Normalising Competition In Agricultural Marketing - The Case For Red Meat In South Africa

During the past fifty years, the controlled marketing system in South Africa created inflexible marketing structures. These structures inhibited growth in the demand for agricultural products, increased the farmers' exposure to risks, limited private enterprise and effectively reduced competition in agricultural marketing. Contrary to the objective of the Marketing Act to reduce marketing risk for the farmer, it actually rendered the trade effective protection. Proponents of controlled agricultural marketing wrongly believed and are still believing that to limit effective competition in agricultural markets by restricting the number of traders and controlling the whole distribution channel, farmers as well as the consumers would gain from such systems. A study of concentration in the marketing structure of red meat showed that the red meat industry is virtually controlled by only three organizations. Excessive horizontal as well as vertical concentration exist and were effectively created, promoted and maintained by the red meat scheme. Oligopolistic and oligopsonistic structures were found throughout the red meat marketing system and market shares of 40 per cent plus, for the largest organizations are not uncommon. Market sharing in the form of joint ventures, supply control and restrictive registration limited competition while exemptions to Class 2 and Class 3 abattoirs strengthened the oligopolistic-oligopsonistic market structures. The lack of competition may affect deregulation of the red meat industry and normalising private enterprise due to the barriers of entry created by the concentrated structure of the marketing system.