Keywords: aquaculture, contract farming, organisational design, small farmers, transaction costs, competitiveness, product quality, market integration, small firms, mussel farming, mussels, South Africa, emerging economies, perishable products, postharvest, supply chain relationships, contract design, market specifications, production management, resource provision
Enhancing competitiveness, product quality and market integration of small mussel growers: a South African case study
The key proposition in this paper is that the competitiveness of small firms operating in emerging economies and producing highly perishable products (e.g. mussels) is largely contingent on their ability to contend with high Transaction Costs (TC). The study examines the role of contracting in reducing TC associated with small-scale mussel farming in South Africa. 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 the possible sources of TC that constrain the existing supply chain relationship. This, therefore, motivates parties to contract or vertically integrate, as it is costly and risky to rely on spot markets. The paper concludes with a proposed contract design including market specifications, production management and resource provision aspects.