How African mass food markets use moments of truths to redefine roles
People who blame middlemen for messing up the market have no idea about the role playing by different market actors to keep the market functioning smoothly. It is when the market is in action that one can see the extent to which the middlemen is there at the invitation of both the farmer and the consumer. Practical reasons explain why very few large-scale potato farmers can sell huge volumes of potatoes to consumers directly without a middleman.
For example, in Zimbabwe, two thousand pockets of potatoes on a 30-ton truck (gonyeti) are often valued at USD12000 – 15000. No ordinary consumer has that kind of money to buy that load at once from the farmer. On the other hand, a single trader cannot raise such amount of money to buy that load from the farmer. Banks are often not willing to provide such money to the trader so that he buys the load from the farmer. This is where the farmer sees the value of selling through a middleman who acts as an agent-merchandiser. Farmers who do not often take commodities to the mass market miss some of these crucial moments of truths.
Another frequent moment of truth
Another telling moment of truth is when a farmer shows up at the market early in the morning with fresh commodities like cabbages, tomatoes or fruits only to find stiff competition from other farmers. This is where the agent-merchandiser becomes very important. Based on relationships built over time, the agent-merchandiser promotes the farmer’s commodities to customers who know him/her (the agent-merchandiser). These customers do not know the farmer who has just brought the commodities. In some cases, the agent-merchandiser finds trading space for the farmer and knows buyers who come daily. Moreso, buyers who frequent the market prefer buying from a merchandiser who has commodities all the time rather than buying from a new farmer they do not know.
Day credit based on relationships
By being present in the market all the time, the agent-merchandiser has been able to monetize his/her socio-economic presence to the point of being able to give credit in the form of commodities to local customers like food vendors around the market so that they sell on his/her behalf and repay the same day. The farmer cannot do the same because s/he has no relationship with such customers. To benefit from existing relationships, the farmer has to engage the agent-trader on a commission basis.
Through that arrangement, the agent-merchandiser gives out the farmer’s commodity to his customers and collects payment after some hours before the market closes. Since the vendors around the market break the bulk, they are able to sell the commodities faster than the farmer can do. At close of trading in the market, the customer comes back to pay the merchandiser or the merchandiser follows up to collect cash and packaging. The farmer cannot do this because s/he does not know who is credible enough to deserve a loan in the form of commodities.
Merchandising has become the most preferred relationship in mass food markets
All bag packaged commodities like butternuts, cucumbers, green beans, peas, sweet potatoes and carrots are mainly sold through the agency-merchandising system in which the commission is agreed upon before commodity selling starts. The commission is usually USD1 – 2/unit of measurement like a crate or a 50kg bag. Since the farmer does not want to lose income from a given price for the sake of accommodating a commission, the agent-merchandiser often asks the farmer to offer a slightly higher price to buyers/customers so that the commission is embedded in the price. For instance, where a farmer expects USD15 from a bag of cucumbers as given by the market on that day, the farmer and the merchandiser agree to raise the price to USD18.
Raising the price to USD18 benefits both the farmer and the merchandiser as they will share the extra USD3. For instance, the farmer can take USD2 and the merchandiser gets USD1 or they share equally. This means, instead of getting USD15, the farmer ends up earning USD16 or USD17 per bag of cucumbers. In most cases, when commodities are in short supply, the merchandisers become very friendly. Farmers eventually develop solid relationships with merchandisers who can end up receiving stock from the farmer to sell commodities and send back the money to the farmer.
Positioning farmers in competitive markets
Contrary to common misconceptions, the agent-merchandisers are not able to earn abnormal profits because almost every commodity has substitutes which sets price limits as seen by how the market resists unusual price increases. Positioning farmers in a competitive market is one of the critical roles fulfilled by the agent-merchandiser. The fast and dynamic ways in which markets are changing are influencing collaboration between diverse value chains actors. How market actors organize themselves to create value is becoming more important than producing commodities. That is why instead of scoffing at middlemen, farmers and consumers should applaud these actors for their leadership role as navigators and connectors who help farmers and consumers to make sense of the market.
As middlemen, agents-merchandisers have enormous influence in the market’s random dance as well as new skills that are always emerging. Middlemen and merchandisers should be celebrated for moving up, down, and across the market acquiring experiences and skills that eventually get to farmers. The resilience of African mass markets is based on how value chain actors decide to hold the same values and the same ways of working such as setting prices together and agreeing on certain mark-ups. This is also how the market develops its own unique language which influences how the entire market works as a robust ecosystem that distributes income to diverse actors. Most agent-merchandisers are driven by purpose and passion. Whoever wants to create a playbook on indigenous commerce and market leadership cannot succeed by ignoring these actors.
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