South African Competition Watchdog’s Inquiry Finds Abuses in Fresh Produce Market

South African Competition Watchdog’s Inquiry Finds Abuses in Fresh Produce Market
Photo: 19.06.2024 353

To address distortion in the market, the inquiry identified recommendations and remedial actions.

On June 18, the Competition Commission of South Africa released a provisional report on the Fresh Produce Market Inquiry (FPMI).

The inquiry focused on the role of market agents in the markets, concentration of market agents, pricing of certain inputs (mainly some fertilisers and some seeds), barriers to entry in the fresh produce value chain, access to formal retail space and pricing of fresh produce with a detailed analysis of potatoes, onions and tomatoes.  

Detailing the findings of the preliminary report, Deputy Commissioner Hardin Ratshisusu said the inquiry found some instances of high mark-ups by retailers which have been sustained over a period of time, which the Commission found to be an indictor of a lack of competition.

Ratshisusu said prices of fresh produce "are not transparent enough such that they allow consumers to reasonably compare prices in-store and across retailers," because prices are not at per kilogram but per unit basis.

The agricultural sector contributes approximately 2.5% of South Africa's gross domestic product, while the market size of the domestic fresh produce market is estimated at over 53 billion rand ($2.93 billion) annually.

According to the pprovisional report, SPAR, Woolworths, Food Lover’s Market, and Shoprite, seed company Starke Ayres, and JSE-listed entities African Rainbow Capital and agrochemicals giant Bayer South Africa as all being separately and collectively implicit or responsible for price distortions in the market.

The inquiry also noted that there is still slow progress in integrating historically disadvantaged small-to-medium enterprise farmers into various retailers' supply chains. The smallholder farmers were systematically cut out of the market with an about 1% contribution to the sales as they lacked access to the market, funds, retail shelves and water rights.  Hardin Ratshisusu recommended 29 practical actions and eight remedies to address the barriers to entry and participation of small farmers.

Despite the fact that the major supermarket chains agreed to phase out long-term exclusive lease agreements in shopping centres,there have been no new entrants to challenge the four food retailers in shopping centres and malls, and the retail landscape had not changed.

The inquiry recommended that the Department of Trade, Industry and Competition (dtic) set up a fund to help entrants into the market to challenge the established retailers and also called on property owners to reserve space in malls and shopping complexes for fresh produce entrants in a bid to balance out the monopoly.

The Commission announced the decision to launch a public market inquiry into the fresh produce market  in March 2022. The press release noted that the inquiry will focus on particular issues at each layer of the value chain — from the farmer's sale of fresh produce to the supplier to the end customer.

Sources: IOL, Reuters

food markets  agricultural markets  South Africa 

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