Browsing by Author "Diza, Sakhumzi Jacob"

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    Contract design for small scale mussel growers in Saldanha Bay : a transaction cost approach
    (Stellenbosch : Stellenbosch University, 2005-12) Diza, Sakhumzi Jacob; Karaan, A. S. M.; Stellenbosch University. Faculty of AgriSciences. Dept. of Agricultural Economics.
    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.