22. The present marketing system consists of two official outlets and one unofficial (and illegal) outlet and handles approximately 3400 tons of wool and 800 tons of mohair annually. Each tends to serve a different kind of producer and satisfies the different needs of each client. The relationships between these three outlets are presented in Figures 1 and 2 which also show the approximate proportion of farmers using and of clip moving through each outlet.
(i) Government woolsheds
23. The government operates approximately 100 shearing sheds scattered throughout the country. Although they fall under the auspices of the Livestock Department, their day-to-day administration is in the hands of producer groups known as Wool Growers Associations (WGAs). The number of animals sheared at these sheds varies from year to year depending on market conditions and the timeliness of LPMS payments (see paragraph 24), but recent estimates indicate that the proportions have been in the range of 53 to 63% for sheep and about 55% for goats. These animals are owned by approximately 35 to 38% of the stock keepers. The average sheep flock sheared at government woolsheds is, at 53 head, about twice as large as the national average. The average goat flock, at 31 head; is almost half again as large as the national average.
24. After shearing, classing, and weighing a farmer's wool or mohair, a receipt is issued against the advance (or first) payment by cheque. Although LPMS attempts to get cheques to farmers within a month, delays of up to 3 or 4 months are not uncommon. After the entire clip has been sold, a second payment may be made if the average realized price is in excess of the advance price. If it is not, the difference is made up by the Stabilization Fund. Second payment cheques, which are sometimes substantial, may take a year or more after shearing to reach farmers. Farmers receive interest on these delayed payments. Payment by cheque is necessary to minimize financial irregularities.
25. LPMS acts as the growers' agent with the South African Wool and Mohair Boards. In addition to the functions outlined above (paragraph 13), it bulks wool from the government woolsheds, arranges transport to South African markets, and serves as a conduit for payments. It also operates a fibre-testing laboratory.
26. Prices paid to farmers selling through this outlet are determined by the South African Wool or Mohair Board in consultation with LPMS and are gross of all marketing costs and levies which are deducted by LPMS from both the advance and second payments.
27. Data from surveys of livestock holders conducted at their homesteads and at woolsheds reveal that almost two-thirds of the respondents listed the primary advantage of selling through LPMS to be higher total payment. 2 In second place, listed by about 20%, was convenience - the government woolshed was either the only outlet or the closest one available. The mayor disadvantage listed, also by about two-thirds of the respondents, was slow payment.
(ii) Private traders
28. Although the number varies from year to year, there are currently approximately 40 private traders licensed to purchase wool and mohair. This is less than one-third the number operating before government involvement in marketing. Despite the relatively few private shearing sheds, they shear about one-third of the animals owned by about one-third of the stock keepers. Flocks shorn by private traders average 22 sheep and 20 goats. These are, on average, much smaller than the flocks shorn at government woolsheds.
29. In addition to wool or mohair shorn on the premises, private traders also purchase home-shorn fleeces. Although home-shearing is discouraged (because of problems of contamination of fleeces with dirt and difficulties of classing), approximately 15% of animals, owned by 30% of stock keepers, are shorn at home. Home-shorn flocks, at 14 sheep and 11 goats, are a little more than half as large as those shorn by private traders. Home-shearing in general tends to be done in the more remote areas. For the remote area producer, the cost of driving the flock to a shed for shearing is high in terms of time lost and distance travelled. Precise data are difficult to come by but estimates are that about two-thirds of the wool and one-half of the mohair shorn at home are sold to private traders. The remainder is sold to smugglers (see paragraph 32). Thus, traders are purchasing wool or mohair from approximately 50% of smallstock keepers whose flocks are average to below-average in size.
30. Traders' prices are gazetted by the government after a committee of traders and government officials agree on the allowable marketing margin. In the event of disagreement, the government has the last word. This margin makes allowances for transportation and handling charges, shed operation and depreciation, and commission (profit mark-up). In addition, since traders pay cash upon sale, their marketing margin also includes an allowance for the cost of financing the purchase in advance of sale in South Africa.
31. Livestock Holders (LHS) and Woolshed (WS) Survey data (see Swallow et al, 1987 for description) on advantages of marketing to private traders are not so unambiguous as they are for LPMS. Prompt payment receives a plurality of support in one survey, but in another, producers list highest total payment as being the primary advantage. Finally, many producers list the fact that private traders will purchase coloured fleeces (government woolsheds will not) or that they are the only (or closest) purchaser available. As to disadvantages, producers are more in agreement that tracers' payments are lower.
(iii) Smugglers
32. Because their activities are illegal, reliable data on smuggling are necessarily difficult, if not impossible, to obtain. Nonetheless, data on the amount of Lesotho-type wool and mohair sold in magisterial districts just outside Lesotho provide upper-limit estimates of the amount of smuggled clip. Such estimates indicate that less than 5% of wool (which has a relatively low value per unit weight) and perhaps as much as 15 to 20% of the mohair (which has a high value per unit weight) may be smuggled. Smugglers purchase fleeces in farmers' villages.
33. Historical data, as well as anecdotal evidence, suggest that smugglers are residual buyers whose business expands or contracts according to the health and efficiency of the two official channels.
34. Before the government got involved in marketing and when hawkers were still purchasing wool and mohair, most smuggling seems to have been done to avoid paying the wool and mohair levy. Today, according to the LHS and WS, producers have a variety of motivations for selling to smugglers:
a. To avoid costs of driving flocks to shearing sheds or transporting home-shorn fleeces to the market. In this regard, smugglers are fulfilling the function formerly performed by hawkers. This motivation seems to apply particularly to small flock owners in remote areas and to those with a large proportion of low-value, off-colour animals.b. Because smugglers come to farmers and pay cash, they may be a particularly desirable sales outlet for those requiring ready cash for emergency needs. Although traders also pay cash (and higher prices, as well), there are transportation costs involved in getting it.
c. Smugglers purchase wool and mohair from stolen animals. Proof of ownership must be shown in order to market through official channels but not through smugglers. Survey evidence suggests that perhaps as many as 2 to 3% of sheep or goats may be stolen in any year.
35. The principal disadvantages listed by survey respondents are unreliability and low prices. Given the nature of the trade, this is not surprising.
