Contract design for small scale mussel growers in Saldanha Bay : a transaction cost approach

Diza, Sakhumzi Jacob (2005-12)

Thesis (MScAgric)--Stellenbosch University, 2005.

Thesis

ENGLISH ABSTRACT: This study examines the role of contracting in reducing transaction costs in smalIscale mussel farming in Saldanha Bay. Masiza Mussel Growers (Masiza), an initiative by the public and private sector to address the imbalances of the past through entrepreneurial development, are used as a case study hence a case study approach is followed. Two transactions were considered, one between Masiza and Blue Bay Aqua Farm (Blue Bay) and another between La Vie Sea Food Products (La Vie) and Masiza. These transactions form the basis for analysis. Market risks, uncertainties, environmental risks, information incompleteness, illiteracy, limited technical knowledge of farming, lack of appropriate infrastructure and lack of transport facilities are identified and examined as possible sources of transaction costs that constrain the existing supply chain relationship. The study shows that asset specificity, time specificity, and site specificity playa positive role in the supply chain as they result in relative dependency amongst parties. Opportunistic behavior within the existing supply chain is neutral, but appears to be relatively high on the spot or fresh live market. Characteristics of market transactions for mussels and associated transaction costs suggest that fresh-live spot market trading for Masiza is difficult to attain. This therefore motivates parties (Masiza) to contract or vertically integrate, as it is costly and risky to rely on spot live markets. Interviewees (Masiza) pointed out that the benefits associated with contract farming outweigh the transaction costs associated with this governance structure. Hence a market specification contract with the La Vie (a processing company), and a production management and resource provision contract with Blue Bay (a larger producer) were designed. They reduce transaction costs associated with fresh-live markets and ensure a more stable and reliable market for growers.

AFRIKAANSE OPSOMMING: Die studie ondersoek die rol van kontraktering in die vermindering van transaksie koste vir klein skaal mossel produsente in Saldanha baai. Die Masiza Mussel Growers (Masiza) word as gevallestudie gebruik. Twee transaksies met o.a. Blue bay Aqua Farm (Blue Bay) en La Vie Sea Food Products (La Vie) was ter sprake en laasgenoemde het as basis vir die analise gedien. Mark risiko, onsekerheid, omgewings risiko, gebrekkige informasie, ongeletterdheid, beperkte tegniese kennis, beperkte infrastruktuur en beperkte verroer fasiliteite is geidentifiseer en ondersoek as moontlike oorsake van hoë transaksie koste wat die huidige aanbod ketting strem. Die studie toon aan dat interafhanklikheid tussen die betrokke partye deur bate, tyd en area spesifisiteite bevorder word en dus 'n positiewe rol in die aanbod ketting speel. Opportunistiese gedrag binne die bestaande aanbod ketting is neutraal, maar blyk hoog te wees in die vars mark. Transaksie kostes en eienskappe blyk beduidende beperkinge te wees vir kleinskaal mossel produsente om aktief deel te neem in die mark. Die opstel van kontrakte (of vertikale integrasie) blyk dus 'n uitkoms te wees. Respondente het aangetoon dat kontrak boerdery voordelig blyk te wees. Laasgoemde het tot die ontwikkeling van mark kontrakte met die La Vie ('n verwerkings maatskappy) asook produksie bestuur en hulpbron voorsiennings kontrakte met Blue Bay ('n groot kommersiële produsent) gelei. Die kontrakte beperk transaksie koste vir die vars mark en verseker 'n stabiele en betroubare mark vir produsente. 'n Transaksie koste analiese word gebruik om transaksie kostes te ondersoek en te verifieer binne die industrie.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/50302
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