Urbanisation and a growing middle class with changing consumption patterns provide an ideal setting for supermarkets to prosper. With South Africa's urban population approaching 60 per cent, supermarket retail chains are now important players in the agro-food sector. Over the last two decades they have begun to purchase produce from in-house sourcing companies who buy mainly from large-scale farmers. Together with the strict requirements of the retail groups, this makes it difficult for small-scale farmers to supply these retailers. This paper highlights the market changes that could continue to exclude small producers from mass consumer markets. It uses a case study to show how small farmers can be integrated into the urban retail market and, using evidence from this study, proposes a number of strategies to help them participate in the mainstream agro-food supply chains and an innovative model for including them while maintaining profitable business operations.

Abstract

I In nc cr re ea as si in ng g D Do om me es st ti ic c C Co on ns su um mp pt ti io on n o of f S So ou ut th h A Af fr ri ic ca an n W Wi in ne es s: : E Ex xp pl lo or ri in ng g t th he e m ma ar rk ke et t p po ot te en nt ti ia al l o of f t th he e " "B Bl la ac ck k D Di ia am mo on nd ds s" "

The South African beef industry, like many other South African supply chains, is challenged by the increased complexity and demand brought about by globalization, increased volumes and competition, shortage of skilled staff and pressures to meet changing customer needs. The power has shifted from the supply side to the consumer. The consumer has been empowered by greater knowledge. Consumer needs are changing. A combination of these two facts implies that not only the retailer, but also the supply chain as a whole must make sure that it is aligned to deliver customer value, in order to ensure sustainable competitiveness and survival, manage risks and ensure acceptable returns. Competition today is based on competing supply chains. The focus of this study is to define the South African consumer and their needs, so that the beef industry and in particular the supply chain participants, are able to identify opportunities to improve the delivery of customer value. This study attempts to determine the extent to which the South African consumer needs and demands regarding beef have changed, and whether the beef value chain is positioned to meet these changes. The supply chain concept, market orientation, meat quality and consumer food trends form the theoretical framework of this study; an industry analysis provides the context in which agri-businesses function; a network analysis provides a better understanding of the roles and value-adding activities that are delivered by chain participants; and an analysis of the South African consumer establishes the composition of the market, consumer needs and disposable income issues that are critical to finding the optimal solution that is sustainable enough to meet the changing environment. Although the industry has a good status, good management practices can further increase consumer confidence in beef.

A survey of 52 smallholder fresh produce farmers was conducted in the Gauteng province of South Africa to grasp how risk and its management affect the mainstreaming of smallholder farmers into formal, high-value markets. The study employed a supply chain analysis approach, which focused on the functions and risks that occur along the fresh produce chain. The results highlight the risks that impede the participation of smallholder farmers in formal, high-value chains. At the production level, risk is prominent from input procurement through to the post-harvest stage of the chains. At the retail and consumption level, risks are linked to the adherence to quality and quantity standards, including prescribed packaging, grading, labelling and traceability and transport requirements. As a result of these risks across the formal chain, smallholder farmers often resort to distributing their products in low-value informal markets. The consequence is that smallholder farmers tend to remain trapped in poverty, in part, because of their risk appetites and their ability to bear risk. 8Further research is required in the areas pertaining to smallholder farmers’ risk appetite and risk-bearing ability and mechanisms to deal with the particular risks in the value chain that impede their all-round ability to escape the “smallholder dilemma”.