An investigation into South Africa’s fresh produce sector has found barriers to entry, distorted competition and price mark-ups.

A provisional report published yesterday (18 June) by the country’s Competition Commission identified “29 practical and reasonable provisional remedial actions and recommendations that could address distortions in the fresh produce market”.

The report, seen by Just Food, follows an investigation launched last year
to examine whether any features in the fresh produce value chain “impede, restrict or distort competition in the market”.

In its report, the Competition Commission found some instances of price mark-ups by retailers which have been sustained over a period of time, which it suggested are an indicator of a lack of competition.

Amongst other findings, the inquiry noted that there is still slow progress in integrating historically disadvantaged SME (small-to-medium enterprise) farmers into retailers’ supply chains.

And it found there are “overarching concerns” of slow transformation in the sector particularly as there is limited participation of black farmers or market agents in the value chain.

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“It is important that the markets should be competitive and provide market access opportunities,” the report said.

It added: “Although the size of the market is relatively big, the share of black-owned farms or market agents, or even small-scale farmers in general, is negligible.”

The inquiry looked at the production, supply and sale of fruit and vegetables – namely apples, citrus (particularly oranges and soft citrus), bananas, pears, grapes, potatoes, onions, carrots, cabbage, tomatoes and spinach.

Its report said prices of fresh produce “are not transparent enough such that they allow consumers to reasonably compare prices in-store and across retailers”.

Two immediate courses of action the Commission has recommended, after 14 months of evidence gathering and public hearings, are that crisp maker Simba, owned by US food and beverage giant PepsiCo, should make available its potato variety FL2006 gene material to the Agricultural Research Council for preservation and so that it is available to any member of the public and that African Rainbow Capital should divest its shareholding in either Subtropico or RSA Group, which both specialise in sales and marketing of fresh produce on behalf of producers.

Another recommendation is for the creation of a new fund to assist new entrants selling fresh fruits and vegetables in shopping centres.

The agricultural sector contributes approximately 2.5% of South Africa’s gross domestic product, while the market size of the domestic fresh produce market is estimated at more than R53bn ($2.93bn) annually.