Placing Packhouses on the Agenda


South Africa’s diverse farming community covers the spectrum from large-scale commercial farmers to small subsistence farmers. In recent decades, however, fresh produce farming has decreased to the point where there are now grave concerns regarding food security in this country and emphasis is being placed on emerging and traditional farmers to promote the expansion of this crucial industry

Simply growing fresh produce, however, is not the answer. Fresh produce has to be packaged and transported from point of origin to venues where it can be sold. This process creates the need for packhouses in close proximity to farming commuities.

Packhouses, controlled by current or ex-commercial farmers are intensive and complex businesses to manage. Good management skills and a thorough understanding of the fresh produce market are imperative to successfully manage them.

In addition, packhouses are usually seasonally bound and this can create financial pressure. To build and maintain a successful unit, managers need to nurture and maintain relationships with both retailers and other buyers.

Fresh produce retail and distribution units are also under enormous pressure to support black economic empowerment. Packhouses are generally perceived as great business opportunities for these black entrepreneurs, yet the rate of success is very limited given the operating complexities and financial requirements.

TechnoServe’s extensive experience in the fresh produce industry has enabled them to create a workable model to successfully address these challenges: E-Fresh.

Although the E-Fresh markets purchase produce nationwide, they are primarily committed to buying locally from traditional and emerging farmers. This has created, for the first time ever, secure markets for local farmers.

There are two established E-Fresh markets in Tonga (Limpopo) and Elukwatini (Mpumalanga) that have a collective turnover of R15 million annually and are showing real profits. With the E-Fresh model now two years old and challenging the packhouse norm, the crux of the model involves a tiered process of selling to local traders, carrying out product distribution for local producers and lastly packaging local production for retailers and national distribution entities.

TechnoServe’s model is based on consolidated marketing for both traditional and emerging commercial farmers. This entails creating a central point where retailers can purchase from BEE farmers and local traders be assured that they will obtain fresh produce at fair prices.

TechnoServe is hoping to expand the E-Fresh markets by establishing six packhouses in rural areas where the organization already has a presence supporting emerging commercial farmers.

The Tonga and Elukwatini units are already profitable fresh produce markets with only specialised packing still required for the operational mix.

The concentration of people in Bushbuckridge close to Nelspruit is triple that of other areas and is where the Central Management Unit (CMU) will be based. The current E-Fresh management team will play an integral role in establishing this unit from a zero base.

With TechnoServe’s support for emerging farmers, the figures show that one market/packhouse/distribution center (MPDC) could create a revenue of over R21-million per year and at the same time maintain more than 500 jobs.

With six MPDCs in place, turnover could reach R125-million and contribute to 3000 jobs. Just 20 units would result in R400-million turnover and well over 10 000 jobs.

The primary goal of the CMU, however, will not be profit, but development, resulting in a solid basis for consolidated agriculture and entrepreneurship where produce is produced, distributed and purchased in a sustainable context.

The key will be to plough a high percentage of surplus funds into the development of the brand, the support and improvement of current MPDCs, the development of new centres and to ensure maximum profitability at the MPDC level.

This will provide a secure base for credible development institutions to develop traditional and emerging commercial farmers

The last element in the model is the development of the emerging famers earmarked to supply the MPDCs. TechnoServe has made noteworthy progress in this area in the last few years with a system based on sustainable, commercial values, ensuring farmers are not set up to fail or to waste investors’ money.

This philosophy of ‘the market comes to us-we do not go to the market’ has the goals of a market comprising bakkie traders, local traders, commercial packhouses, retail, hospitals, correctional services and feeding schemes, ensuring that the customer can always get what he is looking for, at fair prices, creates trade from local, emerging, commercial, and traditional farmers as much as possible, builds entrepreneurship on all levels and creates a strong brand.

The results would include improving BEE scorecards while still having the convenience of a centralised location; the creation of a consolidated structure that could stimulate the development of the agricultural sector; building entrepreneurs who are responsible for developing the enterprise at all levels; and untimately achieving food security in rural communities.

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