Competition Commission rings changes in fresh produce market after inquiry finds abuses

Fresh lemons from Apple Queens Commodity Brokers. They sell fresh produce at the Joburg Produce Market in City Deep. Picture: Simone Kley

Fresh lemons from Apple Queens Commodity Brokers. They sell fresh produce at the Joburg Produce Market in City Deep. Picture: Simone Kley

Published Jun 19, 2024


The Competition Commission has thrown the book at the fresh produce market chain, citing major retailers and wholesalers, agro-processing companies and seed companies for cartel behaviour that enforces barriers to new entrants and manipulating the product gene pool, among other indictments in South Africa’s more than R53 billion industry.

The commission yesterday said that SPAR, Woolworths, Food Lover’s Market, and Shoprite, seed company Starke Ayres, and JSE-listed entities African Rainbow Capital and agrochemicals giant Bayer South Africa as all being separately and collectively implicit or responsible for price distortions in the market.

In a provisional report on the Fresh Produce Market Inquiry, Deputy Commissioner Hardin Ratshisusu recommended sweeping changes to the fresh produce value chain from farm to fork, criticising the conduct of dominant players, saying it had resulted in distortions that resulted in unjustified price hikes and controlled distribution of choice food stocks.

The commission said a further inquiry would still proceed on the retail sector after the groups, which account for about R32bn annually in formal retail, disputed the commission’s findings.

The commission had said these groups had unjustifiably high mark-ups and prices were not transparent enough as they were presented at price per unit instead of “per kilogram or gram” on display, and frustrated consumers’ ability to compare prices.

This was in addition to the concern the commission expressed that all four food retailers had a common shareholder in African Rainbow Capital, which Ratshisusu said was questionable and raised the possibility of price manipulation.

“In retail produce (the inquiry) found some instances of high mark-ups that retailers are able to sustain over a period of time. It could be a good indicator of lack of competition,” he said.

“The inquiry is continuing to analyse the data and further engagements with these retailers because they raised some issues with the data analysed.

“The data that was provided by the concerned retailers but for due process, the inquiry has resolved that these retailers will have to be engaged even following the publication of this report.”

The scope of the fresh produce market encompassed the value chain of apples, citrus, bananas, pears and table grapes while on vegetables it looked at potatoes, onions, cabbage, tomatoes and spinach.

Ratshisusu said following the disbandment of exclusive leases, there have been no new entrants to challenge the four food retailers in shopping centres and malls, and the retail landscape had not changed.

The inquiry recommended that the Department of Trade, Industry and Competition (dtic) set up a fund to help entrants into the market to challenge the established retailers and also called on property owners to reserve space in malls and shopping complexes for fresh produce entrants in a bid to balance out the monopoly.

The inquiry raised concern that infrastructure across all fresh produce markets in the country was poor and no funds for recapitalisation were set aside for maintenance and development even though they were sustainable.

The commission assessed the infrastructure of the main four markets in Joburg, Tshwane, Cape Town and Durban.

It recommended that the SA Local Government Association take a leading role in the corporation of the marketing entities, implementation of the Municipal Finance Management Act and the three-year review of bye-laws.

The inquiry noted that smallholder farmers were systematically cut out of the market with an about 1% contribution to the sales as they lacked access to the market, funds, retail shelves and water rights.

It recommended 29 practical actions and eight remedies to address the barriers to entry and participation of small farmers.

The inquiry said the seed market was littered with firms charging exploitative prices where the firms had a high market share.

It cited Simba Pepsico as being particularly responsible for the practice of early termination of the variety that it had growers rights to ensure that it was no longer available in the market.

Starke Ayres was cited as having particularly high mark-ups on its seed varieties, and the commission recommended that the company reduce its mark-ups to the market average.