Supermarkets were imposing large markups on customers for specific fruits and vegetables, according to the Competition Commission’s fresh produce market inquiry report.
The report, which was made public in Pretoria on Monday, was issued after the fresh produce market’s yearly revenue — excluding exports and informal sales — surpassed R53-billion.
It identifies a number of persistent issues facing the sector that are also impeding growth.
It was determined that large retailers such as Shoprite Checkers, Pick n Pay, Woolworths, Spar Group, Food Lover’s Market, and Massmart needed to update their fresh produce pricing policies for each 100g.
According to the report, consumers find it difficult to compare prices across retailers or even within the same store because fresh produce prices are frequently displayed per unit.
The commission’s deputy commissioner, Hardin Ratshisusu, drew attention to packaging size discrepancies, such as selling tomatoes in 3kg bags when other retailers sell them in 1kg or 3.5kg bags.
These discrepancies make weighted pricing opaque and impede fair competition.
With a suggestion to put these changes into effect within a year, Ratshisusu emphasised the significance of clearly and easily displaying weighted prices to assist customers in making informed decisions.
Historically disadvantaged farmers
The report also notes that historically disadvantaged farmers and market agents continue to participate at low rates, primarily as a result of limited opportunities and insufficient funding in municipality-owned fresh produce markets (MFPM).
Ratshisusu suggested that the Department of Agriculture, Land Reform, and Rural Development should take steps to boost the sales of small-scale and historically disadvantaged farmers through MFPMs.
This includes reviewing the legal framework governing these markets.
He proposed that municipalities should, within three years, align their bylaws regarding trading hours, market agent rules, and the use of cold storage and refrigeration facilities.
Regular reviews every five years were recommended to ensure bylaws remain relevant to economic changes.
The report further states that only a few market agents have significant market shares, despite the noted number of market agents operating across various MFPMs.
RSA Group, the Grow Group, and Subtropico were recognised as the big players and account for 70% market share in major MFPMs.
Incentive to compete reduced
He said the inquiry found that African Rainbow Capital, an investment company, has significant cross-shareholdings in two of South Africa’s largest market agents, RSA Group and Subtropico.
“The concern is that such cross-shareholdings create an alignment of economic interests,” said Ratshisusu.
“The inquiry finds that African Rainbow Capital’s cross-shareholding, in the context of a market with exceptionally high concentration levels, reduces the incentive of its investee firms, namely RSA Group and Subtropico, to compete.
“Accordingly, the inquiry finds that African Rainbow Capital’s cross-shareholding in the RSA Group and Subtropico impedes, restricts, or distorts competition.”
Ten days to table the report
The report was handed over to Parks Tau, the Minister of Trade, Industry, and Competition, who has 10 days to present it to parliament.
Tau stated that since he had just received the report, he was unable to provide specifics.
He does, however, hope that retailers will heed the advice and refrain from charging exorbitant prices for fresh produce.
“There are a number of areas that have been identified with regards to addressing barriers to entry for small and emerging farmers, issues of funding for farmers, and the range of recommendations that we have to take into account,” said Tau.
