where market agents sells the products on behalf of the farmers.
In South Africa we have the added option of Informal Markets which are a feature of our national landscape as they can be found along main roads, outside bus stations, taxi ranks, alongside existing fresh produce markets and in rural towns. Informal Markets in various forms can also be found in many African countries. In this country they are essentially wholesale markets, as the vendors have purchased their products from farmers or the bigger markets to resell again to the public and tourists. They are classified as Informal Markets because they are not subject to the same formal structures and laws that govern the fresh produce markets.
Markets traditionally sold all farm products but as times changed so did the selling and distribution requirements of agricultural products. Specialisation has become the key and in this country we now have fresh produce markets, flower markets and livestock markets (auctions).
We thank the late Michael Cordes for notes supplied to Agribook and used on this page.
There are four different categories of ownership/management of the National Fresh Produce Markets (NFPMs) (refer to the heading “The fresh produce markets and their role players” further down).
Registered Market Agents sell produce on behalf of farmers. They are governed by the Agricultural Produce Agents Act No. 12 of 1992 (amended 2003) which prescribes, amongst other requirements, how they will handle the farmer’s money. These agents register with the Agricultural Produce Agents Council (APAC) and after complying with certain requirements of Act 12 can open for business.
The Act requires a Market Agency to open a Trust Account on behalf of its farmers thereby ensuring that their money is controlled and regulated. Market Agents must submit a Trust Account Reconciliation to APAC every month. Market Agents must by law pay their farmers within 5 working days after completing the sale of a consignment.
Act 12 also provides for a Market Agents’ Fidelity Fund to which only they contribute annually and which guarantees farmers’ money under specified circumstances. Find the notes on the Fidelity Fund and when a farmer can claim against it further down this page.
How do NFPMs operate?
By reacting to the laws of supply and demand on a daily basis, fresh produce commission markets remain the purest form of price establishment available to farmers and buyers.
Find the list of registered fresh produce market agencies at www.apacweb.org.za/registered-fresh-produce-agents
NFPMs are a public marketing infrastructure that are key for food security and Local Economic Development (LED).
NFPMs sold 3.4 million tons of fresh vegetables and fruits with a turnover of R17 billion in 2019.
Source: Portfolio Committee on Agriculture, Land Reform and Rural Development meeting (2021, March 2). See https://pmg.org.za/committee-meeting/32406
The Department of Agriculture established a Fidelity Fund many years ago at the request of Fresh Produce Market Commission Agents in the event of there not being sufficient funds in the Trust Account to pay the farmers, or if a market agent was found guilty of any fraudulent actions with farmers’ money. In such cases a farmer who has sold his fresh produce through a registered commission agent may claim for his losses from the Fidelity Fund. Market Commission Agents pay a levy each year determined by APAC which is based on their annual turnover. It is part of APAC’s function to administer and control this Fidelity Fund in terms of Act 12.
The Fidelity Fund guarantees a farmer’s money. This system of financial security for South African farmers is unique in the world.
Act 12 makes provision for a farmer to claim for financial losses under the following circumstances:
A farmer who wishes to make a claim against the Fidelity Fund must do so within three (3) months of the alleged offence. Full details are available from APAC.
In terms of the Act a Market Agency must open a Trust Account at a registered banking institution on behalf of their farmers. This Trust Account has only two purposes:
It must be a separate bank account from the Market Agency’s normal business account. Every Market Agency must submit a Trust Account reconciliation to APAC monthly before the 21st. The Trust Account therefore, controls the farmer’s money.
The most important difference that sets our commission markets apart from others (wholesale markets) – locally or abroad – is the security of payment for producers – see earlier note. This security is vital in a country as large and as diverse as ours. Producers hail from the farthest corners of our land, distances to markets are often great and personal contact between farmer and agent can be limited at times. The knowledge that his money is safe and that legislation requires the agent to pay him within 5 working days ensures that a farmer can market his produce with confidence.
This is very important in a South African context when seen against the background of our commercial farmers and the many thousands of small-scale future farmers. The former are geared for commercial farming and most have the ‘tools’ for marketing. But a future, resource poor farmer has to struggle with many obstacles before landing his produce on the market floor. He generally will not have the marketing skills of his commercial neighbour so protection of his money on the market is absolutely essential.
Another benefit of our fresh produce commission markets is the competition which exists on the floor between producers, products, packaging, presentation, quality, the market agents and the buyers. There is probably no better way for a farmer to learn about the complexities of fresh produce marketing than to have his/her produce on a market floor competing against so many other producers.
Source: Michael Cordes
Read about the “collaborative effort between Government and the fresh produce industry to improve and revive the operations and service standards of NFPMs across the country” (DALRRD, 2021). Project Rebirth has been adopted to revive the operations and service standards of struggling markets and consists of 5 phases. Find details of these in the above mentioned committee meeting.
Read about the Agricultural Produce Agents Act (Act 12 of 1992) under the Agricultural Produce Agents Council (APAC) bullet point below.
Read about requirements for Food Business Operators (FBOs) at www.dalrrd.gov.za. This is a prerequisite for, amongst others, retailers and municipal markets.
In terms of the Agricultural Produce Agents Act. Act 12 of 1992 (amended 2003) the Minister of Agriculture is required to establish an Agricultural Produce Agents Council (APAC) – a Statutory Body – to administer the Act on behalf of the Minister. An amendment is in the pipeline. Look for the draft Agricultural Agents Amendment Bill, 2020 (not yet an Act in 2021) on the internet. The basic reason for having the Act and for the establishment of APAC is because Agricultural Produce Commission Agents act on behalf of their clients – farmers – in a financial capacity and the Act is there to protect the farmers’ interests.
Members of the Council are appointed by the Minister and represent role players in the marketing of fresh produce as well as appropriate Government departments. In terms of the Act any person who wishes to trade as an agricultural produce commission agent must register with APAC.
The NAMC is a Statutory Body established in terms of the Marketing Act to advise the Minister of Agriculture on matters regarding the marketing of all agricultural products.
An entity of the Department of Trade, Industry and Competition (the dtic) is “to administer compulsory specifications and other technical regulations with the view to protect human health, safety, the environment and ensure fair trade in accordance with government policies and guidelines”.
Another piece of legislation that applies to fresh produce markets is Regulation R638 under the Foodstuffs, Cosmetics and Disinfectants Act. This Regulation outlines hygiene requirements for food handling establishments.
There are four categories of NFPMs in terms of ownership/management:
Department/business units
Corporatised/municipal entities
Public–private partnerships
Privately owned and operated entities
