By Ragheema Mclean
South Africa’s fresh produce markets are under scrutiny as the Competition Commission calls for reforms to boost the competitiveness and inclusivity of black farmers and market agents.
Supermarkets are also urged to be more transparent about their pricing practices, especially concerning high mark-ups on fruits and vegetables.
This is according to the latest provisional findings of the Fresh Produce Market Inquiry (FPMI) conducted by the Competition Commission.
The inquiry focused on a range of produce, including apples, citrus bananas, pears, table grapes, potatoes, onions, carrots, cabbage, tomatoes, and spinach.
The commission identified three key themes: the role of national fresh produce markets (NFPMs), market agents, input pricing (fertilizers and seeds), regulatory constraints, barriers to entry, market access, access to finance, and the pricing of fresh produce.
These assessments covered the top four NFPMs in Johannesburg, Cape Town, Tshwane, and Durban, though similar issues were found in other areas.
Speaking on VOC Breakfast, Principal Analyst at the Competition Commission, Ruan Mare, stated that the inquiry was initiated because the commission had been examining the fresh produce value chain for several years. Various issues were emerging at different levels but addressing them individually was not sufficient.
“That’s why the commission launched a market inquiry, which is a very broad investigation, not necessarily aimed at individual firms but at the value chain.”
Mare noted, “We’ve been looking at each level of the value chain to see where there are distortions in competition and other problems.”
The inquiry revealed two separate supply chains for fresh produce: one for wholesale and another for formal retail stores.
“When we talk about prices, we see a lot of fluctuation at a wholesale level, which is more to do with seasonality than other reasons tampering with prices,” Mare said.
“Whereas retail operates on a different model.”
High markups at the retail level were a significant finding, with retailers charging much more for produce than they pay for it.
“In the provisional report, we did mention that we are not making any concrete findings at this stage about retail pricing. Obviously, the retailers are not agreeing with our findings thus far, but all we are saying is we are noticing high markups but there is more to that story,” Mare added.
The Commission’s engagements with retailers are ongoing.
Meanwhile, another critical finding was that less than one percent of the total sales value in national fresh produce markets comes from small-holder or Small, Micro, and Medium Enterprises (SMME) farmers.
SME farmers, particularly those from historically disadvantaged backgrounds, face significant challenges in selling their produce in these markets despite them being the least costly route to market.
“Small-scale farmers and black farmers have been a major focus for us in this inquiry. It’s well known that large commercial farmers dominate the market,” Mare said.
The inquiry found that these farmers struggle with access to water, finance, and other resources necessary for their operations.
The commission has encouraged stakeholders to constructively engage the provisional report. Public comments should be submitted by email to freshproduceinq@compcom.co.za by 16 July 2024.
VOC News
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