Cape Town: The Fresh Produce Market Inquiry has released its final report, which identifies features within the fresh produce value chain that impede, restrict and distort competition. The inquiry, initiated by the Competition Commission, follows rigorous analysis and extensive stakeholder engagement aimed at assessing competition within South Africa’s fresh produce market.
According to South African Government News Agency, the inquiry began on 31 March 2023 and assessed the fresh produce value chain across three main themes, including the efficiency of the value chain, concentrating on fresh produce market facilities; market dynamics of key inputs and their impact on producers, and barriers to entry, expansion and participation.
At a media briefing on Monday where the report was launched, Deputy Commissioner and chair of the inquiry, Hardin Ratshisusu, noted that the fresh produce market-valued at some R53 billion annually (excluding informal sales channels and exports)-presents ‘significant opportunity for growth and inclusion’. However, Ratshisusu highlighted the low participation share of historically disadvantaged farmers and market agents, emphasizing the sector’s historical inequities and the need for meaningful economic participation and transformation in South Africa.
The inquiry mainly focused on five fruits, namely, apples, citrus (notably oranges and soft citrus), bananas, pears, and table grapes, along with six vegetables, including potatoes, onions, carrots, cabbage, tomatoes, and spinach. These products are staples in South African households.
Ratshisusu outlined six concerns related to competition in the fresh produce sector: inefficient municipal fresh produce markets, inefficiencies in the value chain, the conduct of fresh produce market agents, high input costs (particularly for certain fertilizers and seeds), regulatory obstacles, and systemic barriers to entry for small-scale, emerging, and historically disadvantaged farmers.
To disrupt the status quo, Ratshisusu suggested adopting new and diverse lower-cost models of retailing that enable greater pass-through of farmgate and supplier prices. Localized competition, particularly from SMMEs and HDP independent retailers with diverse models, is required for more dynamic competition in fresh produce retail, supported by efficiently functioning National Fresh Produce Markets (NFPMs) and effective policies.
The inquiry found that historically disadvantaged farmers face challenges accessing formal retail channels and national fresh produce markets. To enhance the participation of SMMEs and HDPs and improve their ability to innovate and upgrade in grocery retail value chains in South Africa, the inquiry recommends investigating the feasibility of a mandatory code of conduct, drawing lessons from international best practices.
For consumers, the inquiry revealed concerning instances of high mark-ups by supermarkets over what suppliers are paid for selected products, with slim net margins after accounting for high supermarket chain operation costs. This indicates concerns in the value chain, with potential high rents extracted at the supermarket level, suggesting that competition in the formal retailing of fresh produce is not as healthy as it could be.
To address these challenges, the inquiry has identified 31 ‘practical and reasonable remedies’, including recommendations for policy reform, market restructuring, and targeted support for small-scale, emerging, and historically disadvantaged farmers, aimed at promoting competition, lowering barriers to entry, and creating a more inclusive and competitive fresh produce value chain.
Ratshisusu emphasized the report’s significance as more than just a document, providing insights into the domestic fresh produce market and a path towards economic inclusion. Market inquiries are a strategic focus of the Competition Commission to tackle high market concentration and barriers to entry, promoting economic growth and transformation in South Africa. The report signifies the Commission’s commitment to fostering competitive markets that contribute to the country’s broader socio-economic objectives.