Mohair farmers face ‘financial Armageddon’

Mohair farmers face ‘financial Armageddon’

PORT ELIZABETH – It’s the peak season for mohair sales but there is despair for Basotho farmers.
BKB’s 7 000 square meters warehouse in Port Elizabeth which is usually packed with Lesotho’s mohair at this time is empty.
This is because Basotho mohair farmers are not able to export their mohair due to the New Agricultural Marketing Regulations of 2018.
In good times Lesotho would deliver 700 of the 2 500 tonnes of mohair BKB received from farmers.
And time is running out for Basotho farmers to sell their mohair.

While Lesotho’s farmers are unable to export the Mohair South Africa Market report for the auction on Tuesday in Port Elizabeth shows a 9.6 percent increase in the average price of mohair, with the highest price at M539 per kilogramme. The third sale of the 2018 winter season will be on 25 September 2018. Lesotho’s mohair is sold at five of the 16 main auctions. The best prices are in August and September because that is when the main buyers come to the auctions. From October the prices are depressed because only small buyers are at the auctions.

Buyers told thepost that if Basotho farmers don’t bring their mohair on September 25 they will look for alternatives and Lesotho would have lost its niche market. “Mohair has been mainly affected. It had developed a special niche of buyers but with the prevailing situation it is likely not to come to the market,” said Anthony Kirsten, Chairman of the South African Wool and Mohair Buyers Association (SAWAMBA).

Kirsten says spinners and weavers who buy Lesotho’s mohair will have no choice but to look for substitutes.
“The longer it takes for this issue to be resolved the more the wool or mohair from Lesotho becomes irrelevant.”
Etienne Bezuidenhout, manager of Mohair Marketing Lesotho Account BKB, said “it will be suicidal for Lesotho to fail to avail its mohair to the market by the end of this month”.
“Buyers need to meet demands of their clients on time. If the product they want is not available they will find a substitute and stick with it,” Bezuidenhout said. “They need consistency and failing to deliver just this once will bring the mohair industry in Lesotho on its knees.”

He adds that once buyers ditch a product it is game over, they are very unlikely to go back regardless of how good the product is.
“In the past almost 50 years this has never happened. It would be sad to let a relationship built over so many years with buyers collapse.”
According to Clarens Eriskin of Segara Masurel, another wool and mohair buyer, Lesotho only has two options: “It is either you send your mohair to South Africa to be auctioned in a competitive environment which results in farmers getting best prices or you sell to Stone which will not fetch good prices for the farmers”.

Stone Shi is the Chinese-Australian investor whose deal with the Lesotho National Wool and Mohair Growers Association (LNWMGA) has gone sour.
He has since been evicted from Thaba-Bosiu Wool and Mohair Centre which he built under a joint venture with the LNWMGA.
Stone’s business model was based on the idea that buyers would come to Lesotho to buy the wool and mohair from Lesotho.
The idea was that such an arrangement would cut out the middlemen.

But Eriskin said he thinks Stone’s biggest market will be the informal market in China.
He said Stone’s strategy is to use the tender system that makes farmers mere bystanders in the sale of their wool and mohair.
Shi is said to have the backing of some ministers who tinkered with regulations to shore up his fledgling business.
The government has introduced stiff penalties for people who sell or buy wool and mohair without a licence. It has also banned the export of wool and mohair without licence. All these, critics say, are meant to assist Shi’s business.

He further indicates that Stone Shi had proposed the same model for South Africa but it was rejected.
“Basically his proposal is to create a monopoly,” Eriskin says.

Peter Carey of Lempriere, a wool and mohair buyer, said that selling the mohair to Stone will mean that the mohair will be sold through tenders or in the informal sector in China and not through auctions which are considered fair, efficient and transparent ways that ensure buyers get the best value for their product. “China tried to implement the auction system about ten years ago but it collapsed within three months,” Carey said.

Buyers also fret that proposed direct auctioning of wool and mohair from Lesotho will increase their costs and result in lower prices for the farmers.
“We will not come, the costs will be astronomical for us as buyers and the quantities are not enough,” said Andrew Papie of Modiano, one of the biggest wool buyers in the world. He cautioned that it is important for Lesotho to remember that its wool and mohair is not sold in isolation. Buyers are looking at wool and mohair from both Lesotho and South Africa. He further said the duration of Lesotho mohair and wool season is not enough to keep any plant or factory operating.

It’s estimated that to have a facility like the one BKB is using for storage, sorting and displaying Lesotho will need at least M500 million.
Kirsten pointed out that he believes that setting up a factory is not the hardest part but it is keeping the factory running that is costly.
“One will need an intense working capital. We are talking about around M50 million a season. As it is, several factories shut down because the quantities were not enough to cover the running costs.”

He states that SAWAMBA wrote a letter in July to Prime Minister Thomas Thabane trying to explain the implications of the new regulations but they didn’t get a response. Wian Heath of the South African Wool Testing Bureau told thepost that it will cost millions for Lesotho to establish a testing wool or mohair testing centre. They warn against buying testing equipment off the shelf.

They say most of the equipment is bespoke and some of it comes from Australia.
It says that needs a high level of expertise and also needs in-house maintenance.

The bureau says testing is crucial as it gives buyers that they are getting the best product.
Selibe Mochoboroane, a farmer and politician in Lesotho, said Lesotho is not yet ready to set up such facility.
“Setting it up will not be in the interest of farmers or the country due to the costly upkeep of such facility.”

“It is not a facility that can be erected in a day, month or year therefore in the meantime it would be best to let farmers use their former channels,” Mochoboroane said. His sentiments were echoed by Prince Seeiso Bereng Seeiso, the Principal Chief of Matsieng, who was also at the auction.
Chief Seeiso said his visit has revealed that it takes more than regulations to transform the sector.

He said he has seen that the sector is “not only capital intensive but also demands expertise”. He said without the expertise Lesotho would not be able to meet the international standards and the industry will collapse.

BKB, the South African company that has been buying Lesotho’s wool and mohair for over four decades has been at loggerheads with the government.
The government has accused the company of evading tax and opening bank accounts without proper documents.
BKB has said all those charges are trumped up and a ruse to hound it out of Lesotho so as to give an unfair advantage to competitors.

Lemohang Rakotsoane

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