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Analysis of the Governance Structure used by Eksteenskull Raisin Producers: Is there a need for more Vertical Coordination?

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  • Jordaan, Henry
  • Grove, Bennie
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    Abstract

    Eksteenskuil raisin producers are a group of emerging raisin producers who are successfully participating in a sophisticated value chain. They collectively export their raisins through the fairtrade initiative. Emerging farmers typically face high levels of transaction cost. The high levels of transaction cost in combination with the changing nature of the marketing environment, suggest that the different modes with which transactions can be coordinated need to be assessed in order to identify that mode that would minimise the transaction cost. The aim of this paper is to investigate the governance structures that are employed by Eksteenskuil raisin producers in order to determine whether an alternative may not contribute to reducing transaction costs faced by Eksteenskuil producers. The mode of governance employed by Eksteenskuil producers first is compared to the alternative that is widely used by other raisin producers in the region to determine whether the existing alternative may be more efficient. Thereafter the need for more vertical coordination is assessed to determine whether or not a higher level of vertical coordination is needed to reduce transaction cost. Based on the results from this study the specifications-contracting mode of governance that is currently used by Eksteenskuil raisin producers is more efficient than the spot market that is mainly used by other raisin producers in the region. Although complete vertical integration does not prove to be viable at this stage, there still is a need for some more vertical coordination towards the level of strategic alliances.

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    Bibliographic Info

    Paper provided by African Association of Agricultural Economists (AAAE) & Agricultural Economics Association of South Africa (AEASA) in its series 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa with number 96645.

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    Date of creation: Sep 2010
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    Handle: RePEc:ags:aaae10:96645

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    Keywords: Crop Production/Industries;

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    1. Jill E. Hobbs, 1997. "Measuring the Importance of Transaction Costs in Cattle Marketing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1083-1095.
    2. Dave D. Weatherspoon & Thomas Reardon, 2003. "The Rise of Supermarkets in Africa: Implications for Agrifood Systems and the Rural Poor," Development Policy Review, Overseas Development Institute, vol. 21, pages 333-355, 05.
    3. Peterson, H. Christopher & Wysocki, Allen F. & Harsh, Stephen B., 2001. "Strategic Choice Along The Vertical Coordination Continuum," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 4(02).
    4. Jordaan, Daniel du Plessis Scheepers & Kirsten, Johann F., 2008. "Investigating alternative governance systems for the South African mohair supply chain," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(2), June.
    5. Pierre Matungul & Michael Lyne & Gerald Ortmann, 2001. "Transaction costs and crop marketing in the communal areas of Impendle and Swayimana, KwaZulu-Natal," Development Southern Africa, Taylor & Francis Journals, vol. 18(3), pages 347-363.
    6. Kherallah, Mylène & Kirsten, Johann, 2001. "The new institutional economics," MSSD discussion papers 41, International Food Policy Research Institute (IFPRI).
    7. Shelanski, Howard A & Klein, Peter G, 1995. "Empirical Research in Transaction Cost Economics: A Review and Assessment," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(2), pages 335-61, October.
    8. Michael Boehlje, 1999. "Structural Changes in the Agricultural Industries: How Do We Measure, Analyze and Understand Them?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(5), pages 1028-1041.
    9. Louw, Andre & Jordaan, Daniel du Plessis Scheepers & Ndanga, Leah Z.B. & Kirsten, Johann F., 2008. "Alternative marketing options for small-scale farmers in the wake of changing agri-food supply chains in South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(3), September.
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