The agriculture sector has raised the alarm over some of the recommendations made in the Competition Commission’s report on its fresh produce market inquiry, warning that the continued collapse in municipal infrastructure undermined access to the market.
The commission released the report this week, complete with a call for retailers to adjust the price points at which they sell fresh produce to end customers. However, specialists in the agriculture sector maintained that other challenges confronted small farmers supplying the market.
The report measures intentions to “promote competition, inclusion, lower barriers to entry, and to create a more inclusive and competitive fresh produce market. The measures include recommendations for policy reform, market restructuring and targeted support for small-scale, emerging and historically disadvantaged farmers.”
According to the findings, South Africa’s R53bn fresh produce market presents significant opportunities for growth and inclusion but the share of historically disadvantaged farmers and market agents remains negligible.
Wandile Sihlobo, agricultural economist at the Agricultural Business Chamber of South Africa (Agbiz), said while the report was “a valuable resource” for understanding the industry’s structure, some of its recommendations and findings bordered on unrealistic.
“Some of the points raised move the inquiry outside the commission's mandate and the initial scope of the inquiry. The most important recommendations are in itself uncompetitive by forcing quotas in terms of volumes and numbers.”
He said the service and poor state of governance in municipalities and the lack of maintenance of vital infrastructure prohibit the participation of black farmers in economic and commercial activity.
“That is the single biggest reason these markets have few black farmers and black agents. A case in point is Pretoria, where the operating conditions and infrastructure remain in bad shape, and the municipality — custodian of the market — needs to improve and pay closer attention to it.”
Sihlobo said government-owned agricultural land — about 2.5-million hectares — could help boost black farmers' production, and while it was not all suitable for fresh produce, it could ease the gap in land access.
The report acknowledged that stakeholders, including the market agents, were concerned about the diminishing centrality of the national fresh produce markets as a route to market as retailers grew in influence.
“This concern has been informed by indications that the volumes of fresh produce being sold at the national fresh produce markets have been steadily declining over the years. This is largely attributed to the lack of upkeep and investments by the local municipalities, which are the custodians of these markets,” the report stated.
The Competition Commission said its inquiry assessed the levels of assistance that large retailers offered SMEs and historically disadvantaged farmers to comply with their product standards and found that insufficient help was being provided. “Consequently, the inquiry made a provisional finding that the mandatory use of Global GAP [farmer certification scheme], in particular, distorts competition for SMEs and historically disadvantaged farmers — by raising and enforcing barriers to entry.”
Despite extensive state failure, the fresh products markets in South Africa are already some of the best and most productive in the world.
— Piet le Roux, Sakeliga CEO
The report said while the commission was not opposed to the Global GAP fresh produce standards, the use of such standards should be applied judiciously, and with SME and historically disadvantaged farmers in mind.
The inquiry noted that, “despite the elimination of exclusivity clauses in shopping centre lease agreements, there has not been any meaningful entry into the retail space”.
“The inquiry thus made a provisional finding that expansion by small challenger retailers is inhibited by a lack of adequate trading floor spaces in shopping malls, which are still dominated by the formal retailers.”
Sakeliga CEO Piet le Roux said the inquiry was off the mark as it sought to interfere with businesses in the fresh produce value chain. “Despite extensive state failure at municipal fresh produce markets and failures at Eskom and around transport, the fresh products markets in South Africa are already some of the best and most productive in the world.
“[The inquiry] wants to limit the range of services marketing agents may offer by prohibiting them from providing credit, selling 24 hours a day, and more. It moves beyond the generally considered scope of competition law by proposing several BEE restrictions.”
He warned against the report’s recommendations to force marketing agents to — at their own expense — enter into specific management agreements with black-owned companies for six years to provide training and establishment.
“The inquiry is part of what is now the new trend at the Competition Commission, stemming from amendments to the Competition Act in 2018, against which we have warned before.”
Le Roux said South Africa's fresh produce markets and value chains were among the best in the world, and the private sector was maintaining standards despite state failure at many levels.
“The businesses are not monopolies, and they deserve praise for generally providing higher quality fresh produce at lower prices than almost anywhere on earth. They provide this service to businesses big and small, and consumers rich and poor.”
He added that the single biggest threat to the availability of fresh produce to the public was the potential collapse of the markets under the control of collapsing municipalities, with potential disruption by the Competition Commission now possibly a close second.
AgriSA COO Jolanda Andrag said the report underscored the vital role of fresh produce markets in both price discovery and food security, “which operate freely with the necessary transparency and ethical practices” in place. “Large retailers aren't exerting undue influence over farmers, and fresh produce markets still hold key importance as alternative outlets for large and small producers. However, we express reservations about additional retail labelling burdens, given the existing price transparency and affordability of fresh produce in South Africa.”
Critically, she said, the report highlights the infrastructure challenges in municipalities that have long hindered the functioning of fresh produce markets, adding that local municipalities have to accept responsibility for the critical role they play in improving governance and infrastructure.
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