Competition regulators play an important role in society. They have a responsibility to identify markets that are failing consumers and to come up with recommendations that aim to deliver greater competition, better choice, more innovation and lower prices.
James Hodge, chief economist of the Competition Commission, set out this role in his column, "Level the playing field for small retail entrants" (June 16).
To make his case, Hodge highlighted a new report by the commission on its inquiry into the grocery retail sector. According to him, the report gave "a fascinating account of how our concentrated retail markets actively work against new entrants and SMEs". In essence, he argued that the "big four" retailers - Shoprite-Checkers, Spar, Pick n Pay and Woolworths - have such "size and power" that they can use it in ways that distort the market and disadvantage smaller rivals.
We share the Competition Commission's commitment to vibrant markets which offer genuine choice to consumers, and give opportunities for businesses to grow and be successful, including new entrants who help to deliver a more inclusive economy.
One of our concerns about the commission's report, and Hodge's column, is that they rely on a fundamentally incorrect assertion that the market is "highly concentrated", with the "big four" supermarkets allegedly "accounting for more than 70% of sales".
In making this claim, the commission relies on a report published by Stats SA in 2015. Unfortunately, it has misinterpreted the data in that report. When it says the "big four" account for 72% of sales, it has mistakenly included R15bn of sales in countries outside SA. It has also mistakenly included in the "big four's" grocery sales R14bn in turnover in furniture and building products.
The commission has also underestimated the size of the formal retail sector by almost 15% - excluding a category of general merchandise sales from non-specialised stores that are part of the grocery retail sector.
If it had properly interpreted the Stats SA report, it would see that the five largest retailers account for less than 50% of sales in the South African grocery retail sector. This is before we take into account the informal sector. The share held by the "big four" retailers of the total formal and informal sector is less than 30%. This is well below the levels in other countries which the commission holds up as benchmarks of competitive markets.
Ours is not, as Hodge claims, a "concentrated retail market actively working against new entrants and SMEs". In reality, those who serve customers effectively can and do thrive, whether large or small, established or new. Ironically, Hodge identifies two retailers - Food Lover's Market and Choppies - which he says have "struggled to get traction". Yet over the past decade or more, these two retailers have been among the fastest growing in SA.
In searching for solutions to create a more inclusive market, the commission has focused its attention in the wrong place and neglected to see a large part of the market. As the "big four" grocery retailers account for less than 30% of the sector, this leaves more than 70% in which other businesses, large and small, are successfully competing.
After taking three-and-a-half years to produce its 550-page report, the commission has given stakeholders a mere four weeks to respond. We trust this reflects its impatience to get at the real facts, so we can have a final report that reflects the whole market and the opportunities that already lie in it to achieve the inclusive growth everyone is seeking.
• North is group executive: strategy and human resources at Pick n Pay Stores
