14 Jan 2025 SA’s fresh produce inquiry – final report released
The Competition Commission has called for a major overhaul of South Africa’s fresh produce value chain, citing various issues such as ambiguous pricing practices, which have prompted a defensive response from industry stakeholders.
In a report released on Monday Jan 14, 2025, two years after the inquiry began, the commission identified “significant barriers to competition” within the sector. These include inadequate infrastructure, regulatory hurdles, anti-competitive behaviours from certain market players and rising input costs.
The commission proposed 31 recommendations aimed at enhancing pricing transparency, restructuring market frameworks, and reducing input costs to improve affordability and competition in the long run.
By increasing pricing transparency, consumers could more easily identify the best deals, while adjustments to market structures and input costs might help lower long-term prices, according to the report.
Parks Tau, the Minister of Trade, Industry, and Competition, expressed hope that the commission’s suggestions would serve as a blueprint for fostering a fairer and more inclusive fresh produce market.
During the report’s unveiling, Deputy Commissioner Hardin Ratshisusu noted that retailers’ pricing for certain fresh produce items showed instances of significant markups on total revenues compared to what suppliers receive for select products.
Despite the overall slim profit margins, this raises concerns regarding the value chain for commonly consumed fruits and vegetables. Ratshisusu stated, “This suggests that modern food retailing models are not effectively passing on prices from farmers to consumers, indicating that competition in the retail sector for fresh produce could be improved.”
The inquiry also revealed that major retailers, including Woolworths, Pick n Pay, and Shoprite Checkers, typically price fresh produce by unit. However, these units vary across stores, complicating price comparisons for consumers.
For example, the units may range from 1kg to 7kg, or even by count. The commission suggested that retailers implement dual pricing — displaying prices by both unit and kilogram or gram — to enhance transparency.
This inquiry represents the latest governmental intervention in the economy and is likely to spark discussions regarding the level of government oversight in typically free markets. It has also elicited defensive reactions from major industry players, who point to their existing measures for transparency and quality.
Shoprite and Pick n Pay both noted that they already display per-kilogram prices where feasible, while Woolworths has not yet commented on the report.
A few large market agents and input suppliers dominate the industry
The report noted how this stifles competition and drives prices up. It also pointed out challenges facing smallholder and historically disadvantaged farmers, inconsistencies in pricing formats, and elevated costs for fertilizers, seeds, and agrochemicals due to reliance on imports.
The inquiry raised concerns regarding the dominance of large market agents, such as the RSA Group, in the national fresh produce markets, particularly in Johannesburg and Tshwane.
It noted that the cross-shareholding between RSA Group and Subtropico through African Rainbow Capital (ARC) reduces competition by aligning their economic interests. The commission recommended that ARC divest its stake in either RSA Group or Subtropico to eliminate this structural connection.
Despite the fresh produce market’s annual value exceeding R53-billion (not including informal sales and exports), the representation of historically disadvantaged farmers remains minimal, accounting for only about 1% of sales at national markets. This reflects systemic barriers rooted in historical inequalities and established relationships that favour large commercial entities.
Wandile Sihlobo, an agricultural economist, highlighted that this issue is not exclusive to the fresh produce markets but mirrors broader challenges within South Africa’s agriculture sector. He emphasised the need for established stakeholders in agriculture to facilitate skills transfer to new entrants.
The inquiry also found that national fresh produce markets in regions like Johannesburg and Durban struggle with deteriorating infrastructure, such as insufficient cold storage and ripening facilities. The commission recommended that municipalities, alongside the South African Local Government Association and the South African Union of Food Markets, revise the operational and governance models of the fresh produce markets they manage and allocate profits to fund infrastructure enhancements.
It further pointed out South Africa’s heavy dependence on imported fertilizers, seeds, and agrochemicals, which exposes the fresh produce supply chain to fluctuations in global prices and supply, thereby increasing market uncertainty. The commission advocated for local initiatives, including support for domestic seed production, to lessen reliance on imports and alleviate inflated prices.
Source: BusinessLive.co.za, Competition Commission
