An investigation into South Africa’s fresh produce sector has revealed barriers to entry, distorted competition, and price mark-ups. The Competition Commission’s provisional report, published on 18 June, identified “29 practical and reasonable provisional remedial actions and recommendations that could address distortions in the fresh produce market.”
The report, which follows an investigation launched last year, aims to analyze whether any features in the fresh produce value chain impede, restrict, or distort competition in the market. The Competition Commission found instances of sustained price mark-ups by retailers, indicating a lack of competition.
Among its findings, the inquiry noted slow progress in integrating historically disadvantaged SME farmers into retailers’ supply chains. Additionally, there are concerns about the limited participation of black farmers or market agents in the value chain, highlighting overall slow transformation in the sector.
“It is important that the markets should be competitive and provide market access opportunities,” the report emphasized. However, the share of black-owned farms or market agents in the fresh produce market remains negligible.
The inquiry focused on the production, supply, and sale of various fruits and vegetables, including apples, citrus, bananas, pears, grapes, potatoes, onions, carrots, cabbage, tomatoes, and spinach. The report highlighted that prices of fresh produce lack transparency, making it difficult for consumers to compare prices across retailers.
After 14 months of evidence gathering and public hearings, the Commission has recommended immediate actions, such as Simba making its potato variety FL2006 gene material available for preservation and African Rainbow Capital divesting its shareholding in Subtropico or RSA Group. Additionally, a new fund is recommended to assist new entrants selling fresh produce in shopping centers.
The agricultural sector contributes around 2.5% of South Africa’s GDP, with the domestic fresh produce market estimated at over R53bn annually.
In conclusion, addressing the challenges in South Africa’s fresh produce sector is crucial for fostering competition and inclusivity. The proposed actions aim to promote transparency, diversity, and market access opportunities for all stakeholders.