Competition Commission Calls for Transparent Pricing of Fresh Produce

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In a move aimed at enhancing consumer price comparison, the Competition Commission has proposed that supermarkets display per kilogram or gram prices for all fresh fruit and vegetables in addition to unit prices. This recommendation was announced during the launch of a provisional report from the Commission’s fresh produce market inquiry on Tuesday.

The inquiry, initiated in March 2023, seeks to identify and address potential adverse effects in the fresh produce value chain that could hinder competition at both wholesale and retail levels. Deputy Commissioner Hardin Ratshisusu, who chairs the inquiry, emphasized the need for greater pricing transparency to facilitate better consumer decisions.

“Consumers find it difficult to compare prices offered by different retailers. Right now, they can see unit prices, but for them to work this back and figure out how much a product costs per kilogram is cumbersome,” Ratshisusu explained. He noted that the current lack of transparency distorts competition as it impairs consumers’ ability to effectively compare prices among retailers.

The proposed remedial action targets the five largest retailers—Woolworths, Shoprite, Spar, Food Lover’s Market, and Pick n Pay—mandating that they display per kilogram prices alongside unit prices for fresh produce.

Despite retailer opposition citing the high cost of implementation, the Commission remains unconvinced by their arguments. Ratshisusu stated, “We are not convinced by that argument.”

Unresolved Markup Concerns

The inquiry has yet to determine whether the high markups on certain fresh produce by retailers are justified. Ratshisusu mentioned ongoing engagements with retailers to understand their cost structures and the rationale behind these markups. This aspect of the inquiry remains unresolved and was not included in the provisional report.

State of Fresh Produce Markets

The inquiry’s provisional findings highlight significant issues within South Africa’s fresh produce markets. Although these markets generate sufficient revenue for sustainability, profits are not earmarked for current and future capital expenditures.

Smallholder and medium-scale farmers face significant challenges in selling their produce at these markets, with less than 1% of gross sales originating from smallholder farmers. The Commission recommends that fresh produce markets set annual targets to increase sales from smallholder and historically disadvantaged farmers by at least 10% annually.

Barriers for New Market Agents

High market concentration among market agents operating in fresh produce markets poses another barrier. The inquiry found that new market agents, especially smaller and historically disadvantaged ones, struggle to gain a foothold due to limited access to highly traded produce like potatoes, onions, tomatoes, and bananas.

To address this, the Commission recommends the establishment of programs to introduce new historically disadvantaged market agents and ensure their access to popular produce.

Structural Linkages and Ownership Concerns

The inquiry identified concerning structural linkages between two dominant market agents—Subtropico Market Agents and RSA Group. African Rainbow Capital, owned by businessperson Patrice Motsepe, holds shares in both companies. To mitigate potential conflicts of interest and promote fair competition, the Commission recommends that African Rainbow Capital divest its shareholding in one of these companies. The divested shares should be acquired by a firm wholly owned or controlled by historically disadvantaged individuals to maintain the current level of black ownership.

The Commission’s recommendations aim to foster a more competitive and equitable fresh produce market, ultimately benefiting consumers and small-scale farmers alike. Further engagement with stakeholders will continue as the inquiry progresses towards its final report.

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