South African Fruit Farmers: Protect Your Money When Exporting Through an Agent
Selling fruit through an export agent can make life easier for growers – but it also comes with financial risks that should not be overlooked.
A recent warning from the South African Avocado Growers’ Association (SAAGA) highlights just how important it is for growers to understand where their money is held when fruit is exported on commission.
Earlier this year, an export company entered voluntary liquidation after selling fruit on behalf of growers. The company had not paid the growers the money owed to them.
The important issue is where the proceeds from the fruit were held.
Your fruit, your money – make sure it is protected
When an exporter acts as a commission agent, the grower remains the owner of the fruit. South African law requires export agents operating on this basis to have a grower trust account into which the proceeds from fruit sold on commission must be paid.
This distinction can become critically important if an exporter runs into financial trouble.
According to SAAGA, in the recent case the growers’ money had not been paid into a trust account. Had it been properly held in a trust account, those funds would have been treated separately during the liquidation process and would have been available to be paid to the growers.
For fruit farmers, the message is simple: don’t assume your money is protected – verify it before you send your fruit.
Four checks to make before appointing an exporter
Before entering into an agreement with an export agent or company to sell your fruit locally or internationally, SAAGA recommends that growers carry out several basic checks.
1. Ask for proof of a grower trust account
Don’t simply take an exporter’s word for it. Ask for confirmation that they have a properly established grower trust account.
Your contract should also clearly state that proceeds from the sale of your fruit will be paid into this trust account.
2. Check their industry registrations
Find out whether the company is registered with the Fresh Produce Exporters’ Forum (FPEF).
Fresh Produce Exporters’ Forum (FPEF)
Also check whether the company is registered with the Agricultural Produce Agents Council (APAC).
Agricultural Produce Agents Council (APAC)
There is an important distinction here: a trader who buys your fruit outright for resale does not fall under APAC legislation in the same way as a commission agent. APAC legislation applies to agents who sell produce on behalf of growers in return for a commission.
3. Ask for references
Don’t be afraid to ask an exporter for references from other growers who have done business with them.
More importantly, contact those growers yourself. Ask whether payments were made on time, whether the exporter communicated properly and whether there were any problems during the marketing and payment process.
4. Never ship without a contract
Make sure there is a written contract before your fruit leaves the farm or packhouse.
Read the agreement carefully and make sure you understand how your fruit will be marketed, what commission will be charged, when payment will be made and, critically, where the proceeds from your fruit will be held.
A small amount of due diligence can prevent a major loss
Fruit production already carries significant financial and production risks. Growers shouldn’t have to discover after the fact that their marketing arrangements exposed them to an avoidable financial risk.
The recent warning highlighted by SAAGA is a useful reminder to South African fruit farmers: check the company, check the registrations, check the trust account and check the contract before committing your crop.
When it comes to the proceeds from your fruit, a few questions asked before export could make a very big difference if the unexpected happens.
This article is based on a warning issued by the South African Avocado Growers’ Association (SAAGA). Growers should obtain appropriate professional or legal advice regarding their specific contracts and circumstances.
