Writes Tjonane Matla
On the 15th of December 2017, the Silo had an opportunity to interview the biggest wool buyer in South Africa MODIANO (Pty) Ltd. MODIANO was represented by its Managing Director – Derick J. Pape. Our interest with MODIANO interview was technically to glean from its Managing Director who has been buying wool since 1960, a number of scenarios and feasibility on such ideas. The first question was based on possibility of on-line wool and mohair auctioning while the other critical factor was appetite in buying Lesotho wool from Thaba-Bosiu Wool Centre, instead of Wool Exchange in Port Elizabeth.
INTERNET WOOL AUCTION
“It has been tried before but to be honest it did not work and was too time consuming. One of the major reasons was there has to be a “time out” to enable buyers to increase their bids. This resulted in huge delays as another “time out” was triggered time and again which became impractical. “, commented Derick Pape.
In the Wool Exchange, one Lot, which comprise of one to say 40 bales, is sold every 20 to 24 seconds and sometimes even quicker.
All wool sold at the Wool Exchange has been tested and certified by the WOOL TESTING BUREAU S.A, an internationally accredited Laboratory recognized by IWTO. In order to issue a certified Certificate a trained employee of the WTB must be present to supervise the coring and sampling operation including weighing of the bales, samples and the Grab sampling operation to ensure all the bales in a Lot are the same. Sample tufts are then taken to determine the Additional Measurements for Length and Strength determination. All the samples are under the control of the WTB employee and delivery to the Laboratory. The Test results are then sent to the respective Brokers electronically by the WTB. The Test results are then printed on the respective Catalogue which is then downloaded electronically to all the Wool Buying companies.
The wool brokers canvas farmers to sell their wool through their companies at the auctions. They provide advice on breeding, classing, farming practices and shearing services. The catalogues are prepared for the wool buyers with all details, after being checked to ensure that no wrong bales are auctioned. If there are wrong bales they are removed, as if incorrect bales are shipped overseas this can cause severe damage to the processing lot, i.e., stained or coloured wool in a delivery can result in the rejection of the product which can end up costing the wool buyer / processor hundreds of thousands of Rands in claims. Occasionally if wrong bales slip through and the processor finds these bales, the broker is held responsible and must pay a claim.
The buyers prefer to buy properly prepared wool from the brokers at auction, rather than directly from the farmers. The brokers high density press the bales and pack the containers for shipment, avoiding additional costs to the buyer (cross-haulage, additional receipt and loading preparation costs). Buying directly from farmers is impractical as shipping loads per type and per container takes too long and there is no guarantee of quality or certification as is done by the brokers.
BUYING FIBRE FROM THABA-BOSIU WOOL CENTRE
There are about seven brokers and nine fibre buyers all based in Port Elizabeth. The seven brokers compete to prepare wool and mohair from the farmers while the nine buying companies compete to buy wool for the international market. It is better to compete at a centralised auction where there are many products and buyers. In other words, buyers are more confident when buying from a bigger and established market, than having to travel far for one product, therefore the issue of time and cost to get fibre might work against Lesotho should they take that move. Lesotho wool can obtain better prices when sold where there are many buyers – at the Wool Exchange in PE.
While responding to the same Wool Centre, Pape mentioned that he has met a Chinese Businessman who had come to Port Elizabeth for talks with the biggest buyers of wool in South Africa and a key players globally.
- MODIANO SA (PTY) LTD
Modiano is the biggest buyer of wool in South Africa. The company’s head office is in London, the Modiano Group has companies in Bradford UK – Biella, in Italy – Shanghai China and the largest wool mill / processing plant in the world – in Nejdek, Czech Republic, Eastern Europe.
The group wool buying companies are in Melbourne, Sidney and Freemantle Australia – Christchurch, New Zealand and Port Elizabeth.
ELIMINATING THE MIDDLEMAN
According to Pape, the issue of cutting out the brokers from the value chain is not really a new thing, whether in Lesotho or in the South African Wool and Mohair Industry. Pape explained much of his business is buying the South African and Lesotho Wool and very little of Kenya’s wool. He also said that when buying wool at the wool exchange auction, payment is made after five working days, yet they as buyers get paid thirty to ninety days after the wool has been shipped. He furthermore said that the nature of business in China needs letters of credit and guarantees amounting to of millions of Rands.
According to our findings, the buyers have trust in the organised secured system – like the one that wool is bought at auction via the brokers – hence competition and price. Buyers furthermore like this system as it has guarantees of quality and should mistakes happen, buyers do no lose as the whole system is guaranteed. The biggest question then becomes if wool is not seen by the buyers, then how do they evaluate the wool and guarantee correct delivery.
The developments in online technology are so rapid that it is inevitable that in future those challenges will be addressed and sales will be online.
PLAYERS IN THE FIELD
The South African and Mohair Wool Exchange.
G Modiano SA (Pty) Ltd, Lempriere SA, Standard Wool SA, Tianyu, Stucken & Co, Segard Masurel SA, New England Wool SA, CMW Operations and SAFIL SA.
BKB, CMW, JLW, S/MAS, QWB, SBL and VLW
To bid on auctions a buyer has to be a member in good standing with SAWAMBA.
* This, in some measure, ensures that brokers/growers will receive
payment for wool and mohair purchased on auction.
- SAWAMBA facilitates the auctions in conjunction with the brokers, ensuring that auctions are conducted in an orderly fashion.
- Co-ordinates policy and action of its members, and may arbitrate or settle disputes that may arise between them.
- Works to preserve the reputation of the wool & mohair trades in South Africa and internationally.
- Establishes and ensure standardisation of charges and conditions of sale.
- Ensures that buyers/exporters of wool & mohair are represented on other bodies with similar objects.
- Collects funds to benefit the interests of the wool and mohair trades.
- Liaises with veterinary departments when necessary to ensure dissemination of information.
Feasibility and challenges of beneficiation of wool and mohair
[M1]Add a box that highlights the development of auction software that could address these challenges
[M2]It might be worth to do an article on the wool market and if we could attract the buyers from a volume perspective