The South African Wool and Mohair Buyers Association (SAWAMBA)
Board in front of the ad-hoc committee at the Exchange in Port Elizabeth.
Writes: Tjonane Matla and Tshepo Heqoa
The ad-hoc committee after meeting with the two powerful fibre brokers in the Wool Exchange met up with the Wool Testing Bureau (WTB) and the South African Wool and Mohair Buyers Association (SAWAMBA) in order to get a clear picture of the wool and mohair trading pattern.
At the Wool Testing Bureau, the parliamentarians were received by WTB – Managing Director Wian Heath who took them through the journey of the wool industry, why tests had to be done, what the certification meant, and what tests were made and why such tests had to be made.
It was not only surprising for the parliamentarians to discover that WTB is an independent company which is a special tool owned by the whole industry and does not share any dividends as there are no shareholders, but only a special purpose company meant for giving a fair valuation of fibre not favouring anyone from the industry, but representing every stakeholder in the fibre value chain.
It then became very clear to the committee that the process of sample grabbing is a scientific exercise that needs to be done in a specific manner as per the international standards set up by Wool and Textile Organisation (IWTO). Furthermore, it then became crystal clear why the samples have to be done in WTB supervised environment.
As Heath took the members of parliament for a tour in the WTB lab facility, more and more answers that were pieces of puzzle before visiting Port Elizabeth were recorded by the ad-hoc committee. It was therefore very clear why WTB could not test Stone Shi’s samples as WTB did not supervise the process nor did Thaba-Bosiu have the correct equipment or well trained personnel.
Isak Staats of BKB, Members of Parliament Ntlhoi Motsamai
and Thabang Kholumo during the investigation tour at BKB stores.
Ad-hoc committee meets the buyers
SAWAMBA board of directors lead by the new chairman Clarence Friskin of Segard Masurel, Andrew Pape of Modiano SA, Paul Lynch of Standard Wool SA, Ivan Smith of Suedwolle, Peter Carey of Lempriere and Anthony Kirsten of Stucken and Company met with a delegation of Members of the Parliament’s Ad hoc Committee at the Wool Exchange in Port Elizabeth.
This was not only an exciting moment for the committee but also the buyers who were able to express their views concerning the new regulations in Lesotho. Members of Parliament asked direct simple questions, which were all well answered enough to make the committee understand the whole fibre industry and how it works. The answers went deep into explaining the PEST + C model of the fibre industry. Political – Economical – Social – Technological + Competition are normally the driving factors that drive any industry’s strategy, hence location of any business enterprise.
It is therefore understandable why the fibre brokers are along the Grahamstown Road in Port Elizabeth, where the Exchange is also on the very same street and why all brokers are hardly ten minutes from the habour. In response to an inquiry from the ad-hock committee on how the absence of the Lesotho clip affected their business, the buyers claimed that that did not only affect their balance sheets but the trade of the wool and mohair industry across the world suffered as mills could not substitute the Lesotho fibre. It is a fact that there is shortage of wool in the world, and the fact that the Lesotho clip did not hit the world organised market affected the global industry.
Paul Lynch of Standard Wool South Africa revealed that he was fortunate to go to China and introduce Lesotho wool into the biggest market in the world a couple of years ago, when Lefu Lehloba was still in office at the Lesotho National Wool and Mohair Growers Association (LNWMGA). Emphasizing that not only his company but several other companies travelled to China (inclusive of Modiano which is the largest buyer of Lesotho wool clip) to introduce Lesotho wool into China. He said that they were invited into an Annual General Meeting of the LNWMGA where a special request was made by the congress to re-negotiate Lesotho wool to hit Chinese market.
What really was sorrow to them as buyers is that after a long-term relationship with the growers association who had on several occasions presented beautiful Basotho hats and blankets over many interaction business occasions to the buyers, a gesture that meant a lot to them as people. It was further said that most of the buyers actually went an extra mile to promote Lesotho wool across the globe.
Parliamentarians at CMW warehouse in Port Elizabeth.
“The interesting thing is that the Lesotho clip has improved dramatically over the last five or ten years, due to improvement of livestock with the assistance of the brokers. Kindly note that we have promoted that internationally. So this people actually like the Lesotho wool because I think the breeding had been particularly good. So its absence has affected all our companies in a big way”-Paul Lynch
“I think just to add to what Paul has just said, another way it has affected us is that for BKB for example to lose the throughput of Lesotho wool clip has meant that the cost per kilo or per bale of handling the wool clip has gone up, they have just handed us a 15% increase in cost that we have to pay to handle our SA wool clip. Now if the SA wool clip and Lesotho clip can combine their volumes and get the economics of scale we can reduce the cost of doing business, which allows us to be more attractive to the international community. So we lose that benefit collectively, South Africa and Lesotho if we split and separate this clips and market them separately.”– Anthony Kirsten
“I think the real question also is; do you understand what it is costing you as an industry. When your wool or mohair are sold, and it is with the price of a fibre that is not tested, with all these companies represented, when that wool goes to the auction, and your mohair and wool was put off for auction, then all these gentlemen, all these buying houses representing all the agents in the world all the factories in the world, will they determine the price your fibre will go for. The real question Mr Chairman is that is not the loss to us consider the loss to yourselves”- Irvin Smith
The Open Cry Auction Method versus the Online Auction Method.
Andrew Pape responded to the quest of the best auction method by stating that the open cry auction system is always the best way to sell the wool. He announced that this method is used in developed countries such as Australia, and to a very large it also happens in Argentina and it is the preferred method in South Africa. The open cry method he said, is the most tried and tested method. On the other hand, he revealed that for the online auction the risk is that one would not know who is on the other side of the bidding or whether the bidding is genuine or not. So with the open cry method one can see and feel the market.
“We have had an online auction in South Africa and it does not work, neither is it for the benefit of the farmer.” – Andrew Pape
Andrew concluded by explaining that 90% of both Australia and Argentina’s being the major players in the world wool goes through an open cry auction system where seven buyers bid for one type of wool. With this system buyers are able to push prices so high that those with the most money will have the benefit of securing the wool hence the farmers also get the best prices for their fibre.