The Competition Commission of South Africa has concluded its Fresh Produce Market Inquiry, unveiling characteristics within the fresh produce value chain that are seen as obstacles to fair competition. Launched on 31 March 2023, the inquiry embarked on a detailed examination and stakeholder engagement process to scrutinize competition levels within the nation's fresh produce sector.
Spanning across major themes such as value chain efficiency, market dynamics of essential inputs, and barriers to market entry and growth, the inquiry has shed light on the operational dynamics of the fresh produce market, which boasts an annual valuation of around R53 billion, not accounting for informal sales channels and exports. Deputy Commissioner Hardin Ratshisusu highlighted the inquiry's emphasis on the need for growth and inclusion, pointing out the low participation rates of historically disadvantaged farmers and market agents.
The inquiry's focus extended to key fruits and vegetables that are staple foods in South African households, identifying six major concerns that hinder competitive practices within the sector. These include inefficiencies at municipal fresh produce markets, value chain inefficiencies, the behavior of market agents, high costs of key inputs such as certain fertilizers and seeds, regulatory hurdles, and systemic entry barriers for small-scale, emerging, and historically disadvantaged farmers.
Ratshisusu proposed the introduction of new, diverse, and lower-cost retail models to enhance competition and ensure more equitable farmgate and supplier price transmission. He stressed the importance of local competition, especially from SMMEs and historically disadvantaged persons (HDPs), through enhanced procurement from National Fresh Produce Markets (NFPM) and the support of alternative retail models.
The inquiry also found that historically disadvantaged farmers face significant challenges in accessing formal retail channels and NFPMs, suggesting the exploration of a mandatory code of conduct to level the playing field. Additionally, concerns were raised regarding the pricing strategies of supermarkets, which, despite high mark-ups, operate on slim net margins due to operational costs, pointing to inefficiencies in price transmission from farmers to consumers.
To address these challenges, the inquiry has put forward 31 remedies aimed at fostering a more inclusive and competitive fresh produce value chain. These recommendations include policy reforms, market restructuring, and targeted support for disadvantaged farmers. Ratshisusu emphasized the importance of the inquiry's findings in paving the way for economic inclusion and the creation of a market that benefits all stakeholders, from small farmers to large retailers, and ultimately, the consumer.
Source: SA News