By Joanie Bergh
The Competition Commission has found that supermarkets place excessively high profit margins on specific fruits and vegetables. Major retailers like Shoprite Checkers, Pick n Pay, Woolworths, the Spar Group, Food Lover’s Market and Massmart must also revise their pricing policies for fresh produce to display prices per 100g.
This is just one of the findings in the Commission’s final report on the South African fresh produce market investigation, released on 13 January in Pretoria.
The investigation covered the value chain of apples, citrus, bananas, pears and table grapes, potatoes, onions, carrots, cabbage, tomatoes and spinach.
The Commission launched its investigation into the fresh produce value chain in March 2023. The aim was to determine if any factors hindered, restricted, or distorted market competition. The final report was issued after the fresh produce market’s annual income – excluding exports and informal sales – exceeded R53 billion. It was handed to Parks Tau, Minister of Trade, Industry and Competition.
The report identifies several issues that are hampering growth in the sector.
One of the findings is that major retailers like Shoprite Checkers, Pick n Pay, Woolworths, the Spar Group, Food Lover’s Market and Massmart must adjust their fresh produce pricing policy to show prices per 100g to make it easier for consumers to compare prices between different retailers, but also within the same store, as fresh produce prices are often displayed per unit.
Hardin Ratshisusu, the Commission’s Deputy Commissioner, highlighted differences in packaging sizes, such as tomatoes being sold in 3kg bags while other retailers sell them in 1kg or 3.5kg bags. These differences lead to price opacity for weighed products and hinder fair competition.
With changes proposed within the next 12 months, Ratshisusu emphasised the importance of clear and understandable prices for products that need to be weighed to help customers make informed decisions.
Historically disadvantaged farmers
The report also indicates that participation of historically disadvantaged farmers and market agents remains low, mainly due to limited opportunities and insufficient funding in municipally owned fresh produce markets.
Ratshisusu suggests that the Department of Agriculture take steps to promote sales by small-scale and historically disadvantaged farmers in these markets.
One recommendation is to relook at the legal framework regulating these markets.
He proposed that municipalities adjust their bylaws regarding trading hours, market agent rules, and cold storage and cooling facilities within three years. Regular review every five years is also recommended to ensure bylaws remain relevant to economic changes.
The report also points out that only a few market agents hold significant market shares despite the number of market agents operating across various municipally owned markets.
The RSA Group, Grow Group and Subtropico have been identified as the biggest stakeholders, controlling 70% of the market share in the country’s major markets.
Reduced competition
According to Ratshisusu, the investigation found that African Rainbow Capital, an investment company, has significant cross-ownership of shares in two of South Africa’s largest market agents, the RSA Group and Subtropico, which raised concerns that this could lead to an alignment of economic interests.
“The investigation further finds that African Rainbow Capital’s cross-ownership, in the context of a market with exceptionally high concentration levels, reduces the incentive of its investment companies, namely RSA Group and Subtropico, to compete.’
Consequently, the investigation found that African Rainbow Capital hinders, restricts, and distorts competition within this context through the RSA Group and Subtropico.